Question 1

Tall Stand Timber stock has an expected return of 17.3 percent. What is the risk-free rate if the risk premium on the stock is 12.4 percent?

Accepted Answer

A)  4.90 percent 
B)  5.30 percent 
C)  5.67 percent 
D)  6.55 percent 
E)  7.17 percent 
A)  4.90 percent 
B)  5.30 percent 
C)  5.67 percent 
D)  6.55 percent 
E)  7.17 percent

Question 2

You are graphing the investment opportunity set for a portfolio of two securities with the expected return on the vertical axis and the standard deviation on the horizontal axis. If the correlation coefficient of the two securities is +1, the opportunity set will appear as which one of the following shapes?

Accepted Answer

A)  conical shape 
B)  linear with an upward slope 
C)  combination of two straight lines 
D)  hyperbole 
E)  horizontal line 
A)  conical shape 
B)  linear with an upward slope 
C)  combination of two straight lines 
D)  hyperbole 
E)  horizontal line

Question 3

Explain the primary goal of portfolio diversification as it relates to asset allocation and correlation.

Accepted Answer

The primary goal of portfolio diversific

Question 4

The risk-free rate is 4.35 percent. What is the expected risk premium on this security given the following information?

Accepted Answer

A)  6.09 percent 
B)  6.54 percent 
C)  7.65 percent 
D)  7.87 percent 
E)  8.15 percent 
A)  6.09 percent 
B)  6.54 percent 
C)  7.65 percent 
D)  7.87 percent 
E)  8.15 percent

Tall Stand Timber stock has an expected return of 17.3 percent. What is the risk-free rate if the risk premium on the stock is 12.4 percent?

Explain the primary goal of portfolio diversification as it relates to asset allocation and correlation.

The risk-free rate is 4.35 percent. What is the expected risk premium on this security given the following information?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate Bonds

Government Bonds

Mortgage-Backed Securities

Filters

Exam 11: Diversification and Risky Asset Allocation

Tall Stand Timber stock has an expected return of 17.3 percent. What is the risk-free rate if the risk premium on the stock is 12.4 percent?

Explain the primary goal of portfolio diversification as it relates to asset allocation and correlation.

The risk-free rate is 4.35 percent. What is the expected risk premium on this security given the following information?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate Bonds

Government Bonds

Mortgage-Backed Securities

Filters