What is the standard deviation of the returns on a share given the following information? \(\begin{array} { | l | l | l | } \hline \text { State of Economy } & \text { Probability of State of Economy } & \text { Rate of Return if State Occurs } \\ \hline \text { Boom } & 10 \% & 16 \% \\ \hline \text { Normal } & 60 \% & 11 \% \\ \hline \text { Recession } & 30 \% & - 8 \% \end{array}\)

A) 5.80% B) 7.34% C) 8.38% D) 9.15% E) 9.87% A) 5.80% B) 7.34% C) 8.38% D) 9.15% E) 9.87%

What is the portfolio variance if 30% is invested in share S and 70% is invested in share T? \(\begin{array} { | l | l | l | l | } \hline & & \multicolumn{3}{|c|} { \text { Returns if State Occurs } } \\ \hline \text { State of Economy } & \text { Probability of State of Economy } & \text { Share S } & \text { Share T } \\ \hline \text { Boom } & 40 \% & 12 \% & 20 \% \\ \hline \text { Normal } & 60 \% & 6 \% & 4 \% \\ \hline \end{array}\)

A) .002220 B) .004056 C) .006224 D) .008080 E) .098000 A) .002220 B) .004056 C) .006224 D) .008080 E) .098000

Exam 10: Risk and Return: the Capital Asset Pricing Model

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Your portfolio has a beta of 1.18.The portfolio consists of 15% Treasury bills, 30% in share A, and 55% in share B.Share A has a risk-level equivalent to that of the overall market.What is the beta of Share B?

(Multiple Choice)

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Question 41

What is the standard deviation of the returns on a share given the following information? State of Economy Probability of State of Economy Rate of Return if State Occurs Boom 10\% 16\% Normal 60\% 11\% Recession 30\% -8\%

(Multiple Choice)

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Question 42

A typical investor is assumed to be:

(Multiple Choice)

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Question 43

What is the portfolio variance if 30% is invested in share S and 70% is invested in share T? \multicolumn 3 |c| Returns if State Occurs State of Economy Probability of State of Economy Share S Share T Boom 40\% 12\% 20\% Normal 60\% 6\% 4\%

(Multiple Choice)

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Question 44

You would like to combine a risky share with a beta of 1.5 with Treasury bills in such a way that the risk level of the portfolio is equivalent to the risk level of the overall market.What percentage of the Portfolio should be invested in Treasury bills?

(Multiple Choice)

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Question 45

Which one of the following statements is correct concerning the expected rate of return on an individual share given various states of the economy?

(Multiple Choice)

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Question 46

Diversiﬁcation can effectively reduce risk.Once a portfolio is diversiﬁed, the type of risk remaining is:

(Multiple Choice)

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Question 47

The standard deviation of a portfolio will tend to increase when:

(Multiple Choice)

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Question 48

The diagram below represents an opportunity set for a two asset combination.Indicate the correct eﬃcient set with labels; explain why it is so.

(Essay)

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Question 49

In practice, most of the idiosyncratic risk from the assets in a diversiﬁed portfolio can be eliminated when the portfolio has approximately _____ diverse securities.

(Multiple Choice)

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Question 50

Which one of the following is an example of systematic risk?

(Multiple Choice)

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Question 51

The eﬃcient set of portfolios

(Multiple Choice)

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Question 52

The rate of return on the shares of Flowers by Flo is expected to be 14% in a boom economy, 8% in a normal economy, and only 2% in a recessionary economy.The probabilities of these economic States are 20% for a boom, 70% for a normal economy, and 10% for a recession.What is the Variance of the returns on the shares of Flowers by Flo?

(Multiple Choice)

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Question 53

The combination of the eﬃcient set of portfolios with a riskless lending and borrowing rate results in:

(Multiple Choice)

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Question 54

An eﬃcient set of portfolios is:

(Multiple Choice)

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Question 55

The expected return on a portfolio:

(Multiple Choice)

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Question 56

The correlation between two shares:

(Multiple Choice)

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Question 57

The separation principle states that an investor will:

(Multiple Choice)

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Question 58

If the correlation between two shares is +1, then a portfolio combining these two shares will have a variance that is:

(Multiple Choice)

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Question 59

You want your portfolio beta to be 1.20.Currently, your portfolio consists of €100 invested in share A with a beta of 1.4 and €300 in share B with a beta of .6.You have another €400 to invest and Want to divide it between an asset with a beta of 1.6 and a risk-free asset.How much should you Invest in the risk-free asset?

(Multiple Choice)

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Question 60

Showing 41 - 60 of 118

Exam 10: Risk and Return: the Capital Asset Pricing Model

Your portfolio has a beta of 1.18.The portfolio consists of 15% Treasury bills, 30% in share A, and 55% in share B.Share A has a risk-level equivalent to that of the overall market.What is the beta of Share B?

What is the standard deviation of the returns on a share given the following information? State of Economy Probability of State of Economy Rate of Return if State Occurs Boom 10\% 16\% Normal 60\% 11\% Recession 30\% -8\%

A typical investor is assumed to be:

What is the portfolio variance if 30% is invested in share S and 70% is invested in share T? \multicolumn 3 |c| Returns if State Occurs State of Economy Probability of State of Economy Share S Share T Boom 40\% 12\% 20\% Normal 60\% 6\% 4\%

You would like to combine a risky share with a beta of 1.5 with Treasury bills in such a way that the risk level of the portfolio is equivalent to the risk level of the overall market.What percentage of the Portfolio should be invested in Treasury bills?

Which one of the following statements is correct concerning the expected rate of return on an individual share given various states of the economy?

Diversiﬁcation can effectively reduce risk.Once a portfolio is diversiﬁed, the type of risk remaining is:

The standard deviation of a portfolio will tend to increase when:

The diagram below represents an opportunity set for a two asset combination.Indicate the correct eﬃcient set with labels; explain why it is so.

In practice, most of the idiosyncratic risk from the assets in a diversiﬁed portfolio can be eliminated when the portfolio has approximately _____ diverse securities.

Which one of the following is an example of systematic risk?

The eﬃcient set of portfolios

The combination of the eﬃcient set of portfolios with a riskless lending and borrowing rate results in:

An eﬃcient set of portfolios is:

The expected return on a portfolio:

The correlation between two shares:

The separation principle states that an investor will:

If the correlation between two shares is +1, then a portfolio combining these two shares will have a variance that is:

Introduction to Corporate Finance

Corporate Governance

Financial Statement Analysis

Discounted Cash Flow Valuation

Bond, Equity and Firm Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options and Capital Budgeting

Risk and Return: Lessons From Market History

Factor Models and the Arbitrage Pricing Theory

Risk, Cost of Capital and Capital Budgeting

Efficient Capital Markets and Behavioural Finance

Long-Term Financing: an Introduction

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Equity Financing

Debt Financing

Leasing

Options and Corporate Finance

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Financial Risk Management With Derivatives

Short-Term Finance and Planning

Short-Term Capital Management

Mergers and Acquisitions

Financial Distress

International Corporate Finance

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