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

Use the table for the question(s) below. Consider the following returns: -The variance on a portfolio that is made up of equal investments in Stock × and Stock Z stock is closest to:

Use the table for the question(s) below. Consider the following expected returns, volatilities, and correlations: -The volatility of a portfolio that is equally invested in Duke Energy and Microsoft is closest to:

Use the information for the question(s) below. Sisyphean industries is seeking to raise capital from a large group of investors to fund a new project. Suppose that the efficient portfolio has an expected return of 14% and a volatility of 20%. Sisyphean's new project is expected to have a volatility of 40% and a 70% correlation with the efficient portfolio. The risk-free rate is 4%. -The beta for Sisyphean's new project 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. -The weight on Ball Corporation in your portfolio is:

Use the table for the question(s) below. Consider the following covariances between securities: -What is the variance on a portfolio that has $3000 invested in Duke Energy,$4000 invested in Microsoft,and $3000 invested in Wal-Mart stock?

Use the information for the question(s) below. Suppose you have $10,000 in cash and you decide to borrow another $10,000 at a 6% interest rate to invest in the stock market. You invest the entire $20,000 in an exchange traded fund (ETF) with a 12% expected return and a 20% volatility. -The expected return on your of your investment is closest to:

Which of the following statements is false?

The beta for the market portfolio is closest to:

Which of the following is not an assumption used in deriving the Capital Asset Pricing Model (CAPM)?

Use the table for the question(s) below. Consider the following covariances between securities: -The variance on a portfolio that is made up of equal investments in Duke Energy and Microsoft stock is closest to:

Use the following information to answer the question(s) below. The volatility of the market portfolio is 10%, the expected return on the market is 12%, and the risk-free rate of interest is 4%. -Suppose that Google Stock has a beta of 1.06 and Boeing stock has a beta of 1.31.If the risk-free interest rate is 4% and the expected return from the market portfolio is 12%,then the expected return on a portfolio that consists of 30% Google stock and 70% Boeing stock is closest to:

Use the table for the question(s) below. Consider the following returns: -The variance on a portfolio that is made up of equal investments in Stock × and Stock Y stock is closest to:

Use the table for the question(s) below. Consider the following three individuals portfolios consisting of investments in four stocks: -Assuming that the risk-free rate is 4% and the expected return on the market is 12%,then required return on Peter's portfolio is closest to:

Use the table for the question(s) below. Consider the following returns: -The Volatility on Stock Y's returns is closest to:

Which of the following statements is false?

Use the table for the question(s) below. Consider the following three individuals portfolios consisting of investments in four stocks: -The beta on Peter's Portfolio is closest to:

Which of the following statements is false?

Explain how having different interest rates for borrowing and lending affects the CAPM and the SML.

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. -The weight on Abbott Labs in your portfolio is:

Use the following information to answer the question(s) below. The volatility of the market portfolio is 10%, the expected return on the market is 12%, and the risk-free rate of interest is 4%. -The Sharpe Ratio for Rearden Metal is closest to: