Question 1

Based on the capital asset pricing model, investors are compensated based on which of the following? I. market risk premium
II)  portfolio standard deviation
III)  portfolio beta
IV)  risk-free rate

Accepted Answer

A)   I and III only
B)   II and IV only
C)   I, II, and III only
D)   I, III, and IV only
E)   I, II, III, and IVF) A) and B)
G) A) and C)

Question 2

The beta of a risky portfolio cannot be less than _____ nor greater than _____.

Accepted Answer

A)   0; 1
B)   1; the market beta
C)   the lowest individual beta in the portfolio; market beta
D)   the market beta; the highest individual beta in the portfolio
E)   the lowest individual beta in the portfolio; the highest individual beta in the portfolioF) C) and E)
G) B) and E)

Question 3

What is the beta of the following portfolio?

Accepted Answer

A)   1.08
B)   1.14
C)   1.17
D)   1.21
E)   1.23F) D) and E)
G) A) and E)

Question 4

Given the following information, what is the standard deviation of the returns on this stock?

Accepted Answer

A)   7.38 percent
B)   7.55 percent
C)   7.80 percent
D)   7.91 percent
E)   8.06 percentF) A) and B)
G) B) and E)

Question 5

You own a portfolio that is invested 38 percent in stock A, 43 percent in stock B, and the remainder in stockC. The expected returns on these stocks are 10.7 percent, 15.4 percent, and 9.1 percent, respectively. What is the expected return on the portfolio?

Accepted Answer

A)   10.55 percent
B)   11.02 percent
C)   11.67 percent
D)   12.42 percent
E)   13.01 percentF) A) and B)
G) B) and E)

Question 6

A risky security has less risk than the overall market. What must the beta of this security be?

Accepted Answer

A)   0
B)   > 0 but 
C)   1
D)   > 1
E)   The beta cannot be determined based on the information provided.F) A) and E)
G) B) and E)

Question 7

Blue Lagoon stock is expected to produce the following returns given the various states of the economy. What is the expected return on this stock?

Accepted Answer

A)   3.90 percent
B)   4.23 percent
C)   4.51 percent
D)   5.47 percent
E)   5.92 percentF) B) and D)
G) B) and C)

Question 8

Stock A has an expected return of 15.6 percent and a beta of 1.27. Stock B has an expected return of 11.4 percent and a beta of 0.89. Both stocks have the same reward-to-risk ratio. What is the risk-free rate?

Accepted Answer

A)   1.56 percent
B)   2.28 percent
C)   2.79 percent
D)   3.35 percent
E)   3.92 percentF) None of the above
G) A) and D) A

Question 9

You would like to create a portfolio that is equally invested in a risk-free asset and two stocks. One stock has a beta of 1.14. What does the beta of the second stock have to be if you want the portfolio to be equally as risky as the overall market?

Accepted Answer

A)   0.62
B)   0.97
C)   1.23
D)   1.55
E)   1.86F) B) and D)
G) B) and C)

Question 10

Global Importers predicted that its earnings per share for the year would be $1.86. Today, the firm released its earnings report and the earnings per share turned out to be $1.99 per share. In response to the earnings report, the price per share of Global Importers stock declined by 3.4 percent. Explain how the market price can decrease when the announced earnings were higher than the firm predicted.

Accepted Answer

The stock market must have anticipated e...

Question 11

A stock has a beta of 1.68, the expected return on the market is 14.72, and the risk-free rate is 4.65. What must the expected return on this stock be?

Accepted Answer

A)   15.67 percent
B)   16.75 percent
C)   17.10 percent
D)   18.46 percent
E)   21.57 percentF) C) and D)
G) None of the above

Question 12

You own a $210,000 portfolio that is invested in stock A andB. The portfolio beta is equal to the market beta. Stock A has an expected return of 18.7 percent and has a beta of 1.42. Stock B has a beta of 0.88. What is the value of your investment in stock A?

Accepted Answer

A)   $38,600
B)   $42,333
C)   $44,499
D)   $46,666
E)   $47,200F) A) and E)
G) All of the above

Question 13

You own a $46,000 portfolio comprised of four stocks. The values of stocks A, B, and C are $5,600, $16,700, and $11,400, respectively. What is the portfolio weight of stock D?

Accepted Answer

A)   26.74 percent
B)   28.39 percent
C)   30.33 percent
D)   32.10 percent
E)   32.58 percentF) C) and D)
G) B) and E)

Question 14

LKP, Inc., stock has an expected return of 14.47 percent. The risk-free rate is 3.8 percent and the market risk premium is 8.6 percent. What is the stock's beta?

