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5 Written questions

5 Matching questions

  1. 41. An investor can design a risky portfolio based on two stocks, A and B. The standard deviation of return on stock A is 20% while the standard deviation on stock B is 15%. The correlation coefficient between the return on A and B is 0%. The standard deviation of return on the minimum variance portfolio is __________.
    a. 0%
    b. 6%
    c. 12%
    d. 17%
  2. 38. The standard deviation of the returns on the optimal risky portfolio is __________.
    a. 25.5%
    b. 22.3%
    c. 21.4%
    d. 20.7%
  3. 36. The proportion of the optimal risky portfolio that should be invested in stock B is approximately __________.
    a. 29%
    b. 71%
    c. 44%
    d. 56%
  4. 85. Which stock is riskier for an investor currently holding his portfolio in a well diversified portfolio of common stock?
    a. Stock A is riskier
    b. Stock B is riskier
    c. Both stocks are equally risky
    d. You cannot tell from the information given
  5. 43. Semitool Corp has an expected excess return of 5% for next year. However for every unexpected 1% change in the market, Semitool's return responds by a factor of 1.3. Suppose it turns out the economy and the stock market do better than expected by 1.5% and Semitool's products experience more rapid growth than anticipated, pushing up the stock price by another 1%. Based on this information what was Semitool's actual excess return?
    a. 7.50%
    b. 6.95%
    c. 8.25%
    d. 7.95%
  1. a D. 7.95%
  2. b C. 21.4%
  3. c B. Stock B is riskier
  4. d B. 71%
  5. e C. 12%

5 Multiple choice questions

  1. B. Located on the capital market line to those located on the efficient frontier
  2. D. -1.0
  3. B. 10.8%
  4. B. 0.75
  5. D. 0.69

5 True/False questions

  1. 86. Which stock is riskier to a non-diversified investor who puts all his money in only one of these stocks?
    a. Stock A is riskier
    b. Stock B is riskier
    c. Both stocks are equally risky
    d. You cannot tell from the information given
    A. Stock's standard deviation

          

  2. 16. Consider an investment opportunity set formed with two securities that are perfectly negatively correlated. The global minimum variance portfolio has a standard deviation that is always __________.
    a. Equal to the sum of the securities standard deviations
    b. Equal to -1
    c. Equal to 0
    d. Greater than 0
    C. 85%

          

  3. 27. Reward-to-variability ratios are ________ on the capital market line than (as) on the efficient frontier.
    a. Lower
    b. Higher
    c. The same
    d. Indeterminate
    B. Up, left

          

  4. 2. The _______ decision should take precedence over the _____ decision.
    a. Asset allocation, stock selection
    b. Choice of fad, mutual fund selection
    c. Stock selection, asset allocation
    d. Stock selection, mutual fund selection
    A. Asset allocation, stock selection

          

  5. 56. Diversification can reduce or eliminate __________ risk.
    a. All
    b. Systematic
    c. Non-systematic
    d. Only an insignificant
    D. Unique risk, diversifiable risk

          

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