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

Use the information for the question(s) below. Suppose that you currently have $250,000 invested in a portfolio with an expected return of 12% and a volatility of 10%. The efficient (tangent) portfolio has an expected return of 17% and a volatility of 12%. The risk-free rate of interest is 5%. -The Sharpe ratio for the efficient portfolio is closest to:

The Sharpe Ratio for Rearden Metal 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 Lowes in your portfolio after one year is closest to:

Assuming that the risk-free rate is 4% and the expected return on the market is 12%,then calculate the required return on Mary's portfolio.

Which of the following statements is FALSE?

Use the table for the question(s) below. Consider the following returns: -The covariance between Stock X's and Stock Z's returns is closest to:

Use the following information to answer the question(s) below. Suppose that all stocks can be grouped into two mutually exclusive portfolios (with each stock appearing in only one portfolio): growth stocks and value stocks. Assume that these two portfolios are equal in size (market value), the correlation of their returns is equal to 0.6, and the portfolios have the following characteristics: The risk free rate is 3.5%. -The volatility on the market portfolio (which is a 50-50 combination of the value and growth portfolios)is closest to:

The beta for the market portfolio is closest to:

Which of the following statements is FALSE?

Consider a portfolio consisting of only Microsoft and Wal-Mart stock.Calculate the volatility of such a portfolio when the weight on Microsoft stock is 0%,25%,50%,75%,and 100%

Consider an equally weighted portfolio that contains five stocks.If the average volatility of these stocks is 40% and the average correlation between the stocks is .5,then the volatility of this equally weighted portfolio is closest to:

Use the information for the question(s) below. Suppose that you currently have $250,000 invested in a portfolio with an expected return of 12% and a volatility of 10%. The efficient (tangent) portfolio has an expected return of 17% and a volatility of 12%. The risk-free rate of interest is 5%. -The Sharpe ratio for your portfolio 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:

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?

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%

The expected return for Rearden Metal 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 consists of a long position of $10000 in Wal-Mart and a short position of $2000 in Microsoft is closest to:

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 expected return on his portfolio,then the amount that Tom should invest in the market portfolio to minimize his volatility is closest to:

Which of the following statements is FALSE?

California Gold Mining's beta with the market is closest to: