Exam 11: Optimal Portfolio Choice and the Capital Asset Pricing Model

A portfolio weight is ________ of individual investment in the total investment portfolio.

Conservative investors will invest ________ amount,choosing a portfolio on the line near the risk-free investment.

Use the table for the question(s) below. Consider the following expected returns, volatilities, and correlations: -Consider a portfolio consisting of only Microsoft and Wal-Mart stock.Calculate the expected return on such a portfolio when the weight on Microsoft stock is 0%,25%,50%,75%,and 100%.

Aggressive investors will invest more,choosing a portfolio that is near ________ or even beyond it by buying stocks on margin.

Consider an equally weighted portfolio that contains 20 stocks.If the average volatility of these stocks is 35% and the average correlation between the stocks is .4,then the volatility of this equally weighted portfolio is closest to:

Use the table for the question(s) below. Consider the following covariances between securities: -The variance on a portfolio that is made up of a $6000 investment in Duke Energy stock and a $4000 investment in Wal-Mart stock is closest to:

Use the information for the question(s) below. Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share, 200 shares of Lowes (LOW) at $30 per share, and 100 shares of Ball Corporation (BLL) at $40 per share. -Suppose over the next year Ball has a return of 12.5%,Lowes has a return of 20%,and Abbott Labs has a return of -10%.The return on your portfolio over the year is:

Use the information for the question(s) below. You are presently invested in the Luther Fund, a broad-based mutual fund that invests in stocks and other securities. The Luther Fund has an expected return of 14% and a volatility of 20%. Risk-free Treasury Bills are currently offering returns of 4%. You are considering adding a precious metals fund to your current portfolio. The metals fund has an expected return of 10%, a volatility of 30%, and a correlation of -.20 with the Luther Fund. -The beta of the precious metals fund with the Luther Fund is closest to: