Question 1

Which of the following statements is FALSE?

Accepted Answer

A) The covariance and correlation allow us to measure the co-movement of returns. 
B) Correlation is the expected product of the deviations of two returns. 
C) Because the stocks' prices do not move identically, some of the risk is averaged out in a portfolio. 
D) The amount of risk that is eliminated in a portfolio depends on the degree to which the stocks face common risks and their prices move together. 
A) The covariance and correlation allow us to measure the co-movement of returns. 
B) Correlation is the expected product of the deviations of two returns. 
C) Because the stocks' prices do not move identically, some of the risk is averaged out in a portfolio. 
D) The amount of risk that is eliminated in a portfolio depends on the degree to which the stocks face common risks and their prices move together.

Question 2

A portfolio has 30% of its value in IBM shares and the rest in Microsoft (MSFT). The volatility of IBM and MSFT are 35% and 30%, respectively, and the correlation between IBM and MSFT is 0.5. What is the standard deviation of the portfolio?

Accepted Answer

A) 23.61% 
B) 27.78% 
C) 31.95% 
D) 30.56% 
A) 23.61% 
B) 27.78% 
C) 31.95% 
D) 30.56%

Question 3

The beta of the market portfolio is ________.

Accepted Answer

A) 0 
B) -1 
C) 2 
D) 1 
A) 0 
B) -1 
C) 2 
D) 1

Question 4

A portfolio has 45% of its value in IBM shares and the rest in Microsoft (MSFT). The volatility of IBM and MSFT are 33% and 35%, respectively, and the correlation between IBM and MSFT is 0. What is the standard deviation of the portfolio?

Accepted Answer

A) 19.45% 
B) 27.96% 
C) 34.04% 
D) 24.31% 
A) 19.45% 
B) 27.96% 
C) 34.04% 
D) 24.31%

Which of the following statements is FALSE?

A portfolio has 30% of its value in IBM shares and the rest in Microsoft (MSFT). The volatility of IBM and MSFT are 35% and 30%, respectively, and the correlation between IBM and MSFT is 0.5. What is the standard deviation of the portfolio?

The beta of the market portfolio is ________.

A portfolio has 45% of its value in IBM shares and the rest in Microsoft (MSFT). The volatility of IBM and MSFT are 33% and 35%, respectively, and the correlation between IBM and MSFT is 0. What is the standard deviation of the portfolio?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: an Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bonds

Stock Valuation

Investment Decision Rules

Fundamentals of Capital Budgeting

Stock Valuation: a Second Look

Risk and Return in Capital Markets

The Cost of Capital

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modeling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Option Applications and Corporate Finance

Mergers and Acquisitions

International Corporate Finance

Leasing

Insurance and Risk Management

Corporate Governance

Filters

Exam 12: Systematic Risk and the Equity Risk Premium

Which of the following statements is FALSE?

A portfolio has 30% of its value in IBM shares and the rest in Microsoft (MSFT). The volatility of IBM and MSFT are 35% and 30%, respectively, and the correlation between IBM and MSFT is 0.5. What is the standard deviation of the portfolio?

The beta of the market portfolio is ________.

A portfolio has 45% of its value in IBM shares and the rest in Microsoft (MSFT). The volatility of IBM and MSFT are 33% and 35%, respectively, and the correlation between IBM and MSFT is 0. What is the standard deviation of the portfolio?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: an Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bonds

Stock Valuation

Investment Decision Rules

Fundamentals of Capital Budgeting

Stock Valuation: a Second Look

Risk and Return in Capital Markets

The Cost of Capital

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modeling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Option Applications and Corporate Finance

Mergers and Acquisitions

International Corporate Finance

Leasing

Insurance and Risk Management

Corporate Governance

Filters