Question 1

What is the standard deviation of a security which has the following expected returns?

Accepted Answer

A)  7.48 percent 
B)  7.61 percent 
C)  7.67 percent 
D)  7.82 percent 
E)  7.91 percent 
A)  7.48 percent 
B)  7.61 percent 
C)  7.67 percent 
D)  7.82 percent 
E)  7.91 percent

Question 2

Terry has a portfolio comprised of two individual securities.Which one of the following computations that he might do is NOT a weighted average?

Accepted Answer

A)  correlation between the securities 
B)  individual security expected return 
C)  portfolio expected return 
D)  portfolio variance 
E)  portfolio beta 
A)  correlation between the securities 
B)  individual security expected return 
C)  portfolio expected return 
D)  portfolio variance 
E)  portfolio beta

Question 3

What is the expected return on this stock given the following information?

Accepted Answer

A)  -8.07 percent 
B)  -7.69 percent 
C)  -6.00 percent 
D)  -5.70 percent 
E)  -5.20 percent 
A)  -8.07 percent 
B)  -7.69 percent 
C)  -6.00 percent 
D)  -5.70 percent 
E)  -5.20 percent

Question 4

What is the variance of the returns on a security given the following information?

Accepted Answer

A)  239.77 
B)  284.05 
C)  321.16 
D)  347.15 
E)  362.98 
A)  239.77 
B)  284.05 
C)  321.16 
D)  347.15 
E)  362.98

Question 5

Which one of the following is the set of portfolios that provides the maximum return for a given standard deviation?

Accepted Answer

A)  minimum variance portfolio 
B)  Markowitz efficient frontier 
C)  correlated market frontier 
D)  asset allocation relationship 
E)  diversified portfolio line 
A)  minimum variance portfolio 
B)  Markowitz efficient frontier 
C)  correlated market frontier 
D)  asset allocation relationship 
E)  diversified portfolio line

Question 6

You combine a set of assets using different weights such that you produce the following results.   Which one of these portfolios CANNOT be a Markowitz efficient portfolio?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
E)  E 
A)  A 
B)  B 
C)  C 
D)  D 
E)  E

Question 7

You own a portfolio of 5 stocks and have 3 expected states of the economy.You have twice as much invested in Stock A as you do in Stock E.How will the weights be determined when you compute the rate of return for each economic state?

Accepted Answer

A)  The weights will be the probability of occurrence for each economic state. 
B)  Each stock will have a weight of 20 percent for a total of 100 percent. 
C)  The weights will decline steadily from Stock A to Stock E. 
D)  The weights will be based on the amount invested in each stock as a percentage of the total amount invested. 
E)  The weights will be based on a combination of the dollar amounts invested as well as the economic probabilities. 
A)  The weights will be the probability of occurrence for each economic state. 
B)  Each stock will have a weight of 20 percent for a total of 100 percent. 
C)  The weights will decline steadily from Stock A to Stock E. 
D)  The weights will be based on the amount invested in each stock as a percentage of the total amount invested. 
E)  The weights will be based on a combination of the dollar amounts invested as well as the economic probabilities.

Question 8

Travis has a portfolio consisting of two stocks,A and B,which is valued at $53,800.Stock A is worth $23,900.What is the portfolio weight of stock B?

Accepted Answer

A)  0.528 
B)  0.543 
C)  0.549 
D)  0.551 
E)  0.556 
A)  0.528 
B)  0.543 
C)  0.549 
D)  0.551 
E)  0.556

Question 9

Roger has a portfolio comprised of $8,000 of stock A and $12,000 of stock B.What is the standard deviation of this portfolio?

Accepted Answer

A)  4.67 percent 
B)  9.97 percent 
C)  7.23 percent 
D)  8.83 percent 
E)  10.42 percent 
A)  4.67 percent 
B)  9.97 percent 
C)  7.23 percent 
D)  8.83 percent 
E)  10.42 percent

Question 10

Which of the following affect the expected rate of return for a portfolio?
I.weight of each security held in the portfolio
II.the probability of various economic states occurring
III.the variance of each individual security
IV.the expected rate of return of each security given each economic state

Accepted Answer

A)  I and IV only 
B)  II and IV only 
C)  II, III, and IV only 
D)  I, II, and IV only 
E)  I, II, III, and IV 
A)  I and IV only 
B)  II and IV only 
C)  II, III, and IV only 
D)  I, II, and IV only 
E)  I, II, III, and IV

Question 11

As the number of individual stocks in a portfolio increases,the portfolio standard deviation:

Accepted Answer

A)  increases at a constant rate. 
B)  remains unchanged. 
C)  decreases at a constant rate. 
D)  decreases at a diminishing rate. 
E)  decreases at an increasing rate. 
A)  increases at a constant rate. 
B)  remains unchanged. 
C)  decreases at a constant rate. 
D)  decreases at a diminishing rate. 
E)  decreases at an increasing rate.

