Exam 7: Optimal Risky Portfolios

Which of the following statement(s) is(are) true 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.

Which of the following is not a source of systematic risk

The standard deviation of a two-asset portfolio is a linear function of the assets' weights when

Consider two perfectly negatively correlated risky securities A and B. A has an expected rate of return of 10% and a standard deviation of 16%.B has an expected rate of return of 8% and a standard deviation of 12%.The risk-free portfolio that can be formed with the two securities will earn _____ rate of return.

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

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

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

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

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

For a two-stock portfolio, what would be the preferred correlation coefficient between the two stocks

The line representing all combinations of portfolio expected returns and standard deviations that can be constructed from two available assets is called the

Firm-specific risk is also referred to as

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

Other things equal, diversification is most effective when

Consider the following probability distribution for stocks A and B: Which of the following portfolio(s) is(are) on the efficient frontier

Consider an investment opportunity set formed with two securities that are perfectly negatively correlated.The global minimum variance portfolio has a standard deviation that is always

Security X has expected return of 9% and standard deviation of 18%.Security Y has expected return of 12% and standard deviation of 21%.If the two securities have a correlation coefficient of -0.4, what is their covariance

The separation property refers to the conclusion that

Consider the following probability distribution for stocks A and B: The expected rate of return and standard deviation of the global minimum variance portfolio, G, are __________ and __________, respectively.

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