5 Written questions
5 Matching questions
- 28. A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 24% while stock B has a standard deviation of return of 18%. Stock A comprises 60% of the portfolio while stock B comprises 40% of the portfolio. If the variance of return on the portfolio is .0380, the correlation coefficient between the returns on A and B is __________.
- 12. The variance of a portfolio of risky securities is __________.
a. The sum of the securities' covariances
b. The sum of the securities' variances
c. The weighted sum of the securities' covariances
d. The weighted sum of the securities' variances
- 24. The term "complete portfolio" refers to a portfolio consisting of __________________.
a. The risk-free asset combined with at least one risky asset
b. The market portfolio combined with the minimum variance portfolio
c. Securities from domestic markets combined with securities from foreign markets
d. Common stocks combined with bonds
- 63. You find that the annual standard deviation of a stock's returns is equal to 25%. For a 3 year holding period the standard deviation of your total return would equal ________.
- 54. A security's beta coefficient will be negative if _____________.
a. Its returns are negatively correlated with market index returns
b. Its returns are positively correlated with market index returns
c. Its stock price has historically been very stable
d. Market demand for the firm's shares is very low
- a C. The weighted sum of the securities' covariances
- b C. 43%
- c A. The risk-free asset combined with at least one risky asset
- d A. 0.583
- e A. Its returns are negatively correlated with market index returns
5 Multiple choice questions
- C. 1.0
- A. Lower
- B. Correlation coefficient
- C. III and IV only
- A. Stock's standard deviation
5 True/False questions
84. Which of the following is the most likely reward to variability ratio for a capital allocation line that is optimal, assuming all ratios are generated from the same set of potential assets?
d. 0.69 → D. I, II and III
5. Asset A has an expected return of 15% and a reward-to-variability ratio of .4. Asset B has an expected return of 20% and a reward-to-variability ratio of .3. A risk-averse investor would prefer a portfolio using the risk-free asset and _______.
a. Asset A
b. Asset B
c. No risky asset
d. Can't tell from the data given → A. Asset A
71. Which of the following correlations coefficients will produce the least diversification benefit?
d. 0.8 → B. -0.9
76. A portfolio of stocks fluctuates when the treasury yields change. Since this risk can not be eliminated through diversification, it is called
a. Firm specific risk
b. Systematic risk
c. Unique risk
d. None of the above → A. 0.583
6. Adding additional risky assets to the investment opportunity set will generally move the efficient frontier _____ and to the _______.
a. Up, right
b. Up, left
c. Down, right
d. Down, left → B. Up, left