Question 12

You have a portfolio which is comprised of 30 percent of stock A and 70 percent of stock B.What is the portfolio standard deviation?

Accepted Answer

A)  4.00 percent 
B)  5.56 percent 
C)  6.06 percent 
D)  6.82 percent 
E)  7.47 percent 
A)  4.00 percent 
B)  5.56 percent 
C)  6.06 percent 
D)  6.82 percent 
E)  7.47 percent

Question 13

A portfolio comprised of which one of the following is most apt to be the minimum variance portfolio?

Accepted Answer

A)  100 percent stocks 
B)  100 percent bonds 
C)  50/50 mix of stocks and bonds 
D)  30 percent stocks and 70 percent bonds 
E)  30 percent bonds and 70 percent stocks 
A)  100 percent stocks 
B)  100 percent bonds 
C)  50/50 mix of stocks and bonds 
D)  30 percent stocks and 70 percent bonds 
E)  30 percent bonds and 70 percent stocks

Question 14

To reduce risk as much as possible,you should combine assets which have one of the following correlation relationships?

Accepted Answer

A)  strong positive 
B)  slightly positive 
C)  slightly negative 
D)  strongly negative 
E)  zero 
A)  strong positive 
B)  slightly positive 
C)  slightly negative 
D)  strongly negative 
E)  zero

Question 15

A portfolio that belongs to the Markowitz efficient set of portfolios will have which one of the following characteristics? Assume the portfolios are comprised of five individual securities.

Accepted Answer

A)  the lowest return for any given level of risk 
B)  the largest number of potential portfolios that can achieve a specific rate of return 
C)  the largest number of potential portfolios that can achieve a specific level of risk 
D)  a positive rate of return and a zero standard deviation 
E)  the lowest risk for any given rate of return 
A)  the lowest return for any given level of risk 
B)  the largest number of potential portfolios that can achieve a specific rate of return 
C)  the largest number of potential portfolios that can achieve a specific level of risk 
D)  a positive rate of return and a zero standard deviation 
E)  the lowest risk for any given rate of return

Question 16

What is the standard deviation of the returns on this stock?

Accepted Answer

A)  223.94 percent 
B)  24.08 percent 
C)  24.17 percent 
D)  25.72 percent 
E)  26.90 percent 
A)  223.94 percent 
B)  24.08 percent 
C)  24.17 percent 
D)  25.72 percent 
E)  26.90 percent

Question 17

The risk-free rate is 3.5 percent.What is the expected risk premium on this security given the following information?

Accepted Answer

A)  2.09 percent 
B)  3.01 percent 
C)  3.20 percent 
D)  3.87 percent 
E)  4.15 percent 
A)  2.09 percent 
B)  3.01 percent 
C)  3.20 percent 
D)  3.87 percent 
E)  4.15 percent

Question 18

Which one of the following statements is correct concerning asset allocation?

Accepted Answer

A)  Because there is an ideal mix, all investors should use the same asset allocation for their portfolios. 
B)  The minimum variance portfolio will have a 50/50 asset allocation between stocks and bonds. 
C)  Asset allocation affects the expected return but not the risk level of a portfolio. 
D)  There is an ideal asset allocation between stocks and bonds given a specified level of risk. 
E)  Asset allocation should play a minor role in portfolio construction. 
A)  Because there is an ideal mix, all investors should use the same asset allocation for their portfolios. 
B)  The minimum variance portfolio will have a 50/50 asset allocation between stocks and bonds. 
C)  Asset allocation affects the expected return but not the risk level of a portfolio. 
D)  There is an ideal asset allocation between stocks and bonds given a specified level of risk. 
E)  Asset allocation should play a minor role in portfolio construction.

Question 19

You have a portfolio which is comprised of 40 percent of stock A and 60 percent of stock B.What is the portfolio standard deviation?

Accepted Answer

A)  4.00 percent 
B)  5.56 percent 
C)  6.06 percent 
D)  6.82 percent 
E)  7.42 percent 
A)  4.00 percent 
B)  5.56 percent 
C)  6.06 percent 
D)  6.82 percent 
E)  7.42 percent

Question 20

What is the standard deviation of the returns on this stock?

Accepted Answer

A)  3.33 percent 
B)  4.62 percent 
C)  5.01 percent 
D)  5.77 percent 
E)  6.19 percent 
A)  3.33 percent 
B)  4.62 percent 
C)  5.01 percent 
D)  5.77 percent 
E)  6.19 percent

What is the standard deviation of a security which has the following expected returns?

Terry has a portfolio comprised of two individual securities.Which one of the following computations that he might do is NOT a weighted average?

What is the expected return on this stock given the following information?

What is the variance of the returns on a security given the following information?

Which one of the following is the set of portfolios that provides the maximum return for a given standard deviation?

You combine a set of assets using different weights such that you produce the following results. Which one of these portfolios CANNOT be a Markowitz efficient portfolio?

You own a portfolio of 5 stocks and have 3 expected states of the economy.You have twice as much invested in Stock A as you do in Stock E.How will the weights be determined when you compute the rate of return for each economic state?

Travis has a portfolio consisting of two stocks,A and B,which is valued at $53,800.Stock A is worth $23,900.What is the portfolio weight of stock B?

Roger has a portfolio comprised of $8,000 of stock A and $12,000 of stock B.What is the standard deviation of this portfolio?

Which of the following affect the expected rate of return for a portfolio? I.weight of each security held in the portfolio II.the probability of various economic states occurring III.the variance of each individual security IV.the expected rate of return of each security given each economic state

As the number of individual stocks in a portfolio increases,the portfolio standard deviation:

You have a portfolio which is comprised of 30 percent of stock A and 70 percent of stock B.What is the portfolio standard deviation?

A portfolio comprised of which one of the following is most apt to be the minimum variance portfolio?

To reduce risk as much as possible,you should combine assets which have one of the following correlation relationships?

A portfolio that belongs to the Markowitz efficient set of portfolios will have which one of the following characteristics? Assume the portfolios are comprised of five individual securities.

What is the standard deviation of the returns on this stock?

The risk-free rate is 3.5 percent.What is the expected risk premium on this security given the following information?

Which one of the following statements is correct concerning asset allocation?

You have a portfolio which is comprised of 40 percent of stock A and 60 percent of stock B.What is the portfolio standard deviation?

What is the standard deviation of the returns on this stock?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Return,Risk,and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Exam 11: Diversification and Risky Asset Allocation

What is the standard deviation of a security which has the following expected returns?

Terry has a portfolio comprised of two individual securities.Which one of the following computations that he might do is NOT a weighted average?

What is the expected return on this stock given the following information?

What is the variance of the returns on a security given the following information?

Which one of the following is the set of portfolios that provides the maximum return for a given standard deviation?

You combine a set of assets using different weights such that you produce the following results. Which one of these portfolios CANNOT be a Markowitz efficient portfolio?

You own a portfolio of 5 stocks and have 3 expected states of the economy.You have twice as much invested in Stock A as you do in Stock E.How will the weights be determined when you compute the rate of return for each economic state?

Travis has a portfolio consisting of two stocks,A and B,which is valued at $53,800.Stock A is worth $23,900.What is the portfolio weight of stock B?

Roger has a portfolio comprised of $8,000 of stock A and $12,000 of stock B.What is the standard deviation of this portfolio?

Which of the following affect the expected rate of return for a portfolio? I.weight of each security held in the portfolio II.the probability of various economic states occurring III.the variance of each individual security IV.the expected rate of return of each security given each economic state

As the number of individual stocks in a portfolio increases,the portfolio standard deviation:

You have a portfolio which is comprised of 30 percent of stock A and 70 percent of stock B.What is the portfolio standard deviation?

A portfolio comprised of which one of the following is most apt to be the minimum variance portfolio?

To reduce risk as much as possible,you should combine assets which have one of the following correlation relationships?

A portfolio that belongs to the Markowitz efficient set of portfolios will have which one of the following characteristics? Assume the portfolios are comprised of five individual securities.

What is the standard deviation of the returns on this stock?

The risk-free rate is 3.5 percent.What is the expected risk premium on this security given the following information?

Which one of the following statements is correct concerning asset allocation?

You have a portfolio which is comprised of 40 percent of stock A and 60 percent of stock B.What is the portfolio standard deviation?

What is the standard deviation of the returns on this stock?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Return,Risk,and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters