Exhibit 7.7 Use the Information Below for the Following Problem(S) \[\begin{array} { c c } A R _ { E } + ( A ) & \text { AFEE } ( \mathbf { E } ) \\ \hline \left( R _ { A } \right) = 7 / & E \left( R _ { B } \right) = 9 \% \\ \left( \sigma _ { A } \right) = 6 \% & \left( \sigma _ { B } \right) = 5 \% \\ W _ { A } = 0.6 & W _ { B } = 0 .4 \\ C O V _ { A , B } =0 .0014 \end{array}\] -Refer to Exhibit 7.7.What is the standard deviation of this portfolio?

A) 4.87% B) 3.62% C) 4.13% D) 5.76% E) 6.02% A) 4.87% B) 3.62% C) 4.13% D) 5.76% E) 6.02%

Exhibit 7.14 Use the Information Below for the Following Problem(S) Stocks A and B have a correlation coefficient of -0.8. The stocks' expected returns and standard deviations are in the table below. A portfolio consisting of 40% of stock A and 60% of stock B is constructed. \[\begin{array} { c c c } \text { Stack } & \text { Expected Return } & \text { Standard Devintion } \\ \hline \text { A } & 20 \% & 25 \% \\ B & 15 \% & 19 \% \end{array}\] -Refer to Exhibit 7.14.What percentage of stock A should be invested to obtain the minimum risk portfolio that contains stock A and B?

A) 35% B) 42% C) 58% D) 65% E) 72% A) 35% B) 42% C) 58% D) 65% E) 72%

Exhibit 7.5 Use the Information Below for the Following Problem(S) \(\begin{array}{cc} \text { Asset }(A) & \text { Asset }(\mathrm{B}) \\ \hline \mathrm{E}\left(\mathrm{R}_{\mathrm{A}}\right)=8 \% & \mathrm{E}\left(\mathrm{R}_{\mathrm{B}}\right)=15 \% \\ \left(\sigma_{\mathrm{A}}\right)=7 \% & \left(\sigma_{\mathrm{B}}\right)=10 \% \\ \mathrm{~W}_{\mathrm{A}}=0.4 & \mathrm{~W}_{\mathrm{B}}=0.6 \\ \mathrm{COV}_{A,B}=0.0006 \end{array}\) -Refer to Exhibit 7.5.What is the standard deviation of this portfolio?

A) 3.89% B) 4.61% C) 5.02% D) 6.83% E) 6.09% A) 3.89% B) 4.61% C) 5.02% D) 6.83% E) 6.09%

What is the expected return of the three stock portfolio described below? \[\begin{array} { l c c } \text { Comuman Stack } & \text { Markat Value } & \text { Expacted Raturn } \\ \hline \text { Lupkka Inc. } & 50,000 & 13 \% \\ \text { Mackey Co. } & 25,000 & 9 \% \\ \text { Nippan Inc. } & 75,000 & 14 \% \end{array}\]

A) 12.04% B) 12.83% C) 13.07% D) 15.89% E) 17.91% A) 12.04% B) 12.83% C) 13.07% D) 15.89% E) 17.91%

Exhibit 7.6 Use the Information Below for the Following Problem(S) \[\begin{array} { c c } Asset (A) & \text { Asset(B) } \\ \mathrm { E } \left( R _ { A } \right) = 16 \% & \mathrm { E } \left( \mathrm { R } _ { B } \right) = 10 \% \\ \left( \sigma _ { A } \right) = 9 \% & \left( \sigma _ { B } \right) = 7 / \\ W _ { A } = 0 .5 & W _ { B } =0 .5 \\ C O V _ { A , B } = 0 .0009 \end{array}\] -Refer to Exhibit 7.6.What is the standard deviation of this portfolio?

A) 6.08% B) 5.89% C) 7.06% D) 6.54% E) 7.26% A) 6.08% B) 5.89% C) 7.06% D) 6.54% E) 7.26%

What is the expected return of the three stock portfolio described below? \[\begin{array} { l c c } \text { Comman Stark } & \text { MFarkt Value } & \text { Experted Raturn } \\ \hline \text { Anda Inc. } & 95,000 & 12.0 \% \\ \text { Bee Ca. } & 32,000 & 8.75 \% \\ \text { Cadl Inc. } & 65,000 & 17.7 \% \end{array}\]

A) 18.45% B) 12.82% C) 13.38% D) 15.27% E) 16.67% A) 18.45% B) 12.82% C) 13.38% D) 15.27% E) 16.67%

Calculate the expected return for a three asset portfolio with the following \(\begin{array}{cccc} \text { Asset } & \text { Exp. Ret. } & \text { Std. Dev } & \text { Weight } \\ \hline \mathrm{A} & 0.0675 & 0.12 & 0.25 \\ \mathrm{~B} & 0.1235 & 0.1675 & 0.35 \\ \mathrm{C} & 0.1425 & 0.1835 & 0.40 \end{array}\)

A) 11.71% B) 11.12% C) 15.70% D) 14.25% E) 6.75%. A) 11.71% B) 11.12% C) 15.70% D) 14.25% E) 6.75%.

Exam 7: An Introduction to Portfolio Management

Exhibit 7.13 Use the Information Below for the Following Problem(S) A financial analyst covering Magnum Oil has determined the following four possible returns given four different states of the economy over the next period. Prabability Return 0.10 -.20 0.25 -.05 0.4[ 0.15 0.25 0.30 -Refer to Exhibit 7.13.Calculate the expected return for Magnum Oil.

(Multiple Choice)

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Question 21

Exhibit 7.7 Use the Information Below for the Following Problem(S) A+(A) AFEE () =7/ E =9\% =6\% =5\% =0.6 =0.4 CO=0.0014 -Refer to Exhibit 7.7.What is the standard deviation of this portfolio?

(Multiple Choice)

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Question 22

Combining assets that are not perfectly correlated does affect both the expected return of the portfolio as well as the risk of the portfolio.

(True/False)

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Question 23

Exhibit 7.14 Use the Information Below for the Following Problem(S) Stocks A and B have a correlation coefficient of -0.8. The stocks' expected returns and standard deviations are in the table below. A portfolio consisting of 40% of stock A and 60% of stock B is constructed. Stack Expected Return Standard Devintion A 20\% 25\% B 15\% 19\% -Refer to Exhibit 7.14.What percentage of stock A should be invested to obtain the minimum risk portfolio that contains stock A and B?

(Multiple Choice)

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Question 24

When individuals evaluate their portfolios they should evaluate

(Multiple Choice)

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Question 25

Exhibit 7.14 Use the Information Below for the Following Problem(S) Stocks A and B have a correlation coefficient of -0.8. The stocks' expected returns and standard deviations are in the table below. A portfolio consisting of 40% of stock A and 60% of stock B is constructed. Stack Expected Return Standard Devintion A 20\% 25\% B 15\% 19\% -Refer to Exhibit 7.14.What is the expected return of the stock A and B portfolio?

(Multiple Choice)

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Question 26

Between 1994 and 2004,the standard deviation of the returns for the S&P 500 and the NYSE indexes were 0.27 and 0.14,respectively,and the covariance of these index returns was 0.03.What was the correlation coefficient between the two market indicators?

(Multiple Choice)

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Question 27

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. Prabability Return 0.25 0.02 0.50 0.14 0.25 0.30 -Refer to Exhibit 7.16.What is the expected return for Top Choice Corporation?

(Multiple Choice)

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Question 28

The slope of the utility curves for a strongly risk-averse investor,relative to the slope of the utility curves for a less risk-averse investor,will

(Multiple Choice)

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Question 29

Exhibit 7.5 Use the Information Below for the Following Problem(S) Asset (A) Asset () =8\% =15\% =7\% =10\% =0.4 =0.6 =0.0006 -Refer to Exhibit 7.5.What is the standard deviation of this portfolio?

(Multiple Choice)

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Question 30

As the correlation coefficient between two assets decreases,the shape of the efficient frontier

(Multiple Choice)

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Question 31

All of the following are assumptions of the Markowitz model except

(Multiple Choice)

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Question 32

The expected return and standard deviation of a portfolio of risky assets is equal to the weighted average of the individual asset's expected returns and standard deviation.

(True/False)

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Question 33

If equal risk is added moving along the envelope curve containing the best possible combinations the return will

(Multiple Choice)

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Question 34

The correlation coefficient and the covariance are measures of the extent to which two random variables move together.

