Question 1

The risk-free rate is 4.15 percent.What is the expected risk premium on this stock given the following information?

Accepted Answer

A)  5.88 percent 
B)  5.95 percent 
C)  6.10 percent 
D)  6.23 percent 
E)  6.27 percent 
A)  5.88 percent 
B)  5.95 percent 
C)  6.10 percent 
D)  6.23 percent 
E)  6.27 percent

Question 2

Stock X has a standard deviation of 21 percent per year and stock Y has a standard deviation of 6 percent per year.The correlation between stock A and stock B is 0.38.You have a portfolio of these two stocks wherein stock X has a portfolio weight of 42 percent.What is your portfolio standard deviation?

Accepted Answer

A)  8.89 percent 
B)  9.85 percent 
C)  10.64 percent 
D)  11.84 percent 
E)  12.92 percent 
A)  8.89 percent 
B)  9.85 percent 
C)  10.64 percent 
D)  11.84 percent 
E)  12.92 percent

Question 3

Which one of the following statements about efficient portfolios is correct?

Accepted Answer

A)  Any efficient portfolio will lie below the minimum variance portfolio when the expected portfolio return is plotted against the portfolio standard deviation. 
B)  An efficient portfolio will have the lowest standard deviation of any portfolio consisting of the same two securities. 
C)  There are multiple efficient portfolios that can be constructed using the same two securities. 
D)  Any portfolio mix consisting of only two securities will be an efficient portfolio. 
E)  There is only one efficient portfolio that can be constructed using two securities. 
A)  Any efficient portfolio will lie below the minimum variance portfolio when the expected portfolio return is plotted against the portfolio standard deviation. 
B)  An efficient portfolio will have the lowest standard deviation of any portfolio consisting of the same two securities. 
C)  There are multiple efficient portfolios that can be constructed using the same two securities. 
D)  Any portfolio mix consisting of only two securities will be an efficient portfolio. 
E)  There is only one efficient portfolio that can be constructed using two securities.

Question 4

Correlation is the:

Accepted Answer

A)  squared measure of a security's total risk. 
B)  extent to which the returns on two assets move together. 
C)  measurement of the systematic risk contained in an asset. 
D)  daily return on an asset compared to its previous daily return. 
E)  spreading of an investment across a number of assets. 
A)  squared measure of a security's total risk. 
B)  extent to which the returns on two assets move together. 
C)  measurement of the systematic risk contained in an asset. 
D)  daily return on an asset compared to its previous daily return. 
E)  spreading of an investment across a number of assets.

Question 5

Which one of the following distinguishes a minimum variance portfolio?

Accepted Answer

A)  lowest risk portfolio of any possible portfolio given the same securities but in differing proportions 
B)  lowest risk portfolio possible given any specified expected rate of return 
C)  the zero risk portfolio created by maximizing the asset allocation mix 
D)  any portfolio with an expected standard deviation of 9 percent or less 
E)  any portfolio created with securities that are evenly weighted in respect to the asset allocation mix 
A)  lowest risk portfolio of any possible portfolio given the same securities but in differing proportions 
B)  lowest risk portfolio possible given any specified expected rate of return 
C)  the zero risk portfolio created by maximizing the asset allocation mix 
D)  any portfolio with an expected standard deviation of 9 percent or less 
E)  any portfolio created with securities that are evenly weighted in respect to the asset allocation mix

Question 6

There is a 35 percent probability that a particular stock will earn a 16 percent return and a 65 percent probability that it will earn 10 percent.What is the risk-free rate if the risk premium on the stock is 7.5 percent?

Accepted Answer

A)  4.20 percent 
B)  4.60 percent 
C)  5.20 percent 
D)  5.40 percent 
E)  5.80 percent 
A)  4.20 percent 
B)  4.60 percent 
C)  5.20 percent 
D)  5.40 percent 
E)  5.80 percent

Question 7

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

Accepted Answer

A)  -8.07 percent 
B)  -7.69 percent 
C)  -6.80 percent 
D)  -5.70 percent 
E)  -5.20 percent 
A)  -8.07 percent 
B)  -7.69 percent 
C)  -6.80 percent 
D)  -5.70 percent 
E)  -5.20 percent

Question 8

What is the variance of the expected returns on this stock?

Accepted Answer

A)  18.75 
B)  35.49 
C)  61.53 
D)  78.97 
E)  80.03 
A)  18.75 
B)  35.49 
C)  61.53 
D)  78.97 
E)  80.03

The risk-free rate is 4.15 percent.What is the expected risk premium on this stock given the following information?

Which one of the following statements about efficient portfolios is correct?

Correlation is the:

Which one of the following distinguishes a minimum variance portfolio?

There is a 35 percent probability that a particular stock will earn a 16 percent return and a 65 percent probability that it will earn 10 percent.What is the risk-free rate if the risk premium on the stock is 7.5 percent?

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

What is the variance of the expected 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

The risk-free rate is 4.15 percent.What is the expected risk premium on this stock given the following information?

Which one of the following statements about efficient portfolios is correct?

Correlation is the:

Which one of the following distinguishes a minimum variance portfolio?

There is a 35 percent probability that a particular stock will earn a 16 percent return and a 65 percent probability that it will earn 10 percent.What is the risk-free rate if the risk premium on the stock is 7.5 percent?

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

What is the variance of the expected 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