Question 1

For a six-security portfolio, it is necessary to calculate ___ covariances plus ___ variances.

Accepted Answer

A)  36, 6 
B)  30, 6 
C)  15, 6 
D)  30, 12 
A)  36, 6 
B)  30, 6 
C)  15, 6 
D)  30, 12 C

Question 2

The questions relate to the following table of information:
  
-What is the covariance between Stock X and Stock Y?

Accepted Answer

A)  0.025 
B)  0.033 
C)  0.047 
D)  0.054 
A)  0.025 
B)  0.033 
C)  0.047 
D)  0.054 D

Question 3

Security A has a beta of 1.2; security B has a beta of 0.8. If the market variance is 0.30, what is COV (A,B)?

Accepted Answer

A)  .255 
B)  .288 
C)  .314 
D)  .355 
A)  .255 
B)  .288 
C)  .314 
D)  .355 B

Question 4

Suppose Stock M has an expected return of 10%, a standard deviation of 15%, and a Beta of 0.6 while Stock N has an expected return of 20%, a standard deviation of 25% and a beta of 1.04, and the correlation between the two stocks is 0.50. What is the expected return for a portfolio with 80% invested in Stock M and 20% invested in Stock N?

Accepted Answer

A)  12% 
B)  14% 
C)  16% 
D)  18% 
A)  12% 
B)  14% 
C)  16% 
D)  18%

Question 5

Knowing beta, determining the portfolio with a sixty-security fully diversified portfolio requires ______ statistic(s) per security.

Accepted Answer

A)  1 
B)  60 
C)  3600/2 
D)  3600 
A)  1 
B)  60 
C)  3600/2 
D)  3600

Question 6

Securities A, B, and C have betas of 1.2, 1.3, and 1.7, respectively. What is the beta of an equally weighted portfolio of all three?

Accepted Answer

A)  1.15 
B)  1.40 
C)  1.55 
D)  1.60 
A)  1.15 
B)  1.40 
C)  1.55 
D)  1.60

Question 7

Suppose Stock M has an expected return of 10%, a standard deviation of 15%, and a Beta of 0.6 while Stock N has an expected return of 20%, a standard deviation of 25% and a beta of 1.04, and the correlation between the two stocks is 0.50. What is the standard deviation for a portfolio with 80% invested in Stock M and 20% invested in Stock N?

Accepted Answer

A)  13.2% 
B)  15.1% 
C)  17.3% 
D)  21.5% 
A)  13.2% 
B)  15.1% 
C)  17.3% 
D)  21.5%

Question 8

COV (A,B) is equal to

Accepted Answer

A)  the product of their standard deviations and their correlation 
B)  the product of their variances and their correlation 
C)  the product of their standard deviations and their covariances 
D)  the product of their variances and their covariances 
A)  the product of their standard deviations and their correlation 
B)  the product of their variances and their correlation 
C)  the product of their standard deviations and their covariances 
D)  the product of their variances and their covariances

Question 9

Securities A and B have expected returns of 12% and 15%, respectively. If you put 40% of your money in Security A and the remainder in B, what is the portfolio expected return?

Accepted Answer

A)  13.4% 
B)  13.8% 
C)  14.6% 
D)  15.3% 
A)  13.4% 
B)  13.8% 
C)  14.6% 
D)  15.3%

Question 10

A diversified portfolio has a beta of 1.2; the market variance is 0.25. What is the diversified portfolio's variance?

Accepted Answer

A)  0.33 
B)  0.36 
C)  0.41 
D)  0.44 
A)  0.33 
B)  0.36 
C)  0.41 
D)  0.44

Question 11

Suppose Stock M has an expected return of 10%, a standard deviation of 15%, and a Beta of 0.6 while Stock N has an expected return of 20%, a standard deviation of 25% and a beta of 1.04, and the correlation between the two stocks is 0.50. What is the percent invested in Stock M to yield the minimum standard deviation portfolio containing Stock M and Stock N?

Accepted Answer

A)  34% 
B)  55% 
C)  73% 
D)  92% 
A)  34% 
B)  55% 
C)  73% 
D)  92%

Question 12

Without knowing beta, determining portfolio variance with a sixty-security portfolio requires ___ statistics per security.