(True/False)

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Question 35

What is the expected return of the three stock portfolio described below? Comuman Stack Markat Value Expacted Raturn Lupkka Inc. 50,000 13\% Mackey Co. 25,000 9\% Nippan Inc. 75,000 14\%

(Multiple Choice)

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Question 36

Exhibit 7.6 Use the Information Below for the Following Problem(S) Asset(A) Asset(B) =16\% =10\% =9\% =7/ =0.5 =0.5 CO=0.0009 -Refer to Exhibit 7.6.What is the standard deviation of this portfolio?

(Multiple Choice)

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Question 37

An investor is risk neutral if she chooses the asset with lower risk given a choice of several assets with equal returns.

(True/False)

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Question 38

What is the expected return of the three stock portfolio described below? Comman Stark MFarkt Value Experted Raturn Anda Inc. 95,000 12.0\% Bee Ca. 32,000 8.75\% Cadl Inc. 65,000 17.7\%

(Multiple Choice)

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Question 39

Calculate the expected return for a three asset portfolio with the following Asset Exp. Ret. Std. Dev Weight 0.0675 0.12 0.25 0.1235 0.1675 0.35 0.1425 0.1835 0.40

(Multiple Choice)

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Question 40

Exam 7: An Introduction to Portfolio Management

Exhibit 7.7 Use the Information Below for the Following Problem(S) A+(A) AFEE () =7/ E =9\% =6\% =5\% =0.6 =0.4 CO=0.0014 -Refer to Exhibit 7.7.What is the standard deviation of this portfolio?

Combining assets that are not perfectly correlated does affect both the expected return of the portfolio as well as the risk of the portfolio.

When individuals evaluate their portfolios they should evaluate

Between 1994 and 2004,the standard deviation of the returns for the S&P 500 and the NYSE indexes were 0.27 and 0.14,respectively,and the covariance of these index returns was 0.03.What was the correlation coefficient between the two market indicators?

The slope of the utility curves for a strongly risk-averse investor,relative to the slope of the utility curves for a less risk-averse investor,will

Exhibit 7.5 Use the Information Below for the Following Problem(S) Asset (A) Asset () =8\% =15\% =7\% =10\% =0.4 =0.6 =0.0006 -Refer to Exhibit 7.5.What is the standard deviation of this portfolio?

As the correlation coefficient between two assets decreases,the shape of the efficient frontier

All of the following are assumptions of the Markowitz model except

The expected return and standard deviation of a portfolio of risky assets is equal to the weighted average of the individual asset's expected returns and standard deviation.

If equal risk is added moving along the envelope curve containing the best possible combinations the return will

The correlation coefficient and the covariance are measures of the extent to which two random variables move together.

What is the expected return of the three stock portfolio described below? Comuman Stack Markat Value Expacted Raturn Lupkka Inc. 50,000 13\% Mackey Co. 25,000 9\% Nippan Inc. 75,000 14\%

Exhibit 7.6 Use the Information Below for the Following Problem(S) Asset(A) Asset(B) =16\% =10\% =9\% =7/ =0.5 =0.5 CO=0.0009 -Refer to Exhibit 7.6.What is the standard deviation of this portfolio?

An investor is risk neutral if she chooses the asset with lower risk given a choice of several assets with equal returns.

What is the expected return of the three stock portfolio described below? Comman Stark MFarkt Value Experted Raturn Anda Inc. 95,000 12.0\% Bee Ca. 32,000 8.75\% Cadl Inc. 65,000 17.7\%

Calculate the expected return for a three asset portfolio with the following Asset Exp. Ret. Std. Dev Weight 0.0675 0.12 0.25 0.1235 0.1675 0.35 0.1425 0.1835 0.40

An Overview of the Investment Process

The Asset Allocation Decision

The Global Market Investment Decision

Securities Markets: Organization and Operation

Security-Market Indexes

Efficient Capital Markets

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Analysis of Financial Statements

Security Valuation Principles

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

Equity Portfolio Management Stragtegies

Technical Analysis

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

Investment Return and Risk Analysis Questions

Investment and Retirement Plans

Calculating Covariance and Correlation Coefficient of Assets

Portfolio Variance and Stock Weight Calculations

Portfolio Optimization with Negative Correlation: Finding Minimum Variance and Weight Allocation

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