Exhibit 7.11 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) \[\begin{array} { l } \begin{array} { c c } \text { Asset 1 } & \text { Asset 2 } \\ \hline \mathrm { E } \left( \mathrm { R } _ { 1 } \right) = 0.28 & \mathrm { E } \left( \mathrm { R } _ { 2 } \right) = 0.12 \end{array} \\ E \left( \sigma _ { 1 } \right) = 0.15 \quad E \left( \sigma _ { 2 } \right) = 0.11 \\ W _ { 1 } = 0.42 \quad W _ { 2 } = 0.58 \\ \mathrm { r } _ { 1,2 } = 0.7 \\ \end{array}\] -Refer to Exhibit 7.11. Calculate the expected return of the two stock portfolio.

A) 0.107 B) 0.1367 C) 0.1169 D) 0.1872 E) 0.20 A) 0.107 B) 0.1367 C) 0.1169 D) 0.1872 E) 0.20

Exhibit 7.1 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) \[\begin{array} { c c } \text { Asset } ( \mathrm { A } ) & \text { Asset } ( \mathrm { B } ) \\ \hline \mathrm { E } \left( \mathrm { R } _ { \mathrm { A } } \right) = 10 \% & \mathrm { E } \left( \mathrm { R } _ { \mathrm { B } } \right) = 15 \% \\ \left( \sigma _ { \mathrm { A } } \right) = 8 \% & \left( \sigma _ { \mathrm { B } } \right) = 9.5 \% \\ W _ { \mathrm { A } } = 0.25 & W _ { \mathrm { B } } = 0.75 \\ \operatorname { Cov } _ { \mathrm { A } B } = 0.006 \end{array}\] -Refer to Exhibit 7.1. What is the expected return of a portfolio of two risky assets if the expected return E(Ri), standard deviation ($\sigma$i), covariance (COVi,j), and asset weight (Wi) are as shown above?

A) 8.79% B) 12.5% C) 13.75% D) 7.72% E) 12% A) 8.79% B) 12.5% C) 13.75% D) 7.72% E) 12%

Exhibit 7.15 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) \[\begin{array} { c c } \text { Asset } ( \mathrm { A } ) & \text { Asset } ( \mathrm { B } ) \\ \hline \mathrm { E } \left( \mathrm { R } _ { \mathrm { A } } \right) = 14 \% & \mathrm { E } \left( \mathrm { R } _ { \mathrm { B } } \right) = 16 \% \\ \left( \sigma _ { \mathrm { A } } \right) = 13 \% & \left( \sigma _ { \mathrm { B } } \right) = 18 \% \\ \mathrm {~W} _ { \mathrm { A } } = 0.4 & \mathrm {~W} _ { \mathrm { B } } = 0.6 \\ \mathrm { CO } V _ { \mathrm { AB } } = 0.0024 \end{array}\] -Refer to Exhibit 7.15. What is the standard deviation of this portfolio?

A) 10.0% B) 12.5% C) 14.4% D) 15.5% E) 16.0% A) 10.0% B) 12.5% C) 14.4% D) 15.5% E) 16.0%

What is the expected return of the three stock portfolio described below? \[\begin{array} { l c c } \text { Common Stock } & \text { Market Value } & \text { Expected Return } \\ \hline \text { Del ton Inc. } & 50,000 & 10 \% \\ \text { Efley Co. } & 40,000 & 11 \% \\ \text { Grippon Inc. } & 60,000 & 16 \% \end{array}\]

A) 14.89% B) 16.22% C) 12.66% D) 13.85% E) 16.99% A) 14.89% B) 16.22% C) 12.66% D) 13.85% E) 16.99%

Exhibit 7.10 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) \[\begin{array} { c c } \text { Asset } ( \mathrm { A } ) & \text { Asset } ( \mathrm { B } ) \\ \hline \mathrm { E } \left( \mathrm { R } _ { \mathrm { A } } \right) = 16 \% & \mathrm { E } \left( \mathrm { R } _ { \mathrm { B } } \right) = 14 \% \\ \left( \sigma _ { \mathrm { A } } \right) = 3 \% & \left( \sigma _ { \mathrm { B } } \right) = 8 \% \\ W _ { \mathrm { A } } = 0.5 & W _ { \mathrm { B } } = 0.5 \\ \mathrm { COV } V _ { \mathrm { A,B } } = 0.0014 \end{array}\] -Refer to Exhibit 7.10. What is the standard deviation of this portfolio?

A) 3.02% B) 4.88% C) 5.24% D) 5.98% E) 6.52% A) 3.02% B) 4.88% C) 5.24% D) 5.98% E) 6.52%

Exhibit 7A.1 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The general equation for the weight of the first security to achieve the minimum variance (in a two stock portfolio) is given by: WS1U1B11S1U1B0 = [E($\sigma$S1U1B12S1U1B0)S1U1P12S1S1P0 - rS1U1B11.2S1U1B0 E($\sigma$S1U1B11S1U1B0)E($\sigma$S1U1B12S1U1B0)] -[E($\sigma$S1U1B11S1U1B0)S1U1P12S1S1P0 + E($\sigma$S1U1B12S1U1B0)S1U1P12S1S1P0 - 2 rS1U1B11.2S1U1B0E($\sigma$S1U1B11S1U1B0)E($\sigma$S1U1B12S1U1B0)] -Refer to Exhibit 7A.1. Show the minimum portfolio variance for a two stock portfolio when r1.2 = 1.

A) E($\sigma$2) -[E($\sigma$1) -E($\sigma$2)] B) E($\sigma$2) -[E($\sigma$1) + E($\sigma$2)] C) E($\sigma$1) - [E($\sigma$1) -E($\sigma$2)] D) E($\sigma$1) /[E($\sigma$1) + E($\sigma$2)] E) None of the above A) E($\sigma$2) -[E($\sigma$1) -E($\sigma$2)] B) E($\sigma$2) -[E($\sigma$1) + E($\sigma$2)] C) E($\sigma$1) - [E($\sigma$1) -E($\sigma$2)] D) E($\sigma$1) /[E($\sigma$1) + E($\sigma$2)] E) None of the above

Exhibit 7.9 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) \[\begin{array} { c c } \text { Asset } ( \mathrm { A } ) & \text { Asset } ( \mathrm { B } ) \\ \hline \mathrm { E } \left( \mathrm { R } _ { \mathrm { A } } \right) = 18 \% & \mathrm { E } \left( \mathrm { R } _ { \mathrm { B } } \right) = 13 \% \\ \left( \sigma _ { \mathrm { A } } \right) = 7 \% & \left( \sigma _ { \mathrm { B } } \right) = 6 \% \\ W _ { \mathrm { A } } = 0.3 & W _ { \mathrm { B } } = 0.7 \\ \mathrm { COV } V _ { \mathrm { A,B } } = 0.0011 \end{array}\] -Refer to Exhibit 7.9. What is the standard deviation of this portfolio?

A) 5.16% B) 5.89% C) 6.11% D) 6.57% E) 7.02% A) 5.16% B) 5.89% C) 6.11% D) 6.57% E) 7.02%

Exam 7: An Introduction to Portfolio Management

Exhibit 7.11 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Asset 1 Asset 2 =0.28 =0.12 E =0.15E =0.11 =0.42=0.58 =0.7 -Refer to Exhibit 7.11. Calculate the expected return of the two stock portfolio.

(Multiple Choice)

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Question 61

Markowitz assumed that, given an expected return, investors prefer to minimize risk.

(True/False)

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Question 62

When assessing the risk impact of adding a new security to a portfolio, it is necessary to consider the

(Multiple Choice)

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Question 63

What is the standard deviation of an equally weighted portfolio of two stocks with a covariance of 0.009, if the standard deviation of the first stock is 15% and the standard deviation of the second stock is 20%?

(Multiple Choice)

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Question 64

Risk is defined as the uncertainty of future outcomes.

(True/False)

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Question 65

Exhibit 7.1 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Asset () Asset () =10\% =15\% =8\% =9.5\% =0.25 =0.75 =0.006 -Refer to Exhibit 7.1. What is the expected return of a portfolio of two risky assets if the expected return E(R_i), standard deviation ( $\sigma$ _i), covariance (COV_i,j), and asset weight (W_i) are as shown above?

(Multiple Choice)

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Question 66

Between 1975 and 1985, the standard deviation of the returns for the NYSE and the S&P 500 indexes were 0.06 and 0.07, respectively, and the covariance of these index returns was 0.0008. What was the correlation coefficient between the two market indicators?

(Multiple Choice)

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Question 67

Exhibit 7.15 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Asset () Asset () =14\% =16\% =13\% =18\% =0.4 =0.6 =0.0024 -Refer to Exhibit 7.15. What is the standard deviation of this portfolio?

(Multiple Choice)

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Question 68

What is the expected return of the three stock portfolio described below? Common Stock Market Value Expected Return Del ton Inc. 50,000 10\% Efley Co. 40,000 11\% Grippon Inc. 60,000 16\%

(Multiple Choice)

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Question 69

All of the following are common risk measurements except

(Multiple Choice)

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Question 70

An individual investor's utility curves specify the tradeoffs he or she is willing to make between

(Multiple Choice)

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Question 71

A positive covariance between two variables indicates that

(Multiple Choice)

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Question 72

The most important criteria when adding new investments to a portfolio is the

(Multiple Choice)

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Question 73

For a two stock portfolio containing Stocks i and j, the correlation coefficient of returns (r_ij) is equal to the square root of the covariance (cov_ij).

