5 Written questions
5 Matching questions
 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%  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%  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%  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  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%
 a D. 7.95%
 b C. 21.4%
 c B. Stock B is riskier
 d B. 71%
 e C. 12%
5 Multiple choice questions
 B. Located on the capital market line to those located on the efficient frontier
 D. 1.0
 B. 10.8%
 B. 0.75
 D. 0.69
5 True/False questions

86. Which stock is riskier to a nondiversified 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 
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% 
27. Rewardtovariability 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 
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 
56. Diversification can reduce or eliminate __________ risk.
a. All
b. Systematic
c. Nonsystematic
d. Only an insignificant → D. Unique risk, diversifiable risk