Accepted Answer

A)   1.19
B)   1.21
C)   1.24
D)   1.28
E)   1.32F) B) and D)
G) A) and B) C

Question 15

You own a portfolio that is invested as follows: $11,600 of stock A, $7,800 of stock B, $14,900 of stock C, and $3,200 of stock D. What is the portfolio weight of stock C?

Accepted Answer

A)   38.47 percent
B)   39.73 percent
C)   41.26 percent
D)   41.94 percent
E)   43.08 percentF) A) and E)
G) None of the above B

Question 16

Stock Y has a beta of 1.28 and an expected return of 13.7 percent. Stock Z has a beta of 1.02 and an expected return of 11.4 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other?

Accepted Answer

A)   2.38 percent
B)   2.76 percent
C)   3.23 percent
D)   3.69 percent
E)   4.08 percentF) None of the above
G) A) and E)

Question 17

Given the following information, what is the expected return on a portfolio that is invested 35 percent in Stock A, 45 percent in stock B, and the balance in Stock C?

Accepted Answer

A)   11.84 percent
B)   12.53 percent
C)   12.91 percent
D)   13.46 percent
E)   13.87 percentF) A) and D)
G) A) and C)

Question 18

You have compiled the following information on your investments. What rate of return should you expect to earn on this portfolio?

Accepted Answer

A)   9.54 percent
B)   9.83 percent
C)   10.01 percent
D)   10.27 percent
E)   10.58 percentF) A) and B)
G) A) and C)

Question 19

Diversifying a portfolio across various sectors and industries might do more than one of the following. However, this diversification must do which one of the following?

Accepted Answer

A)   Increase the expected risk premium
B)   Reduce the beta of the portfolio to zero
C)   Increase the security's risk premium
D)   Reduce the portfolio's systematic risk level
E)   Reduce the portfolio's unique risksF) A) and D)
G) B) and C)

Question 20

Stock J has a beta of 1.47 and an expected return of 15.8 percent. Stock K has a beta of 1.05 and an expected return of 11.9 percent. What is the risk-free rate if these securities both plot on the security market line?

Accepted Answer

A)   2.15 percent
B)   3.34 percent
C)   3.88 percent
D)   4.41 percent
E)   4.68 percentF) D) and E)
G) B) and D)

Exam 11: Risk and Return

Based on the capital asset pricing model, investors are compensated based on which of the following? I. market risk premium II) portfolio standard deviation III) portfolio beta IV) risk-free rate

Correct Answer
verified

The beta of a risky portfolio cannot be less than _ nor greater than _.

Correct Answer
verified

What is the beta of the following portfolio?

Correct Answer
verified

Given the following information, what is the standard deviation of the returns on this stock?

Correct Answer
verified

You own a portfolio that is invested 38 percent in stock A, 43 percent in stock B, and the remainder in stockC. The expected returns on these stocks are 10.7 percent, 15.4 percent, and 9.1 percent, respectively. What is the expected return on the portfolio?

Correct Answer
verified

A risky security has less risk than the overall market. What must the beta of this security be?

Correct Answer
verified

Blue Lagoon stock is expected to produce the following returns given the various states of the economy. What is the expected return on this stock?

Correct Answer
verified

Stock A has an expected return of 15.6 percent and a beta of 1.27. Stock B has an expected return of 11.4 percent and a beta of 0.89. Both stocks have the same reward-to-risk ratio. What is the risk-free rate?

Correct Answer
verified
A

You would like to create a portfolio that is equally invested in a risk-free asset and two stocks. One stock has a beta of 1.14. What does the beta of the second stock have to be if you want the portfolio to be equally as risky as the overall market?

Correct Answer
verified

Correct Answer
verified
The stock market must have anticipated e...
View Answer

A stock has a beta of 1.68, the expected return on the market is 14.72, and the risk-free rate is 4.65. What must the expected return on this stock be?

Correct Answer
verified

You own a $210,000 portfolio that is invested in stock A andB. The portfolio beta is equal to the market beta. Stock A has an expected return of 18.7 percent and has a beta of 1.42. Stock B has a beta of 0.88. What is the value of your investment in stock A?

Correct Answer
verified

You own a $46,000 portfolio comprised of four stocks. The values of stocks A, B, and C are $5,600, $16,700, and $11,400, respectively. What is the portfolio weight of stock D?

Correct Answer
verified

LKP, Inc., stock has an expected return of 14.47 percent. The risk-free rate is 3.8 percent and the market risk premium is 8.6 percent. What is the stock's beta?

Correct Answer
verified
C

You own a portfolio that is invested as follows: $11,600 of stock A, $7,800 of stock B, $14,900 of stock C, and $3,200 of stock D. What is the portfolio weight of stock C?

Correct Answer
verified
B

Stock Y has a beta of 1.28 and an expected return of 13.7 percent. Stock Z has a beta of 1.02 and an expected return of 11.4 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other?

Correct Answer
verified

Given the following information, what is the expected return on a portfolio that is invested 35 percent in Stock A, 45 percent in stock B, and the balance in Stock C?

Correct Answer
verified

You have compiled the following information on your investments. What rate of return should you expect to earn on this portfolio?

Correct Answer
verified

Diversifying a portfolio across various sectors and industries might do more than one of the following. However, this diversification must do which one of the following?

Correct Answer
verified

Stock J has a beta of 1.47 and an expected return of 15.8 percent. Stock K has a beta of 1.05 and an expected return of 11.9 percent. What is the risk-free rate if these securities both plot on the security market line?

Correct Answer
verified

Exam 11: Risk and Return

Based on the capital asset pricing model, investors are compensated based on which of the following? I. market risk premium II) portfolio standard deviation III) portfolio beta IV) risk-free rate

Correct AnswerverifiedShow Answer

The beta of a risky portfolio cannot be less than _____ nor greater than _____.

Correct AnswerverifiedShow Answer

What is the beta of the following portfolio?

Correct AnswerverifiedShow Answer

Given the following information, what is the standard deviation of the returns on this stock?

Correct AnswerverifiedShow Answer

You own a portfolio that is invested 38 percent in stock A, 43 percent in stock B, and the remainder in stockC. The expected returns on these stocks are 10.7 percent, 15.4 percent, and 9.1 percent, respectively. What is the expected return on the portfolio?

Correct AnswerverifiedShow Answer

A risky security has less risk than the overall market. What must the beta of this security be?

Correct AnswerverifiedShow Answer

Blue Lagoon stock is expected to produce the following returns given the various states of the economy. What is the expected return on this stock?

Correct AnswerverifiedShow Answer

Stock A has an expected return of 15.6 percent and a beta of 1.27. Stock B has an expected return of 11.4 percent and a beta of 0.89. Both stocks have the same reward-to-risk ratio. What is the risk-free rate?

Correct AnswerverifiedA

You would like to create a portfolio that is equally invested in a risk-free asset and two stocks. One stock has a beta of 1.14. What does the beta of the second stock have to be if you want the portfolio to be equally as risky as the overall market?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe stock market must have anticipated e...View AnswerShow Answer

A stock has a beta of 1.68, the expected return on the market is 14.72, and the risk-free rate is 4.65. What must the expected return on this stock be?

Correct AnswerverifiedShow Answer

You own a $210,000 portfolio that is invested in stock A andB. The portfolio beta is equal to the market beta. Stock A has an expected return of 18.7 percent and has a beta of 1.42. Stock B has a beta of 0.88. What is the value of your investment in stock A?

Correct AnswerverifiedShow Answer

You own a $46,000 portfolio comprised of four stocks. The values of stocks A, B, and C are $5,600, $16,700, and $11,400, respectively. What is the portfolio weight of stock D?

Correct AnswerverifiedShow Answer

LKP, Inc., stock has an expected return of 14.47 percent. The risk-free rate is 3.8 percent and the market risk premium is 8.6 percent. What is the stock's beta?

Correct AnswerverifiedC

You own a portfolio that is invested as follows: $11,600 of stock A, $7,800 of stock B, $14,900 of stock C, and $3,200 of stock D. What is the portfolio weight of stock C?

Correct AnswerverifiedB

Stock Y has a beta of 1.28 and an expected return of 13.7 percent. Stock Z has a beta of 1.02 and an expected return of 11.4 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other?

Correct AnswerverifiedShow Answer

Given the following information, what is the expected return on a portfolio that is invested 35 percent in Stock A, 45 percent in stock B, and the balance in Stock C?

Correct AnswerverifiedShow Answer

You have compiled the following information on your investments. What rate of return should you expect to earn on this portfolio?

Correct AnswerverifiedShow Answer

Diversifying a portfolio across various sectors and industries might do more than one of the following. However, this diversification must do which one of the following?

Correct AnswerverifiedShow Answer

Stock J has a beta of 1.47 and an expected return of 15.8 percent. Stock K has a beta of 1.05 and an expected return of 11.9 percent. What is the risk-free rate if these securities both plot on the security market line?

Correct AnswerverifiedShow Answer

Correct Answer
verified

The beta of a risky portfolio cannot be less than _ nor greater than _.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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A

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The stock market must have anticipated e...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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C

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B

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