Question 1

Monsters' required return is closest to:

Accepted Answer

A) 10.0% 
B) 13.0% 
C) 11.5% 
D) 15.5% 
A) 10.0% 
B) 13.0% 
C) 11.5% 
D) 15.5%

Question 2

Monsters' beta with the market is closest to:

Accepted Answer

A) 1.3 
B) 1.0 
C) 0.6 
D) 0.8 
A) 1.3 
B) 1.0 
C) 0.6 
D) 0.8

Question 3

Which of the following statements is FALSE?

Accepted Answer

A) The expected return of a portfolio should correspond to the portfolio's beta. 
B) Graphically the line through the risk-free investment and the market portfolio is called the capital market line (CML). 
C) The beta of a portfolio is the weighted average beta of the securities in the portfolio. 
D) By holding a negative beta security,an investor can reduce the overall market risk of her portfolio. 
A) The expected return of a portfolio should correspond to the portfolio's beta. 
B) Graphically the line through the risk-free investment and the market portfolio is called the capital market line (CML). 
C) The beta of a portfolio is the weighted average beta of the securities in the portfolio. 
D) By holding a negative beta security,an investor can reduce the overall market risk of her portfolio.

Question 4

Consider an equally weighted portfolio that contains 100 stocks.If the average volatility of these stocks is 50% and the average correlation between the stocks is .7,then the volatility of this equally weighted portfolio is closest to:

Accepted Answer

A) .72 
B) .63 
C) .40 
D) .50 
A) .72 
B) .63 
C) .40 
D) .50

Question 5

Which of the following statements is FALSE?

Accepted Answer

A) To improve the performance of their portfolios,investors who are holding the market portfolio will compare the expected return of each security with its required return from the security market line. 
B) The Sharpe ratio of a portfolio will increase if we sell stocks with positive alphas. 
C) When a stock's alpha is not zero,investors can improve upon the performance of the market portfolio. 
D) When the market portfolio is efficient,all stocks are on the security market line and have an alpha of zero. 
A) To improve the performance of their portfolios,investors who are holding the market portfolio will compare the expected return of each security with its required return from the security market line. 
B) The Sharpe ratio of a portfolio will increase if we sell stocks with positive alphas. 
C) When a stock's alpha is not zero,investors can improve upon the performance of the market portfolio. 
D) When the market portfolio is efficient,all stocks are on the security market line and have an alpha of zero.

Question 6

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:

Accepted Answer

A) .065 
B) 0.090 
C) .149 
D) -0.020 
A) .065 
B) 0.090 
C) .149 
D) -0.020

Question 7

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

Accepted Answer

A) 3% 
B) 13% 
C) 16% 
D) 18% 
A) 3% 
B) 13% 
C) 16% 
D) 18%

Question 8

The Sharpe ratio for your portfolio is closest to:

Accepted Answer

A) 1.2 
B) 0.6 
C) 1.0 
D) 0.7 
A) 1.2 
B) 0.6 
C) 1.0 
D) 0.7

Question 9

The beta for the market portfolio is closest to:

Accepted Answer

A) 1 
B) 0 
C) Unable to answer this question without knowing the markets expected return 
D) Unable to answer this question without knowing the markets volatility 
A) 1 
B) 0 
C) Unable to answer this question without knowing the markets expected return 
D) Unable to answer this question without knowing the markets volatility

Question 10

Consider an equally weighted portfolio that contains 20 stocks.If the average volatility of these stocks is 35% and the average correlation between the stocks is .4,then the volatility of this equally weighted portfolio is closest to:

Accepted Answer

A) .17 
B) .41 
C) .14 
D) .37 
A) .17 
B) .41 
C) .14 
D) .37

Question 11

Suppose that California Gold Mining's expected return is 2%.Then California Gold Mining's alpha is closest to:

Accepted Answer

A) -3% 
B) -13% 
C) 7% 
D) -11% 
A) -3% 
B) -13% 
C) 7% 
D) -11%

Question 12

Which of the following statements is FALSE?

Accepted Answer

A) When an investor chooses her optimal portfolio,she will do so by finding the tangent line using the risk-free rate that corresponds to her investment horizon. 
B) If the market portfolio is not efficient,savvy investors who recognize that the market portfolio is not optimal will push prices and expected returns back into balance. 
C) Even though different investors may research different stocks,their information will not impact the market portfolio since there is no way to share this information with other investors. 
D) In the real world,borrowers pay higher interest rates than savers receive. 
A) When an investor chooses her optimal portfolio,she will do so by finding the tangent line using the risk-free rate that corresponds to her investment horizon. 
B) If the market portfolio is not efficient,savvy investors who recognize that the market portfolio is not optimal will push prices and expected returns back into balance. 
C) Even though different investors may research different stocks,their information will not impact the market portfolio since there is no way to share this information with other investors. 
D) In the real world,borrowers pay higher interest rates than savers receive.

Question 13

Which of the following statements is FALSE?

Accepted Answer

A) A short sale is a transaction in which you buy a stock that you do not own and then agree to sell that stock back in the future. 
B) The efficient portfolios are those portfolios offering the lowest possible level of volatility for a given level of expected return. 
C) A positive investment in a security can be referred to as a long position in the security. 
D) It is possible to invest a negative amount in a stock or security,which is called a negative position. 
A) A short sale is a transaction in which you buy a stock that you do not own and then agree to sell that stock back in the future. 
B) The efficient portfolios are those portfolios offering the lowest possible level of volatility for a given level of expected return. 
C) A positive investment in a security can be referred to as a long position in the security. 
D) It is possible to invest a negative amount in a stock or security,which is called a negative position.

