Exam 11: Optimal Portfolio Choice and the Capital Asset Pricing Model

Use the table for the question(s) below. Consider the following covariances between securities: -What is the variance on a portfolio that has $2,000 invested in Duke Energy,$3,000 invested in Microsoft,and $5,000 invested in Wal-Mart stock?

Suppose over the next year Ball has a return of 12.5%,Lowes has a return of 20%,and Abbott Labs has a return of -10%.The return on your portfolio over the year is:

The efficient portfolio provides the benchmark that identifies ________ present in the economy.

Which of the following statements is false?

The risk of a portfolio depends on how each stock's ________ moves in relation to it.

Which of the following statements is false?

Suppose over the next year Ball has a return of 12.5%,Lowes has a return of 20%,and Abbott Labs has a return of -10%.The weight of Lowes in your portfolio after one year is closest to:

Use the table for the question(s) below. Consider the following returns: -The covariance between Lowes' and Home Depot's returns is closest to:

Which of the following statements is false?

Use the information for the question(s) below. You are presently invested in the Luther Fund, a broad-based mutual fund that invests in stocks and other securities. The Luther Fund has an expected return of 14% and a volatility of 20%. Risk-free Treasury Bills are currently offering returns of 4%. You are considering adding a precious metals fund to your current portfolio. The metals fund has an expected return of 10%, a volatility of 30%, and a correlation of -.20 with the Luther Fund. -The beta of the precious metals fund with the Luther Fund is closest to:

Which of the following statements is false?

Use the table for the question(s) below. Consider the following expected returns, volatilities, and correlations: -Consider a portfolio consisting of only Duke Energy and Microsoft. The percentage of your investment (portfolio weight)that you would place in Duke Energy stock to achieve a risk-free investment would be closest to:

CAPM states that the investment's expected return should match the expected return of the ________ portfolio with the same level of market risk.

Suppose over the next year Ball has a return of 12.5%,Lowes has a return of 20%,and Abbott Labs has a return of -10%.The weight of Ball Corporation in your portfolio after one year is closest to:

Which of the following statements is false?

Which of the following equations is incorrect?

Use the table for the question(s) below. Consider the following returns: -The variance on a portfolio that is made up of equal investments in Lowes and IBM stock is closest to:

Use the table for the question(s) below. Consider the following covariances between securities: -The variance on a portfolio that is made up of a $6,000 investment in Duke Energy stock and a $4,000 investment in Wal-Mart stock is closest to:

Which of the following statements is false?

Use the information for the question(s) below. Suppose that you currently have $250,000 invested in a portfolio with an expected return of 12% and a volatility of 10%. The efficient (tangent) portfolio has an expected return of 17% and a volatility of 12%. The risk-free rate of interest is 5%. -The Sharpe ratio for the efficient portfolio is closest to: