Exam 7: Optimal Risky Portfolios

Consider the following probability distribution for stocks C and D: If you invest 25% of your money in C and 75% in D, what would be your portfolio's expected rate of return and standard deviation?

Consider the following probability distribution for stocks A and B: If you invest 40% of your money in A and 60% in B, what would be your portfolio's expected rate of return and standard deviation?

As the number of securities in a portfolio is increased, what happens to the average portfolio standard deviation?

Security X has expected return of 7% and standard deviation of 14%.Security Y has expected return of 11% and standard deviation of 22%.If the two securities have a correlation coefficient of -0.45, what is their covariance?

Consider the following probability distribution for stocks A and B: The coefficient of correlation between A and B is

Which of the following statement(s) is(are) false regarding the variance of a portfolio of two risky securities? I) The higher the coefficient of correlation between securities, the greater the reduction in the portfolio variance. II) There is a linear relationship between the securities' coefficient of correlation and the portfolio variance. III) The degree to which the portfolio variance is reduced depends on the degree of correlation between securities.

Market risk is also referred to as

Which statement about portfolio diversification is correct?

Given an optimal risky portfolio with expected return of 16%, standard deviation of 20%, and a risk-free rate of 4%, what is the slope of the best feasible CAL?

Portfolio theory as described by Markowitz is most concerned with

Security X has expected return of 14% and standard deviation of 22%.Security Y has expected return of 16% and standard deviation of 28%.If the two securities have a correlation coefficient of 0.8, what is their covariance?

Firm-specific risk is also referred to as

The capital allocation line provided by a risk-free security and N risky securities is

Consider the following probability distribution for stocks A and B: The standard deviations of stocks A and B are _____ and _____, respectively.

Consider two perfectly negatively correlated risky securities, K and L.K has an expected rate of return of 13% and a standard deviation of 19%.L has an expected rate of return of 10% and a standard deviation of 16%. The weights of K and L in the global minimum variance portfolio are _____ and _____, respectively.

Consider the following probability distribution for stocks A and B: The coefficient of correlation between A and B is

Consider the following probability distribution for stocks C and D: The coefficient of correlation between C and D is

Consider two perfectly negatively correlated risky securities, K and L.K has an expected rate of return of 13% and a standard deviation of 19%.L has an expected rate of return of 10% and a standard deviation of 16%. The risk-free portfolio that can be formed with the two securities will earn _____ rate of return.

Which of the following is not a source of systematic risk?

Which one of the following portfolios cannot lie on the efficient frontier as described by Markowitz?