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. -What alternative investment has the lowest possible volatility while having the same expected return as Google?

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:

Which of the following statements is FALSE?

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 Abbott Labs in your portfolio after one year is closest to:

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

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 beta of the precious metals fund with the Luther Fund is closest to:

Use the table for the question(s) below. Consider the following expected returns, volatilities, and correlations: -Consider a portfolio consisting of only Duke Energy and Microsoft.The percentage of your investment (portfolio weight)that you would place in Duke Energy stock to achieve a risk-free investment would be 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%. -The beta for Taggart Transcontinental 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 covariances between securities: -The variance on a portfolio that is made up of a $6000 investments in Duke Energy and a $4000 investment in Wal-Mart stock is closest to: