【正文】 s expected total rate of return after three years? Stock Market Value Expected Annual Return R $2,000 17% S $3,200 8% T $2,800 13% 33 A. %. B. %. C. %. D. %. C Annual rate of return = [2020/8000*(.17) + 3200/8000*(.08) + 2800/8000*(.13)] = %. Return after three years = ()3 1 = % Question ID: 11343 An investor has two stocks in their portfolio, stoc。 7% D. 6%。 6% B. 4%。s expected return? 29 A. %. B. %. C. %. D. %. B Question ID: 11348 Suppose that the correlation between Remba and Labs is 1. In order to construct a zero variance portfolio using only Remba and Labs, what portion of the portfolio should be invested in Remba? A. 21%. B. 28%. C. 39%. D. 61%. D When r1,2 = 1 the risk will actually go to zero at one point. The optimal weighting that drives σ to zero is: W1 = σ2 / (σ1 + σ2) W2 = σ1 / (σ1 + σ2) W1 = .25/ (.16 + .25) = .25/.41 = .61 Question ID: 11337 An investor has two stocks, stock Y and stock Z in their portfolio. What is the standard 30 deviation of the portfolio given the following information about the two stocks? ? σY= 65% ? σZ= 46% ? Cor = ? WY= 60% ? WZ= 40% A. B. C. D. C σ of a 2 stock portfolio = [WY2σY2+WZ2σZ2+2WYWZσYσZrY,Z]1/2 σY,Z=[( )2( )2+( )2( )2+ 2()()()()()]1/2 = [( )()+()()+]1/2 = ( + + )1/2 = ()1/2 = Question ID: 11341 An investor has two stocks, stock Y and stock Z in their portfolio. What is the standard deviation of the portfolio given the following information about the two stocks? ? σY = 75% ? σZ = 49% ? Cor = ? WY = 55% ? WZ = 45% 31 A. B. C. D. D σ of a 2 stock portfolio = [WY2σY2+WZ2σZ2+2WYWZσYσZrY,Z]1/2 σY,Z=[( )2( )2+( )2( )2+ 2()()()()()]1/2 = [( )()+()()+]1/2 = ( + + )1/2 = ()1/2 = Question ID: 11352 An investor owns the following portfolio. What is the investor39。s utility curve. D. the individual39。s utility curve with the highest possible utility. C. the point of tangency between the efficient frontier and the individual39。s standard deviation? A. 100% in Stock A. B. 50% in Stock A and 50% in Stock B. C. 30% in Stock A and 70% in Stock B. D. 100% in Stock B. D Since they are perfectly correlated you get no benefit from diversification. Question ID: 11321 The risk of a portfolio can be reduced only if the rates of return on the securities are: A. not perfectly positively correlated. B. not equal to zero. C. equal to zero. D. perfectly positively correlated. 23 A Any correlation less than 1 (1 being a perfect positive correlation) will lower the overall risk of a portfolio. With a correlation less than 1 when one stock moves up for example the other stock will either move in the same direction a lesser amount or move in the opposite direction if they are negatively correlated. Either way, the difference in the movements of the stocks will lower the overall risk of the portfolio. Question ID: 11322 If the standard deviation of returns for stock 3 is and for stock 4 is and the covariance between the returns of the two stocks is what is the correlation between stocks 3 and 4? A. B. C. D. B Cov3,4 = (r3,4)(SD3)(SD4) = (r3,4)()() ()() = (r3,4) Question ID: 11314 If the standard deviation of returns for stock A is and for stock B is and the covariance between the returns of the two stocks is what is the correlation between stocks A and B? A. B. C. 24 D. D CovA,B = (rA,B)(SDA)(SDB) = (rA,B)()() ()() = (rA,B) Question ID: 11317 If the standard deviation of returns for stock 5 is and for stock 6 is and the covariance between the returns of the two stocks is what is the correlation between stocks 5 and 6? A. B. C. D. D Cov5,6 = (r5,6)(SD5)(SD6) = (r5,6)()() ()() = (r5,6) Question ID: 11323 The efficient frontier represents the set of portfolios that: A. consistently produce betas greater than one. 25 B. consistently produce betas less than one. C. provides the minimum level of risk for every level of return. D. consistently produce positive alphas. C Question ID: 11327 Which of the following statements regarding a portfolio and the efficient frontier is TRUE? A. A portfolio to the left of the efficient frontier is not attainable, while a portfolio to the right of the efficient frontier is not attainable. B. A portfolio to the left of the efficent frontier is not attainable, while a portfolio to the right of the the efficient frontier is inefficient. C. A portfolio to the left of the efficient frontier is inefficient, while a portfolio to the right of the efficient frontier is not attainable. D. A portfolio to the left of the efficient frontier is inefficient, while a portfolio to the right of the efficient frontier is inefficient. B Question ID: 11325 Which one of the following portfolios cannot lie on the efficient frontier? Portfolio Expected Return Standard Deviation A 20% 35% B 11% 13% C 8% 10% D 10% 11% E 8% 9% A. D. B. C. 26 C. B. D. A. B Portfolio C cannot lie on the frontier because it has the same return as Portfolio E, but has more risk. Question ID: 11324 The slope of the efficient frontier: A. decreases steadily as one moves upward on the curve. B. increases steadily as one moves upward on the curve. C. is constant as one moves upward on the curve. D. cannot determine from the information provided. A Question ID: 11336 The optimal portfolio is determined by: A. the point of tangency between a capital allocation line and the investor39。s risk on the basis of the variability of expected returns. C. prefer higher returns t