\(\begin{array}{c} \begin{array}{c} \underline{\text { Year }} \\ 1 \\ 2 \\ 3 \\ 4 \end{array} \begin{array}{c} \underline{\text {Stock X}}\\ -27 \% \\ 6 \% \\ 34 \%\\ 11\% \end{array} \begin{array}{c} \underline{\text { Market } }\\ -7 \% \\ 11 \% \\ 18 \% \\ 10\% \end{array} \end{array}\) -A risky security has a variance of 0.034596 and a covariance with the market of 0.0216. The variance of the market is 0.023716. What is the correlation of this risky security to the market?

A) 0.47 B) 0.96 C) 0.75 D) 0.37 E) 0.58 A) 0.47 B) 0.96 C) 0.75 D) 0.37 E) 0.58

Exam 12: Return, Risk and Security Management

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1 2 3 4 -27\% 6\% 34\% 11\% -7\% 11\% 18\% 10\% -A risky security has a variance of 0.034596 and a covariance with the market of 0.0216. The variance of the market is 0.023716. What is the correlation of this risky security to the market?

(Multiple Choice)

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Question 101

You own an equally-weighted portfolio consisting of a stock and Treasury bills. You sell a portion of the Treasury bills, and invest in Stock M, which has a positive covariance with the market. The beta of your portfolio will:

(Multiple Choice)

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Question 102

A stock has a beta of 1.30 and an expected return of 16 percent. The risk-free rate is 5 percent. What is the expected return on a portfolio that is equally-weighted in the two assets?

(Multiple Choice)

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Question 103

Which of the following is most commonly used in Canada as the market index?

(Multiple Choice)

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Question 104

The most serious drawback of the arbitrage pricing model is

(Multiple Choice)

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Question 105

Which one of the following combinations will tend to produce the highest rate of return according to the Fama-French three-factor model? Assume beta is constant in all cases

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Question 106

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1 2 3 4 -27\% 6\% 34\% 11\% -7\% 11\% 18\% 10\% -A risky security has a variance of 0.034596 and a covariance with the market of 0.0216. The variance of the market is 0.023716. What is the correlation of this risky security to the market?

You own an equally-weighted portfolio consisting of a stock and Treasury bills. You sell a portion of the Treasury bills, and invest in Stock M, which has a positive covariance with the market. The beta of your portfolio will:

A stock has a beta of 1.30 and an expected return of 16 percent. The risk-free rate is 5 percent. What is the expected return on a portfolio that is equally-weighted in the two assets?

Which of the following is most commonly used in Canada as the market index?

The most serious drawback of the arbitrage pricing model is

Which one of the following combinations will tend to produce the highest rate of return according to the Fama-French three-factor model? Assume beta is constant in all cases

A Brief History of Risk and Return

Diversification and Risky Asset Allocation

The Investment Process

Overview of Security Types

Mutual Funds

The Stock Market

Common Stock Valuation

Stock Price Behaviour and Market Efficiency

Behavioural Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Performance Evaluation and Risk Management

Options

Option Valuation

Futures Contracts

Projecting Cash Flow and Earnings

Corporate Bonds

Government Bonds and Mortgaged-Backed Securities

International Portfolio Investment

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