(True/False)

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Question 74

Between 1980 and 1990, the standard deviation of the returns for the NIKKEI and the DJIA indexes were 0.19 and 0.06, respectively, and the covariance of these index returns was 0.0014. What was the correlation coefficient between the two market indicators?

(Multiple Choice)

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Question 75

Exhibit 7.10 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Asset () Asset () =16\% =14\% =3\% =8\% =0.5 =0.5 =0.0014 -Refer to Exhibit 7.10. What is the standard deviation of this portfolio?

(Multiple Choice)

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Question 76

Exhibit 7A.1 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The general equation for the weight of the first security to achieve the minimum variance (in a two stock portfolio) is given by: W₁ = [E( $\sigma$ ₂)² - r_1.2 E( $\sigma$ ₁)E( $\sigma$ ₂)] -[E( $\sigma$ ₁)² + E( $\sigma$ ₂)² - 2 r_1.2E( $\sigma$ ₁)E( $\sigma$ ₂)] -Refer to Exhibit 7A.1. Show the minimum portfolio variance for a two stock portfolio when r_1.2 = 1.

(Multiple Choice)

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Question 77

Investors choose a portfolio on the efficient frontier based on their utility functions that reflect their attitudes towards risk.

(True/False)

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Question 78

Exhibit 7.9 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Asset () Asset () =18\% =13\% =7\% =6\% =0.3 =0.7 =0.0011 -Refer to Exhibit 7.9. What is the standard deviation of this portfolio?

(Multiple Choice)

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Question 79

Exhibit 7.16 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Based on the economic outlook for the industry a financial analyst covering Top Choice Corporation has determined the following three possible returns given three different states of the economy over the next period. Probability Return 0.25 0.02 0.50 0.14 0.25 0.30 -Refer to Exhibit 7.16. What is the standard deviation for Top Choice Corporation?

(Multiple Choice)

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Question 80

Exam 7: An Introduction to Portfolio Management

Exhibit 7.11 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Asset 1 Asset 2 =0.28 =0.12 E =0.15E =0.11 =0.42=0.58 =0.7 -Refer to Exhibit 7.11. Calculate the expected return of the two stock portfolio.

Markowitz assumed that, given an expected return, investors prefer to minimize risk.

When assessing the risk impact of adding a new security to a portfolio, it is necessary to consider the

What is the standard deviation of an equally weighted portfolio of two stocks with a covariance of 0.009, if the standard deviation of the first stock is 15% and the standard deviation of the second stock is 20%?

Risk is defined as the uncertainty of future outcomes.

Between 1975 and 1985, the standard deviation of the returns for the NYSE and the S&P 500 indexes were 0.06 and 0.07, respectively, and the covariance of these index returns was 0.0008. What was the correlation coefficient between the two market indicators?

Exhibit 7.15 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Asset () Asset () =14\% =16\% =13\% =18\% =0.4 =0.6 =0.0024 -Refer to Exhibit 7.15. What is the standard deviation of this portfolio?

What is the expected return of the three stock portfolio described below? Common Stock Market Value Expected Return Del ton Inc. 50,000 10\% Efley Co. 40,000 11\% Grippon Inc. 60,000 16\%

All of the following are common risk measurements except

An individual investor's utility curves specify the tradeoffs he or she is willing to make between

A positive covariance between two variables indicates that

The most important criteria when adding new investments to a portfolio is the

For a two stock portfolio containing Stocks i and j, the correlation coefficient of returns (rij) is equal to the square root of the covariance (covij).

Between 1980 and 1990, the standard deviation of the returns for the NIKKEI and the DJIA indexes were 0.19 and 0.06, respectively, and the covariance of these index returns was 0.0014. What was the correlation coefficient between the two market indicators?

Exhibit 7.10 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Asset () Asset () =16\% =14\% =3\% =8\% =0.5 =0.5 =0.0014 -Refer to Exhibit 7.10. What is the standard deviation of this portfolio?

Investors choose a portfolio on the efficient frontier based on their utility functions that reflect their attitudes towards risk.

Exhibit 7.9 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Asset () Asset () =18\% =13\% =7\% =6\% =0.3 =0.7 =0.0011 -Refer to Exhibit 7.9. What is the standard deviation of this portfolio?

The Investment Setting

The Asset Allocation Decision

Selecting Investments in a Global Market

Organization and Functioning of Securities Markets

Security-Market Indexes

Efficient Capital Markets

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Analysis of Financial Statements

Introduction to Security Valuation

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

Technical Analysis

Equity Portfolio Management Strategies

Bond Fundamentals

The Analysis and Valuation of Bonds

Bond Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward and Futures Contracts

Option Contracts

Swap Contracts, Convertible Securities, and Other Embedded Derivatives

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Filters

For a two stock portfolio containing Stocks i and j, the correlation coefficient of returns (r_ij) is equal to the square root of the covariance (cov_ij).