5 Written questions
5 Matching 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?
a. 0.45
b. 0.56
c. 0.65
d. 0.69  67. ____ percent of the variance is explained by this regression
a. 12
b. 35
c. 4.05
d. 80  55. The market value weighted average beta of firms included in the market index will always be ______________.
a. 0
b. Between 0 and 1
c. 1
d. There is no particular rule concerning the average beta of firms included in the market index  4. Based on the outcomes in the table below choose which of the statements is/are correct:
I. The covariance of Security A and Security B is zero
II. The correlation coefficient between Security A and C is negative
III. The correlation coefficient between Security B and C is positive
a. I only
b. I and II only
c. II and III only
d. I, II and III  35. The riskfree rate of return is 10%. The standard deviation of return on the optimal risky portfolio is__________.
a. 0%
b. 5%
c. 7%
 a D. 0.69
 b B. 5%
 c A. 12
 d C. 1
 e B. I and II only
5 Multiple choice questions
 C. 1.32
 B. Systematic risk, nondiversifiable risk
 D. 16%
 C. 1.0
 C. 21.4%
5 True/False questions

8. The ________ is equal to the square root of the systematic variance divided by the total variance.
a. Covariance
b. Correlation coefficient
c. Standard deviation
d. Rewardtovariability ratio → B. Correlation coefficient 
14. The risk that can be diversified away is ___________.
a. Beta
b. Firm specific risk
c. Market risk
d. Systematic risk → B. Firm specific risk 
78. You are considering adding a new security to your portfolio. In order to decide whether you should add the security you need to know the security's
I. expected return
II. standard deviation
III. correlation with your portfolio
a. I only
b. I and II only
c. I and III only
d. I, II and III → A. Stock's standard deviation 
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 → A. N / (n1) 
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 → D. Usually positive, but are not restricted in any particular way