Question 1

Portfolio Return Year to date, Company Y had earned a 7 percent return. During the same time period, Company R earned 9.25 percent and Company C earned -2.25 percent. If you have a portfolio made up of 35 percent Y, 40 percent R, and 25 percent C, what is your portfolio return?

Accepted Answer

A)  4.6667% 
B)  6.1667% 
C)  5.5875% 
D)  12.6625%

Question 2

Which of the following is correct?

Accepted Answer

A)  Investors can reduce the risk in their portfolio by investing in international stocks since they tend to have low correlation with our own stock market. 
B)  Combining both stocks and bonds will likely reduce risk in a portfolio because the two assets have low correlation. 
C)  Your optimal portfolio is an efficient portfolio with your desired risk level. 
D)  All of these statements are correct.

Question 3

FedEx Corp stock ended the previous year at $113.39 per share. It paid a $0.40 per share dividend last year. It ended last year at $126.69. If you owned 300 shares of FedEx, what was your dollar return and percent return?

Accepted Answer

A)  $3,990; 11.73% 
B)  $4,110; 12.08% 
C)  $4,250; 12.29% 
D)  $2,009; 9.13%

Question 4

Which of the following makes this a true statement: The shape of the efficient frontier implies that

Accepted Answer

A)  diminishing returns apply to risk-taking in the investment world. 
B)  increasing returns apply to risk-taking in the investment world. 
C)  returns are not impacted by risk-taking in the investment world. 
D)  None of these complete the sentence to make it true.

Question 5

Which of the following statements is correct regarding total risk?

Accepted Answer

A)  A conglomerate will have more total risk than a firm that has one line of business. 
B)  All firms have about the same total risk because they are all exposed to the same market risk. 
C)  Total risk can be quantified by measuring the covariance between the firm and the overall market. 
D)  None of these statements are correct.

Question 6

Which of the following statements is correct?

Accepted Answer

A)  A dominant portfolio has the best risk-return relationship as compared to other portfolios. 
B)  It is not necessarily true that when an investment achieves a high return that it is risky. 
C)  A low standard deviation means that the investment is less likely to achieve high returns; which means that is more risky. 
D)  None of these statements are correct.

Question 7

Sally wants to invest in only two stocks. Which pair of stocks should Sally select?

Accepted Answer

A)  Stocks A and B move downward at the same time. 
B)  Stocks C and D move in opposite directions at the same time. 
C)  Stocks E and F move upward at the same time. 
D)  Stocks G and H move randomly at the same time.

Question 8

Portfolio Return At the beginning of the month, you owned $8,000 of Company G, $8,000 of Company S, and $3,000 of Company N. The monthly returns for Company G, Company S, and Company N were 7.80 percent, 1.50 percent, and -0.75 percent. What is your portfolio return?

Accepted Answer

A)  2.85% 
B)  3.79% 
C)  4.03% 
D)  8.55%

Question 9

Which of the following is incorrect?

Accepted Answer

A)  It is possible to combine assets that all move in the exact same fashion over time and gain the benefits of diversification. 
B)  Adding long-term Treasury bonds to a stock portfolio will reduce the risk of the portfolio. 
C)  The optimal portfolio is the one with the lowest amount of risk. 
D)  All of these statements are correct.

Question 10

Investment Return TechNo stock was $25 per share at the end of last year. Since then, it paid a $1.50 per share dividend last year. The stock price is currently $23. If you owned 300 shares of TechNo, what was your percent return?

Accepted Answer

A)  -2% 
B)  -8% 
C)  6% 
D)  6.5%

Question 11

Which of the following are investor diversification problems?

Accepted Answer

A)  Many employees hold mostly their employer's stocks as investments. 
B)  Many households hold relatively few individual stocks-the median is three. 
C)  Investors seem to prefer local firms thereby limiting diversification opportunities. 
D)  All of these are investor diversification problems.

Question 12

If you own 400 shares of Xerox at $15.00, 500 shares of Qwest at $10.00, and 350 shares of Liz Claiborne at $45.00, what are the portfolio weights of each stock?

Accepted Answer

A)  Weight of Xerox: 22.43%; Weight of Qwest: 11.09%; Weight of Liz Claiborne: 58.88% 
B)  Weight of Xerox: 34.67%; Weight of Qwest: 16.69%; Weight of Liz Claiborne: 48.64% 
C)  Weight of Xerox: 22.43%; Weight of Qwest: 18.69%; Weight of Liz Claiborne: 58.88% 
D)  Weight of Xerox: 36.98%; Weight of Qwest: 61.07%; Weight of Liz Claiborne: 1.95%

Question 13

Which of the following statements is correct?

Accepted Answer

A)  For a few firms in completely different industries, it is possible to have a correlation that approaches -2.0. 
B)  A correlation of -1.0 means that the two firms are uncorrelated or that they have no relationship. 
C)  Most common stocks have low correlation with each other since they operate in different industries. 
D)  None of these statements are correct.

Question 14

To find the percentage return of an investment,

Accepted Answer

A)  multiply the dollar return by the investment's value at the beginning of the period. 
B)  divide the dollar return by the investment's value at the beginning of the period. 
C)  multiply the dollar return by the investment's value at the end of the period. 
D)  divide the dollar return by the investment's value at the end of the period.

Question 15

What is the source of firm-specific risk? What is the source of market risk?

Accepted Answer

The answer of What is the source of firm-specific risk?...

Question 16

Total Risk Rank the following three stocks by their level of total risk, highest to lowest. Rail Haul has an average return of 10 percent and standard deviation of 15 percent. The average return and standard deviation of Idol Staff are 15 percent and 25 percent; and of Poker-R-Us are 12 percent and 35 percent.

Accepted Answer

A)  Rail Haul, Poker-R-Us, Idol Staff 
B)  Idol Staff, Poker-R-Us, Rail Haul 
C)  Poker-R-Us, Idol Staff, Rail Haul 
D)  Idol Staff, Rail Haul, Poker-R-Us

Question 17

Year-to-date, Oracle had earned a 15.0 percent return. During the same time period, Valero Energy earned -12.96 percent and McDonald's earned 1.80 percent. If you have a portfolio made up of 50 percent Oracle, 10 percent Valero Energy, and 40 percent McDonald's, what is your portfolio return?

Accepted Answer

A)  6.14% 
B)  4.86% 
C)  5.86% 
D)  6.92%

Question 18

Compute the standard deviation of Kohl's monthly returns. The past five monthly returns for Kohl's are 5.55 percent, 8.62 percent, -4.44 percent, -1.52 percent, and 9.75 percent.

Accepted Answer

A)  4.92% 
B)  5.07% 
C)  6.28% 
D)  6.12%

Question 19

This is a measure summarizing the overall past performance of an investment.

Accepted Answer

A)  average return 
B)  dollar return 
C)  market return 
D)  percentage return

Question 20

Portfolio Weights You have $45,050 to invest. You want to purchase shares of Company Air at $10.25, Company B at $15.10, and Company F at $9.05. How many shares of each company should you purchase so that your portfolio consists of 30 percent Company A, 50 percent Company B, and 20 percent Company F? Report only whole stock shares.

Accepted Answer

A)  Company A = 30 shares, Company B = 50 shares, Company F = 20 shares 
B)  Company A = 44 shares, Company B = 30 shares, Company F = 50 shares 
C)  Company A = 308 shares, Company B = 755 shares, Company F = 181 shares 
D)  Company A = 1323 shares, Company B = 1490 shares, Company F = 993 shares

Exam 9: Characterizing Risk and Return

Portfolio Return Year to date, Company Y had earned a 7 percent return. During the same time period, Company R earned 9.25 percent and Company C earned -2.25 percent. If you have a portfolio made up of 35 percent Y, 40 percent R, and 25 percent C, what is your portfolio return?

Which of the following is correct?

FedEx Corp stock ended the previous year at $113.39 per share. It paid a $0.40 per share dividend last year. It ended last year at $126.69. If you owned 300 shares of FedEx, what was your dollar return and percent return?

Which of the following makes this a true statement: The shape of the efficient frontier implies that

Which of the following statements is correct regarding total risk?

Which of the following statements is correct?

Sally wants to invest in only two stocks. Which pair of stocks should Sally select?

Portfolio Return At the beginning of the month, you owned $8,000 of Company G, $8,000 of Company S, and $3,000 of Company N. The monthly returns for Company G, Company S, and Company N were 7.80 percent, 1.50 percent, and -0.75 percent. What is your portfolio return?

Which of the following is incorrect?

Investment Return TechNo stock was $25 per share at the end of last year. Since then, it paid a $1.50 per share dividend last year. The stock price is currently $23. If you owned 300 shares of TechNo, what was your percent return?

Which of the following are investor diversification problems?

If you own 400 shares of Xerox at $15.00, 500 shares of Qwest at $10.00, and 350 shares of Liz Claiborne at $45.00, what are the portfolio weights of each stock?

Which of the following statements is correct?

To find the percentage return of an investment,

What is the source of firm-specific risk? What is the source of market risk?

Year-to-date, Oracle had earned a 15.0 percent return. During the same time period, Valero Energy earned -12.96 percent and McDonald's earned 1.80 percent. If you have a portfolio made up of 50 percent Oracle, 10 percent Valero Energy, and 40 percent McDonald's, what is your portfolio return?

Compute the standard deviation of Kohl's monthly returns. The past five monthly returns for Kohl's are 5.55 percent, 8.62 percent, -4.44 percent, -1.52 percent, and 9.75 percent.

This is a measure summarizing the overall past performance of an investment.