Question 1

You have a portfolio which is comprised of 20 percent of stock A and 80 percent of stock B.What is the portfolio standard deviation?

Accepted Answer

A) 4.00 percent 
B) 5.56 percent 
C) 6.07 percent 
D) 6.82 percent 
E)  7.47 percent 
A) 4.00 percent 
B) 5.56 percent 
C) 6.07 percent 
D) 6.82 percent 
E)  7.47 percent

Question 2

A portfolio consists of the following securities.What is the portfolio weight of stock X?

Accepted Answer

A) .183 
B) .202 
C) .219 
D) .246 
E) .285 
A) .183 
B) .202 
C) .219 
D) .246 
E) .285

Question 3

Which one of the following correlation coefficients must apply to two assets if the equally weighted portfolio of those assets creates a minimum variance portfolio that has a standard deviation of zero?

Accepted Answer

A) -1.0 
B) -0.5 
C) 0.0 
D) 0.5 
E) 1.0 
A) -1.0 
B) -0.5 
C) 0.0 
D) 0.5 
E) 1.0

Question 4

Stock X has a standard deviation of 22 percent per year and stock Y has a standard deviation of 8 percent per year.The correlation between stock A and stock B is .21.You have a portfolio of these two stocks wherein stock Y has a portfolio weight of 40 percent.What is your portfolio variance?

Accepted Answer

A) .02022 
B) .02156 
C) .02239 
D) .02247 
E) .02350 
A) .02022 
B) .02156 
C) .02239 
D) .02247 
E) .02350

Question 5

Which of the following are affected by the probability of a state of the economy occurring?
I.expected return of an individual security
II.expected return of a portfolio
III.standard deviation of an individual security
IV.standard deviation of a portfolio

Accepted Answer

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

Question 6

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 7

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 8

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

Accepted Answer

A) 48.18 
B) 56.23 
C) 64.38 
D) 72.87 
E) 91.35 
A) 48.18 
B) 56.23 
C) 64.38 
D) 72.87 
E) 91.35

Question 9

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

Accepted Answer

A) 9.36 percent 
B) 9.74 percent 
C) 10.85 percent 
D) 11.78 percent 
E) 12.05 percent 
A) 9.36 percent 
B) 9.74 percent 
C) 10.85 percent 
D) 11.78 percent 
E) 12.05 percent

Question 10

You have a portfolio which is comprised of 60 percent of stock A and 40 percent of stock B.What is the expected rate of return on this portfolio?

Accepted Answer

A) 12.76 percent 
B) 12.88 percent 
C) 13.44 percent 
D) 13.56 percent 
E)  13.85 percent 
A) 12.76 percent 
B) 12.88 percent 
C) 13.44 percent 
D) 13.56 percent 
E)  13.85 percent

Question 11

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 12

You have a portfolio which is comprised of 65 percent of stock A and 35 percent of stock B.What is the expected rate of return on this portfolio?

Accepted Answer

A) 5.45 percent 
B) 6.62 percent 
C) 7.14 percent 
D) 7.60 percent 
E)  8.22 percent 
A) 5.45 percent 
B) 6.62 percent 
C) 7.14 percent 
D) 7.60 percent 
E)  8.22 percent

Question 13

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 14

You have a portfolio which is comprised of 35 percent of stock A and 65 percent of stock B.What is the standard deviation of this portfolio?

Accepted Answer

A) 4.39 percent 
B) 5.68 percent 
C) 6.41 percent 
D) 7.14 percent 
E)  9.08 percent 
A) 4.39 percent 
B) 5.68 percent 
C) 6.41 percent 
D) 7.14 percent 
E)  9.08 percent

Question 15

Stock A has a standard deviation of 15 percent per year and stock B has a standard deviation of 8 percent per year.The correlation between stock A and stock B is .40.You have a portfolio of these two stocks wherein stock B has a portfolio weight of 40 percent.What is your portfolio variance?

Accepted Answer

A) .01143 
B) .01214 
C) .01329 
D) .01437 
E) .01470 
A) .01143 
B) .01214 
C) .01329 
D) .01437 
E) .01470

Question 16

The risk-free rate is 4.20 percent.What is the expected risk premium on this stock given the following information?

Accepted Answer

A) 5.85 percent 
B) 6.59 percent 
C) 8.22 percent 
D) 10.16 percent 
E) 11.21 percent 
A) 5.85 percent 
B) 6.59 percent 
C) 8.22 percent 
D) 10.16 percent 
E) 11.21 percent

Question 17

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 18

Stock A has a standard deviation of 15 percent per year and stock B has a standard deviation of 21 percent per year.The correlation between stock A and stock B is .30.You have a portfolio of these two stocks wherein stock B has a portfolio weight of 60 percent.What is your portfolio standard deviation?

Accepted Answer

A) 14.87 percent 
B) 15.50 percent 
C) 16.91 percent 
D) 17.45 percent 
E) 18.03 percent 
A) 14.87 percent 
B) 15.50 percent 
C) 16.91 percent 
D) 17.45 percent 
E) 18.03 percent

Question 19

A group of stocks and bonds held by an investor is called which one of the following?

Accepted Answer

A) weights 
B) grouping 
C) basket 
D) portfolio 
E) bundle 
A) weights 
B) grouping 
C) basket 
D) portfolio 
E) bundle

Question 20

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.

You have a portfolio which is comprised of 20 percent of stock A and 80 percent of stock B.What is the portfolio standard deviation?

A portfolio consists of the following securities.What is the portfolio weight of stock X?

Which one of the following correlation coefficients must apply to two assets if the equally weighted portfolio of those assets creates a minimum variance portfolio that has a standard deviation of zero?

Stock X has a standard deviation of 22 percent per year and stock Y has a standard deviation of 8 percent per year.The correlation between stock A and stock B is .21.You have a portfolio of these two stocks wherein stock Y has a portfolio weight of 40 percent.What is your portfolio variance?

Which of the following are affected by the probability of a state of the economy occurring? I.expected return of an individual security II.expected return of a portfolio III.standard deviation of an individual security IV.standard deviation of a 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?

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

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

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

You have a portfolio which is comprised of 60 percent of stock A and 40 percent of stock B.What is the expected rate of return on this portfolio?

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

You have a portfolio which is comprised of 65 percent of stock A and 35 percent of stock B.What is the expected rate of return on this portfolio?

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

You have a portfolio which is comprised of 35 percent of stock A and 65 percent of stock B.What is the standard deviation of this portfolio?

Stock A has a standard deviation of 15 percent per year and stock B has a standard deviation of 8 percent per year.The correlation between stock A and stock B is .40.You have a portfolio of these two stocks wherein stock B has a portfolio weight of 40 percent.What is your portfolio variance?

The risk-free rate is 4.20 percent.What is the expected risk premium on this stock given the following information?

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

A group of stocks and bonds held by an investor is called which one of the following?

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

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

You have a portfolio which is comprised of 20 percent of stock A and 80 percent of stock B.What is the portfolio standard deviation?

A portfolio consists of the following securities.What is the portfolio weight of stock X?

Which one of the following correlation coefficients must apply to two assets if the equally weighted portfolio of those assets creates a minimum variance portfolio that has a standard deviation of zero?

Stock X has a standard deviation of 22 percent per year and stock Y has a standard deviation of 8 percent per year.The correlation between stock A and stock B is .21.You have a portfolio of these two stocks wherein stock Y has a portfolio weight of 40 percent.What is your portfolio variance?

Which of the following are affected by the probability of a state of the economy occurring? I.expected return of an individual security II.expected return of a portfolio III.standard deviation of an individual security IV.standard deviation of a 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?

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

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

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

You have a portfolio which is comprised of 60 percent of stock A and 40 percent of stock B.What is the expected rate of return on this portfolio?

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

You have a portfolio which is comprised of 65 percent of stock A and 35 percent of stock B.What is the expected rate of return on this portfolio?

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

You have a portfolio which is comprised of 35 percent of stock A and 65 percent of stock B.What is the standard deviation of this portfolio?

Stock A has a standard deviation of 15 percent per year and stock B has a standard deviation of 8 percent per year.The correlation between stock A and stock B is .40.You have a portfolio of these two stocks wherein stock B has a portfolio weight of 40 percent.What is your portfolio variance?

The risk-free rate is 4.20 percent.What is the expected risk premium on this stock given the following information?

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

A group of stocks and bonds held by an investor is called which one of the following?

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

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