Consider the following probability distribution for stocks A and B: \[\begin{array} { c c c c } \text { State } & \text { Probability } & \text { Return on Stock A } & \text { Return on Stock B } \\ 1 & 0.10 & 10 \% & 8 \% \\ 2 & 0.20 & 13 \% & 7 \% \\ 3 & 0.20 & 12 \% & 6 \% \\ 4 & 0.30 & 14 \% & 9 \% \\ 5 & 0.20 & 15 \% & 8 \% \\ \hline \end{array}\] Which of the following portfolio(s) is(are) on the efficient frontier?

A) The portfolio with 20 percent in A and 80 percent in B. B) The portfolio with 15 percent in A and 85 percent in B. C) The portfolio with 26 percent in A and 74 percent in B. D) The portfolio with 10 percent in A and 90 percent in B. E) A and B are both on the efficient frontier. A) The portfolio with 20 percent in A and 80 percent in B. B) The portfolio with 15 percent in A and 85 percent in B. C) The portfolio with 26 percent in A and 74 percent in B. D) The portfolio with 10 percent in A and 90 percent in B. E) A and B are both on the efficient frontier.

Consider the following probability distribution for stocks C and D: \[\begin{array} { c c c c } \text { State } & \text { Probability } & \text { Return on Stock C } & \text { Return on Stock D } \\ 1 & 0.30 & 7 \% & - 9 \% \\ 2 & 0.50 & 11 \% & 14 \% \\ 3 & 0.20 & - 16 \% & 26 \% \end{array}\] The expected rates of return of stocks C and D are _____ and _____, respectively.

A) 4.4%; 9.5% B) 9.5%; 4.4% C) 6.3%; 8.7% D) 8.7%; 6.2% E) None of the options are correct. A) 4.4%; 9.5% B) 9.5%; 4.4% C) 6.3%; 8.7% D) 8.7%; 6.2% E) None of the options are correct.

Consider the following probability distribution for stocks C and D: \[\begin{array} { c c c c } \text { State } & \text { Probability } & \text { Return on Stock C } & \text { Return on Stock D } \\ 1 & 0.30 & 7 \% & - 9 \% \\ 2 & 0.50 & 11 \% & 14 \% \\ 3 & 0.20 & - 16 \% & 26 \% \\ \hline \end{array}\] If you invest 25% of your money in C and 75% in D, what would be your portfolio's expected rate of return and standard deviation?

A) 9.891%; 8.70% B) 9.945%; 11.12% C) 8.225%; 8.70% D) 10.275%; 11.12% A) 9.891%; 8.70% B) 9.945%; 11.12% C) 8.225%; 8.70% D) 10.275%; 11.12%

Consider the following probability distribution for stocks A and B: \[\begin{array} { c c c c } \text { State } & \text { Probability } & \text { Return on Stock A } & \text { Return on Stock B } \\ 1 & 0.10 & 10 \% & 8 \% \\ 2 & 0.20 & 13 \% & 7 \% \\ 3 & 0.20 & 12 \% & 6 \% \\ 4 & 0.30 & 14 \% & 9 \% \\ 5 & 0.20 & 15 \% & 8 \% \\ \hline \end{array}\] The coefficient of correlation between A and B is

A) 0.46. B) 0.60. C) 0.58. D) 1.20. A) 0.46. B) 0.60. C) 0.58. D) 1.20.

Exam 7: Optimal Risky Portfolios

Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10\% 8\% 2 0.20 13\% 7\% 3 0.20 12\% 6\% 4 0.30 14\% 9\% 5 0.20 15\% 8\% Which of the following portfolio(s) is(are) on the efficient frontier?

(Multiple Choice)

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Question 61

As the number of securities in a portfolio is increased, what happens to the average portfolio standard deviation?

(Multiple Choice)

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Question 62

Consider the following probability distribution for stocks C and D: State Probability Return on Stock C Return on Stock D 1 0.30 7\% -9\% 2 0.50 11\% 14\% 3 0.20 -16\% 26\% The expected rates of return of stocks C and D are _ and _, respectively.

(Multiple Choice)

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Question 63

Consider two perfectly negatively correlated risky securities, K and L. K has an expected rate of return of 13% and a standard deviation of 19%. L has an expected rate of return of 10% and a standard deviation of 16%. The risk-free portfolio that can be formed with the two securities will earn _____ rate of return.

(Multiple Choice)

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Question 64

Systematic risk is also referred to as

(Multiple Choice)

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Question 65

Consider the following probability distribution for stocks C and D: State Probability Return on Stock C Return on Stock D 1 0.30 7\% -9\% 2 0.50 11\% 14\% 3 0.20 -16\% 26\% If you invest 25% of your money in C and 75% in D, what would be your portfolio's expected rate of return and standard deviation?

(Multiple Choice)

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Question 66

Unique risk is also referred to as

(Multiple Choice)

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Question 67

Market risk is also referred to as

(Multiple Choice)

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Question 68

When borrowing and lending at a risk-free rate are allowed, which capital allocation line (CAL) should the investor choose to combine with the efficient frontier? I. The one with the highest reward-to-variability ratio. II. The one that will maximize his utility. III. The one with the steepest slope. IV. The one with the lowest slope.

(Multiple Choice)

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Question 69

Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10\% 8\% 2 0.20 13\% 7\% 3 0.20 12\% 6\% 4 0.30 14\% 9\% 5 0.20 15\% 8\% The coefficient of correlation between A and B is

(Multiple Choice)

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Question 70

A statistic that measures how the returns of two risky assets move together is:

(Multiple Choice)

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Question 71

Consider two perfectly negatively correlated risky securities A and B. A has an expected rate of return of 12% and a standard deviation of 17%. B has an expected rate of return of 9% and a standard deviation of 14%. The weights of A and B in the global minimum variance portfolio are _ and _, respectively.

(Multiple Choice)

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Question 72

Given an optimal risky portfolio with expected return of 12%, standard deviation of 26%, and a risk free rate of 5%, what is the slope of the best feasible CAL?

(Multiple Choice)

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Question 73

Other things equal, diversification is most effective when

(Multiple Choice)

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Question 74

A two-asset portfolio with a standard deviation of zero can be formed when

(Multiple Choice)

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Question 75

When two risky securities that are positively correlated but not perfectly correlated are held in a portfolio,

(Multiple Choice)

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Question 76

Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10\% 8\% 2 0.20 13\% 7\% 3 0.20 12\% 6\% 4 0.30 14\% 9\% 5 0.20 15\% 8\% Which of the following portfolio(s) is(are) on the efficient frontier?

As the number of securities in a portfolio is increased, what happens to the average portfolio standard deviation?

Consider the following probability distribution for stocks C and D: State Probability Return on Stock C Return on Stock D 1 0.30 7\% -9\% 2 0.50 11\% 14\% 3 0.20 -16\% 26\% The expected rates of return of stocks C and D are _ and _, respectively.

Systematic risk is also referred to as

Unique risk is also referred to as

Market risk is also referred to as

Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10\% 8\% 2 0.20 13\% 7\% 3 0.20 12\% 6\% 4 0.30 14\% 9\% 5 0.20 15\% 8\% The coefficient of correlation between A and B is

A statistic that measures how the returns of two risky assets move together is:

Given an optimal risky portfolio with expected return of 12%, standard deviation of 26%, and a risk free rate of 5%, what is the slope of the best feasible CAL?

Other things equal, diversification is most effective when

A two-asset portfolio with a standard deviation of zero can be formed when

When two risky securities that are positively correlated but not perfectly correlated are held in a portfolio,

The Investment Environment

Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters

Exam 7: Optimal Risky Portfolios

Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10\% 8\% 2 0.20 13\% 7\% 3 0.20 12\% 6\% 4 0.30 14\% 9\% 5 0.20 15\% 8\% Which of the following portfolio(s) is(are) on the efficient frontier?

As the number of securities in a portfolio is increased, what happens to the average portfolio standard deviation?

Consider the following probability distribution for stocks C and D: State Probability Return on Stock C Return on Stock D 1 0.30 7\% -9\% 2 0.50 11\% 14\% 3 0.20 -16\% 26\% The expected rates of return of stocks C and D are _____ and _____, respectively.

Systematic risk is also referred to as

Unique risk is also referred to as

Market risk is also referred to as

Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10\% 8\% 2 0.20 13\% 7\% 3 0.20 12\% 6\% 4 0.30 14\% 9\% 5 0.20 15\% 8\% The coefficient of correlation between A and B is

A statistic that measures how the returns of two risky assets move together is:

Given an optimal risky portfolio with expected return of 12%, standard deviation of 26%, and a risk free rate of 5%, what is the slope of the best feasible CAL?

Other things equal, diversification is most effective when

A two-asset portfolio with a standard deviation of zero can be formed when

When two risky securities that are positively correlated but not perfectly correlated are held in a portfolio,

The Investment Environment

Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters

Consider the following probability distribution for stocks C and D: State Probability Return on Stock C Return on Stock D 1 0.30 7\% -9\% 2 0.50 11\% 14\% 3 0.20 -16\% 26\% The expected rates of return of stocks C and D are _ and _, respectively.