Exam 9: Characterizing Risk and Return

Risk versus Return Rank the following three stocks by their risk-return relationship, best to worst. Rail Haul has an average return of 10 percent and standard deviation of 15 percent. The average return and standard deviation of Idol Staff are 15 percent and 25 percent; and of Poker-R-Us are 12 percent and 35 percent.

This is defined as the portion of total risk that is attributable to firm or industry factors and can be reduced through diversification.

The optimal portfolio for you will be ______________________.

Portfolio Return At the beginning of the month, you owned $6,000 of Company G, $8,000 of Company S, and $1,000 of Company N. The monthly returns for Company G, Company S, and Company N were 7.25 percent, -1.50 percent, and -0.23 percent. What is your portfolio return?

Portfolio Weights If you own 1000 shares of Alaska Corporation at $19.95, 250 shares of Best Company at $17.50, and 250 shares of Motor Company at $2.50, what are the portfolio weights of each stock?

If you own 300 shares of Alaska Air at $15.88, 250 shares of Best Buy at $151.00, and 1,150 shares of Ford Motor at $3.51, what are the portfolio weights of each stock?

Which of these statements is true?

Risk, Return, and Their Relationship Consider the following stocks' annual average return, standard deviation, and coefficient of variation. Which stock appears better? Why?

Which of the following statements is correct regarding total risk?

Consider the following annual returns of Estee Lauder and Lowe's Companies: Compute each stock's average return, standard deviation, and coefficient of variation.

A stock has an expected return of 15% and a standard deviation of 20%. Long-term Treasury bonds have an expected return of 9% and a standard deviation of 11%. Given this data, which of the following statements is correct?

An investor owns $8,000 of Adobe Systems stock, $5,000 of Dow Chemical, and $3,000 of Office Depot. What are the portfolio weights of each stock?

Risk, Return, and Their Relationship Consider the following annual average return, standard deviation, and coefficient of variation for Companies E and L. Which stock appears better? Why?

Rank the following three stocks by their risk-return relationship, best to worst. Night Ryder has an average return of 33 percent and standard deviation of 40 percent. The average return and standard deviation of WholeMart are 10 percent and 20 percent; and of Fruit Fly are 19 percent and 33 percent.

From 1950 to 2007, the average return in the stock market, as measured by the S&P500, was 13.2% and a standard deviation of 17%. Given this information, which of the following statements is correct?

Risk versus Return Rank the following three stocks by their risk-return relationship, best to worst. Rail Haul has an average return of 8 percent and standard deviation of 10 percent. The average return and standard deviation of Idol Staff are 10 percent and 20 percent; and of Poker-R-Us are 6 percent and 15 percent.

JoJo's portfolio's return is 12%. She is invested in Cisco and IBM which had returns of 15% and 9% respectively. What percentage of JoJo's assets are invested in each firm?

Risk versus Return in Bonds Assess the risk-return relationship of the following bonds:

This is a measure of risk to reward earned by an investment over a specific period of time.

The total risk of the S&P500 Index is equal to ____________________.