NAME

Question types


Start with


Question limit

of 86 available terms

5 Written questions

5 Matching questions

  1. 21. Suppose that a stock portfolio and a bond portfolio have a zero correlation. This means that
    a. The returns on the stock and bond portfolio tend to move inversely
    b. The returns on the stock and bond portfolio tend to vary independently of each other
    c. The returns on the stock and bond portfolio tend to move together
    d. The covariance of the stock and bond portfolio will be positive
  2. 17. Market risk is also called __________ and __________.
    a. Systematic risk, diversifiable risk
    b. Systematic risk, nondiversifiable risk
    c. Unique risk, nondiversifiable risk
    d. Unique risk, diversifiable risk
  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. 73. What is the most likely correlation coefficient between a stock index mutual fund and the S&P 500?
    a. -1.0
    b. 0.0
    c. 1.0
    d. 0.50
  5. 74. Investing in two assets with a correlation coefficient of -0.5 will reduce what kind of risk?
    a. Market risk
    b. Non-diversifiable risk
    c. Systematic risk
    d. Unique risk
  1. a B. The returns on the stock and bond portfolio tend to vary independently of each other
  2. b B. 71%
  3. c D. Unique risk
  4. d B. Systematic risk, nondiversifiable risk
  5. e C. 1.0

5 Multiple choice questions

  1. C. Their 401k accounts were not well diversified
  2. C. 21.4%
  3. C. 40%
  4. B. Less than 1
  5. B. 10.8%

5 True/False questions

  1. 75. Investing in two assets with a correlation coefficient of 1.0 will reduce which kind of risk?
    a. Market risk
    b. Unique risk
    c. Unsystematic risk
    d. With a correlation of 1.0, no risk will be reduced
    C. 0.0

          

  2. 18. Firm specific risk is also called __________ and ___________.
    a. Systematic risk, diversifiable risk
    b. Systematic risk, non-diversifiable risk
    c. Unique risk, non-diversifiable risk
    d. Unique risk, diversifiable risk
    B. Systematic risk, nondiversifiable risk

          

  3. 30. A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 35% while stock B has a standard deviation of return of 15%. The correlation coefficient between the returns on A and B is 0.45. Stock A comprises 40% of the portfolio while stock B comprises 60% of the portfolio. The standard deviation of the return on this portfolio is __________.
    a. 23.00%
    b. 19.76%
    c. 18.45%
    d. 17.67%
    B. 19.76%

          

  4. 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 __________.
    a. 0.583
    b. 0.225
    c. 0.327
    d. 0.128
    A. 0.583

          

  5. 71. Which of the following correlations coefficients will produce the least diversification benefit?
    a. -0.6
    b. -1.5
    c. 0.0
    d. 0.8
    C. Average return

          

Create Set