Question 14

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?

Accepted Answer

A) -25% in the risk-free asset and +125% in the market portfolio 
B) -20% in the risk-free asset and +120% in the market portfolio 
C) 0% in the risk-free asset and +100% in the market portfolio 
D) 20% in the risk-free asset and +80% in the market portfolio 
A) -25% in the risk-free asset and +125% in the market portfolio 
B) -20% in the risk-free asset and +120% in the market portfolio 
C) 0% in the risk-free asset and +100% in the market portfolio 
D) 20% in the risk-free asset and +80% in the market portfolio

Question 15

Which of the following statements is FALSE?

Accepted Answer

A) The risk premium of a security is equal to the market risk premium (the amount by which the market's expected return exceeds the risk-free rate),divided by the amount of market risk present in the security's returns measured by its beta with the market. 
B) We refer to the beta of a security with the market portfolio simply as the securities beta. 
C) There is a linear relationship between a stock's beta and its expected return. 
D) A security with a negative beta has a negative correlation with the market,which means that this security tends to perform well when the rest of the market is doing poorly. 
A) The risk premium of a security is equal to the market risk premium (the amount by which the market's expected return exceeds the risk-free rate),divided by the amount of market risk present in the security's returns measured by its beta with the market. 
B) We refer to the beta of a security with the market portfolio simply as the securities beta. 
C) There is a linear relationship between a stock's beta and its expected return. 
D) A security with a negative beta has a negative correlation with the market,which means that this security tends to perform well when the rest of the market is doing poorly.

Question 16

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:

Accepted Answer

A) 0.40 
B) 0.56 
C) 0.80 
D) 1.00 
A) 0.40 
B) 0.56 
C) 0.80 
D) 1.00

Question 17

Assuming that Tom wants to maintain the current expected return on his portfolio,then the minimum volatility that Tom could achieve by investing in the market portfolio and risk-free investment is closest to:

Accepted Answer

A) 20% 
B) 25% 
C) 22% 
D) 18% 
A) 20% 
B) 25% 
C) 22% 
D) 18%

Question 18

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%

Accepted Answer

Var(R_p)= x₁²^Var(

Question 19

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 expected return on the portfolio of the three stocks is closest to:

Accepted Answer

A) 10.0% 
B) 11.4% 
C) 11.8% 
D) 12.0% 
A) 10.0% 
B) 11.4% 
C) 11.8% 
D) 12.0%

Question 20

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:

Accepted Answer

A) .050 
B) .045 
C) .051 
D) -0.020 
A) .050 
B) .045 
C) .051 
D) -0.020

Monsters' required return is closest to:

Monsters' beta with the market is closest to:

Which of the following statements is FALSE?

Consider an equally weighted portfolio that contains 100 stocks.If the average volatility of these stocks is 50% and the average correlation between the stocks is .7,then the volatility of this equally weighted portfolio is closest to:

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 equal investments in Duke Energy and Microsoft stock is closest to:

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

The Sharpe ratio for your portfolio is closest to:

The beta for the market portfolio is closest to:

Consider an equally weighted portfolio that contains 20 stocks.If the average volatility of these stocks is 35% and the average correlation between the stocks is .4,then the volatility of this equally weighted portfolio is closest to:

Suppose that California Gold Mining's expected return is 2%.Then California Gold Mining's alpha is closest to:

Which of the following statements is FALSE?

Which of the following statements is FALSE?

Which of the following statements is FALSE?

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:

Assuming that Tom wants to maintain the current expected return on his portfolio,then the minimum volatility that Tom could achieve by investing in the market portfolio and risk-free investment is closest to:

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%

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 expected return on the portfolio of the three stocks is closest to:

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:

The Corporation

Introduction to Financial Statement Analysis

Financial Decision Making and the Law of One Price

The Time Value of Money

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress,managerial Incentives,and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

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

Monsters' required return is closest to:

Monsters' beta with the market is closest to:

Which of the following statements is FALSE?

Consider an equally weighted portfolio that contains 100 stocks.If the average volatility of these stocks is 50% and the average correlation between the stocks is .7,then the volatility of this equally weighted portfolio is closest to:

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 equal investments in Duke Energy and Microsoft stock is closest to:

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

The Sharpe ratio for your portfolio is closest to:

The beta for the market portfolio is closest to:

Consider an equally weighted portfolio that contains 20 stocks.If the average volatility of these stocks is 35% and the average correlation between the stocks is .4,then the volatility of this equally weighted portfolio is closest to:

Suppose that California Gold Mining's expected return is 2%.Then California Gold Mining's alpha is closest to:

Which of the following statements is FALSE?

Which of the following statements is FALSE?

Which of the following statements is FALSE?

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:

Assuming that Tom wants to maintain the current expected return on his portfolio,then the minimum volatility that Tom could achieve by investing in the market portfolio and risk-free investment is closest to:

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%

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 expected return on the portfolio of the three stocks is closest to:

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:

The Corporation

Introduction to Financial Statement Analysis

Financial Decision Making and the Law of One Price

The Time Value of Money

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress,managerial Incentives,and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

Filters