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

Use the following information to answer the question(s) below. Your investment portfolio consists of $10,000 worth of Google stock. Suppose that the risk-free rate is 4%, Google stock has an expected return of 14% and a volatility of 35%, and the market portfolio has an expected return of 10% and a volatility of 18%. Assume that the CAPM assumptions hold. -The volatility of the alternative investment that has the lowest possible volatility while having the same expected return as Google is closest to:

Which of the following statements is false?

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

Use the table for the question(s) below. Consider the following returns: -The Volatility on Stock X's returns 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 you invest $15,000 in Merck stock and $25,000 in Home Depot stock.You receive an actual return of -8% for Merck and 12% for Home Depot.What is the actual return on your portfolio?

Which of the following equations is incorrect?

Which of the following statements is false?

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 you invest $15,000 in Merck stock and $25,000 in Home Depot stock.You expect a return of 16% for Merck and 12% for Home Depot.What is the expected return on your portfolio?

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 beta for the market is closest to:

Which of the following statements is false?

Which of the following statements is false?

Use the table for the question(s) below. Consider the following returns: -Calculate the covariance between Stock Y's and Stock Z's returns.