1.
a.
b.
c.
d.
e.
d
2.
a.
b.
c.
d.
e.
3.
a.
b.
c.
d.
e.
b
4.
a.
b.
c.
d.
e.
5.
a.
b.
c.
d.
e.
6.
I.
a.
b.
c.
d.
e.
7.
I.
II.
III.
IV.
a.
b.
c.
d.
e.
8.
Which one of the following statements is correct concerning the standard deviation of a
portfolio?
The greater the diversification of a portfolio, the greater the standard deviation of that
portfolio.
The standard deviation of a portfolio can often be lowered by changing the weights of
the securities in the portfolio.
Standard deviation is used to determine the amount of risk premium that should apply
to a portfolio.
Standard deviation measures only the systematic risk of a portfolio.
The standard deviation of a portfolio is equal to a weighted average of the standard
deviations of the individual securities held within the portfolio.
a.
b.
c.
d.
e.
e
9.
I.
II.
III.
IV.
a.
b.
c.
d.
e.
10. What is the expected return on a portfolio which is invested 20 percent in stock A, 50
percent in stock B, and 30 percent in stock C?
State of
Probability of
Returns if State Occurs
Economy
State of Economy
Stock A Stock B
Stock C
Boom
Normal
Recession
a.
b.
7.40 percent
8.25 percent
20%
70%
10%
18%
11%
-10%
9%
7%
4%
6%
9%
13%
c.
d.
e.
b
8.33 percent
9.45 percent
9.50 percent
11. What is the portfolio variance if 30 percent is invested in stock S and 70 percent is
invested in stock T?
State of
Economy
Boom
Normal
a.
b.
c.
d.
e.
Probability of
State of Economy
40%
60%
.002220
.004056
.006224
.008080
.098000
12. Your portfolio has a beta of 1.18. The portfolio consists of 15 percent U.S. Treasury
bills, 30 percent in stock A, and 55 percent in stock B. Stock A has a risk-level
equivalent to that of the overall market. What is the beta of stock B?
a. .55
b. 1.10
c. 1.24
d. 1.40
e. 1.60