Accepted Answer

A)  1 
B)  60 
C)  3600/2 
D)  3600 
A)  1 
B)  60 
C)  3600/2 
D)  3600

Question 13

The questions relate to the following table of information:
  
-What is the beta for a portfolio with 20% invested in X and 80% invested in Y?

Accepted Answer

A)  1.14 
B)  1.24 
C)  1.34 
D)  1.44 
A)  1.14 
B)  1.24 
C)  1.34 
D)  1.44

Question 14

Securities A and B have expected returns of 12% and 15%, respectively. If you put 30% of your money in Security A and the remainder in B, what is the portfolio expected return?

Accepted Answer

A)  13.4% 
B)  14.1% 
C)  14.6% 
D)  15.3% 
A)  13.4% 
B)  14.1% 
C)  14.6% 
D)  15.3%

Question 15

Suppose Stock A has an expected return of 15%, a standard deviation of 20%, and a Beta of 0.4 while Stock B has an expected return of 25%, a standard deviation of 30% and a beta of 1.25, and the correlation between the two stocks is 0.25. What is the beta for a portfolio with 50% invested in Stock A and 50% invested in Stock B?

Accepted Answer

A)  0.425 
B)  0.625 
C)  0.825 
D)  1.125 
A)  0.425 
B)  0.625 
C)  0.825 
D)  1.125

Question 16

Suppose Stock A has an expected return of 15%, a standard deviation of 20%, and a Beta of 0.4 while Stock B has an expected return of 25%, a standard deviation of 30% and a beta of 1.25, and the correlation between the two stocks is 0.25. What is the expected return for a portfolio with 50% invested in Stock A and 50% invested in Stock B?

Accepted Answer

A)  18% 
B)  19% 
C)  20% 
D)  21% 
A)  18% 
B)  19% 
C)  20% 
D)  21%

Question 17

Suppose Stock A has an expected return of 15%, a standard deviation of 20%, and a Beta of 0.4 while Stock B has an expected return of 25%, a standard deviation of 30% and a beta of 1.25, and the correlation between the two stocks is 0.25. What is the standard deviation for a portfolio with 50% invested in Stock A and 50% invested in Stock B?

Accepted Answer

A)  15% 
B)  20% 
C)  23% 
D)  25% 
A)  15% 
B)  20% 
C)  23% 
D)  25%

Question 18

Securities A, B, and C have betas of 1.2, 1.3, and 1.7, respectively. What is the beta of a portfolio composed of 1/2 A and 1/4 each of B and C?

Accepted Answer

A)  1.15 
B)  1.35 
C)  1.55 
D)  1.60 
A)  1.15 
B)  1.35 
C)  1.55 
D)  1.60

Question 19

The questions relate to the following table of information:
  
-What is the standard deviation for a portfolio with 60% invested in X and 40% invested in Y?

Accepted Answer

A)  32.4% 
B)  36.1% 
C)  41.2% 
D)  45.6% 
A)  32.4% 
B)  36.1% 
C)  41.2% 
D)  45.6%

Question 20

Suppose Stock A has an expected return of 15%, a standard deviation of 20%, and a Beta of 0.4 while Stock B has an expected return of 25%, a standard deviation of 30% and a beta of 1.25, and the correlation between the two stocks is 0.25. What is the percent invested in Stock A to yield the minimum standard deviation portfolio containing Stock A and Stock B?

Accepted Answer

A)  25% 
B)  50% 
C)  75% 
D)  90% 
A)  25% 
B)  50% 
C)  75% 
D)  90%

For a six-security portfolio, it is necessary to calculate _ covariances plus _ variances.

The questions relate to the following table of information: -What is the covariance between Stock X and Stock Y?

Security A has a beta of 1.2; security B has a beta of 0.8. If the market variance is 0.30, what is COV (A,B)?

Knowing beta, determining the portfolio with a sixty-security fully diversified portfolio requires ______ statistic(s) per security.

Securities A, B, and C have betas of 1.2, 1.3, and 1.7, respectively. What is the beta of an equally weighted portfolio of all three?

COV (A,B) is equal to

Securities A and B have expected returns of 12% and 15%, respectively. If you put 40% of your money in Security A and the remainder in B, what is the portfolio expected return?

A diversified portfolio has a beta of 1.2; the market variance is 0.25. What is the diversified portfolio's variance?

Without knowing beta, determining portfolio variance with a sixty-security portfolio requires ___ statistics per security.

The questions relate to the following table of information: -What is the beta for a portfolio with 20% invested in X and 80% invested in Y?

Securities A and B have expected returns of 12% and 15%, respectively. If you put 30% of your money in Security A and the remainder in B, what is the portfolio expected return?

Securities A, B, and C have betas of 1.2, 1.3, and 1.7, respectively. What is the beta of a portfolio composed of 1/2 A and 1/4 each of B and C?

The questions relate to the following table of information: -What is the standard deviation for a portfolio with 60% invested in X and 40% invested in Y?

The Process of Portfolio Management

Valuation, Risk, Return, and Uncertainty

Setting Portfolio Objectives

Investment Policy

Why Diversification Is a Good Idea

International Investment and Diversification

The Capital Markets and Market Efficiency

Picking the Equity Players

Equity Valuation Tools

Security Screening

Bond Pricing and Selection

The Role of Real Assets

Alternative Assets

Revision of the Equity Portfolio

Revision of the Fixed-Income Portfolio

Principles of Options and Option Pricing

Option Overwriting

Performance Evaluation

Fiduciary Duties and Responsibilities

Principles of the Futures Market

Benching the Equity Players

Removing Interest Rate Risk

Integrating Derivative Assets and Portfolio Management

Contemporary Issues in Portfolio Management

Filters

Exam 5: The Mathematics of Diversification

For a six-security portfolio, it is necessary to calculate ___ covariances plus ___ variances.

The questions relate to the following table of information: -What is the covariance between Stock X and Stock Y?

Security A has a beta of 1.2; security B has a beta of 0.8. If the market variance is 0.30, what is COV (A,B)?

Knowing beta, determining the portfolio with a sixty-security fully diversified portfolio requires ______ statistic(s) per security.

Securities A, B, and C have betas of 1.2, 1.3, and 1.7, respectively. What is the beta of an equally weighted portfolio of all three?

COV (A,B) is equal to

Securities A and B have expected returns of 12% and 15%, respectively. If you put 40% of your money in Security A and the remainder in B, what is the portfolio expected return?

A diversified portfolio has a beta of 1.2; the market variance is 0.25. What is the diversified portfolio's variance?

Without knowing beta, determining portfolio variance with a sixty-security portfolio requires ___ statistics per security.

The questions relate to the following table of information: -What is the beta for a portfolio with 20% invested in X and 80% invested in Y?

Securities A and B have expected returns of 12% and 15%, respectively. If you put 30% of your money in Security A and the remainder in B, what is the portfolio expected return?

Securities A, B, and C have betas of 1.2, 1.3, and 1.7, respectively. What is the beta of a portfolio composed of 1/2 A and 1/4 each of B and C?

The questions relate to the following table of information: -What is the standard deviation for a portfolio with 60% invested in X and 40% invested in Y?

The Process of Portfolio Management

Valuation, Risk, Return, and Uncertainty

Setting Portfolio Objectives

Investment Policy

Why Diversification Is a Good Idea

International Investment and Diversification

The Capital Markets and Market Efficiency

Picking the Equity Players

Equity Valuation Tools

Security Screening

Bond Pricing and Selection

The Role of Real Assets

Alternative Assets

Revision of the Equity Portfolio

Revision of the Fixed-Income Portfolio

Principles of Options and Option Pricing

Option Overwriting

Performance Evaluation

Fiduciary Duties and Responsibilities

Principles of the Futures Market

Benching the Equity Players

Removing Interest Rate Risk

Integrating Derivative Assets and Portfolio Management

Contemporary Issues in Portfolio Management

Filters

For a six-security portfolio, it is necessary to calculate _ covariances plus _ variances.