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 12% and a volatility of 18%. Assume that the CAPM assumptions hold. -The expected return on the alternative investment having the highest possible expected return while having the same volatility as Google 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: -The Correlation between Stock X's and Stock Y's returns is closest to:

Use the table for the question(s) below. Consider the following covariances between securities: -What is the variance on a portfolio that has $2000 invested in Duke Energy,$3000 invested in Microsoft,and $5000 invested in Wal-Mart stock?

Which of the following statements is FALSE?

Use the information for the question(s) below. You are presently invested in the Luther Fund, a broad based mutual fund that invest 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 expected return on the precious metals fund is closest to:

Which of the following equations is INCORRECT?

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 X and Stock Y stock is closest to:

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 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 required return for Sisyphean's new project is closest to:

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 weight on Ball Corporation in your portfolio after one year is closest to:

Which of the following equations is INCORRECT?

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 value of your portfolio over the year is:

Which of the following statements is FALSE?

Which of the following statements is FALSE?

Use the information for the question(s) below. Tom's portfolio consists solely of an investment in Merck stock. Merck has an expected return of 13% and a volatility of 25%. The market portfolio has an expected return of 12% and a volatility of 18%. The risk-free rate is 4%. Assume that the CAPM assumptions hold in the market. -Assuming that Tom wants to maintain the current volatility of his portfolio,then the amount that Tom should invest in the market portfolio to maximize his expected return is closest to:

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

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 12% 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?