Exam 7: Optimal Risky Portfolios

Consider two perfectly negatively correlated risky securities, K and L.K has an expected rate of return of 13% and a standard deviation of 19%.L has an expected rate of return of 10% and a standard deviation of 16%. The risk-free portfolio that can be formed with the two securities will earn _____ rate of return.

An investor who wishes to form a portfolio that lies to the right of the optimal risky portfolio on the capital allocation line must:

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

The unsystematic risk of a specific security

Given an optimal risky portfolio with expected return of 12% and standard deviation of 26% and a risk free rate of 5%, what is the slope of the best feasible CAL

Draw a graph of a typical efficient frontier.Explain why the efficient frontier is shaped the way it is.

Theoretically, the standard deviation of a portfolio can be reduced to what level Explain.Realistically, is it possible to reduce the standard deviation to this level Explain.

A two-asset portfolio with a standard deviation of zero can be formed when

As the number of securities in a portfolio is increased, what happens to the average portfolio standard deviation

Consider the following probability distribution for stocks C and D: The coefficient of correlation between C and D is

The risk that cannot be diversified away is

Given an optimal risky portfolio with expected return of 16% and standard deviation of 20% and a risk-free rate of 4%, what is the slope of the best feasible CAL

Systematic risk is also referred to as

The risk that can be diversified away is

Given an optimal risky portfolio with expected return of 12% and standard deviation of 26% and a risk free rate of 3%, what is the slope of the best feasible CAL

Consider the following probability distribution for stocks A and B: If you invest 35% of your money in A and 65% in B, what would be your portfolio's expected rate of return and standard deviation

Consider the following probability distribution for stocks C and D: If you invest 25% of your money in C and 75% in D, what would be your portfolio's expected rate of return and standard deviation

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

Given an optimal risky portfolio with expected return of 13% and standard deviation of 26% and a risk free rate of 5%, what is the slope of the best feasible CAL

The standard deviation of a portfolio of risky securities is