Exhibit 6-5 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) \(\begin{array}{c} \begin{array}{cc} \text { Asset }(\mathrm{A}) & \text { Asset }(\mathrm{B}) \\ \hline \mathrm{E}\left(\mathrm{R}_{\mathrm{A}}\right)=8 \% & \mathrm{E}\left(\mathrm{R}_{\mathrm{B}}\right)=15 \% \\ \left(\sigma_{\mathrm{A}}\right)=7 \% & \left(\sigma_{\mathrm{B}}\right)=10 \% \\ \mathrm{~W}_{\mathrm{A}}=0.4 & \mathrm{~W}_{\mathrm{B}}=0.6 \end{array}\\ \mathrm{COV}_{\mathrm{AB}}=0.0006 \end{array}\) -Refer to Exhibit 6-5. What is the standard deviation of this portfolio?

A) 3.89% B) 4.61% C) 5.02% D) 6.83% E) 6.09% A) 3.89% B) 4.61% C) 5.02% D) 6.83% E) 6.09%

Exhibit 6-8 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) \(\begin{array}{c} \begin{array}{cc} \text { Asset }(\mathrm{A}) & \text { Asset }(\mathrm{B}) \\ \hline \mathrm{E}\left(\mathrm{R}_{\mathrm{A}}\right)=10 \% & \mathrm{E}\left(\mathrm{R}_{\mathrm{B}}\right)=14 \% \\ \left(\sigma_{\mathrm{A}}\right)=7 \% & \left(\sigma_{\mathrm{B}}\right)=8 \% \\ \mathrm{~W}_{\mathrm{A}}=0.7 & \mathrm{~W}_{\mathrm{B}}=0.3 \end{array}\\ \mathrm{COV}_{\mathrm{AB}}=0.0013 \end{array}\) -Refer to Exhibit 6-8. What is the standard deviation of this portfolio?

A) 4.51% B) 5.94% C) 6.75% D) 7.09% E) 8.62% A) 4.51% B) 5.94% C) 6.75% D) 7.09% E) 8.62%

Exhibit 6-12 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) \(\begin{array}{cc} \text { Asset 1 } & \text { Asset 2 } \\ \hline E\left(R_{1}\right)=.12 & E\left(R_{2}\right)=.16 \\ E\left(\sigma_{1}\right)=.04 & E\left(\sigma_{2}\right)=.06 \end{array}\) -Refer to Exhibit 6-12. Calculate the expected return and expected standard deviation of a two-stock portfolio when r?,? = -.60 and w? = .75.

A) .13 and .0024 B) .13 and .0455 C) .12 and .0585 D) .12 and .5585 E) .13 and .6758 A) .13 and .0024 B) .13 and .0455 C) .12 and .0585 D) .12 and .5585 E) .13 and .6758

Exhibit 6-5 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) \(\begin{array}{c} \begin{array}{cc} \text { Asset }(\mathrm{A}) & \text { Asset }(\mathrm{B}) \\ \hline \mathrm{E}\left(\mathrm{R}_{\mathrm{A}}\right)=8 \% & \mathrm{E}\left(\mathrm{R}_{\mathrm{B}}\right)=15 \% \\ \left(\sigma_{\mathrm{A}}\right)=7 \% & \left(\sigma_{\mathrm{B}}\right)=10 \% \\ \mathrm{~W}_{\mathrm{A}}=0.4 & \mathrm{~W}_{\mathrm{B}}=0.6 \end{array}\\ \mathrm{COV}_{\mathrm{AB}}=0.0006 \end{array}\) -Refer to Exhibit 6-5. What is the expected return of a portfolio of two risky assets if the expected return E(Ri), standard deviation (?i), covariance (COVi,j), and asset weight (Wi) are as shown above?

A) 8.0% B) 12.2% C) 7.4% D) 9.1% E) 11.6% A) 8.0% B) 12.2% C) 7.4% D) 9.1% E) 11.6%

What is the expected return of the three-stock portfolio described below? \(\begin{array}{lcc} \text { Common Stock } & \text { Market Value } & \text { Expected Return } \\ \hline\text { Delton Inc. } & 50,000 & 10 \% \\ \text { Efley Co. } & 40,000 & 11 \% \\ \text { Grippon Inc. } & 60,000 & 16 \% \end{array}\)

A) 14.89% B) 16.22% C) 12.66% D) 13.85% E) 16.99% A) 14.89% B) 16.22% C) 12.66% D) 13.85% E) 16.99%

Exhibit 6-4 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) \(\begin{array}{c} \begin{array}{cc} \text { Asset }(\mathrm{A}) & \text { Asset }(\mathrm{B}) \\ \hline \mathrm{E}\left(\mathrm{R}_{\mathrm{A}}\right)=10 \% & \mathrm{E}\left(\mathrm{R}_{\mathrm{B}}\right)=8 \% \\ \left(\sigma_{\mathrm{A}}\right)=6 \% & \left(\sigma_{\mathrm{B}}\right)=5 \% \\ \mathrm{~W}_{\mathrm{A}}=0.3 & \mathrm{~W}_{\mathrm{B}}=0.7 \end{array}\\ \mathrm{COV}_{\mathrm{AB}}=0.0008 \end{array}\) -Refer to Exhibit 6-4. What is the standard deviation of this portfolio?

A) 5.02% B) 3.88% C) 6.21% D) 4.04% E) 4.34% A) 5.02% B) 3.88% C) 6.21% D) 4.04% E) 4.34%

Exhibit 6-2 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) \(\begin{array}{c} \begin{array}{cc} \text { Asset (A) } & \text { Asset (B) } \\ \hline \mathrm{E}\left(\mathrm{R}_{\mathrm{A}}\right)=25 \% & \mathrm{E}\left(\mathrm{R}_{\mathrm{B}}\right)=15 \% \\ \left(\sigma_{\mathrm{A}}\right)=18 \% & \left(\sigma_{\mathrm{B}}\right)=11 \% \\ \mathrm{~W}_{\mathrm{A}}=0.75 & \mathrm{~W}_{\mathrm{B}}=0.25\\ \end{array}\\ \mathrm{COV}_{\mathrm{ABB}}=-0.0009 \end{array}\) -Refer to Exhibit 6-2. What is the standard deviation of this portfolio?

A) 5.45% B) 18.64% C) 20.0% D) 22.5% E) 13.65% A) 5.45% B) 18.64% C) 20.0% D) 22.5% E) 13.65%

Exam 6: An Introduction to Portfolio Management

Exhibit 6-5 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Asset () Asset () =8\% =15\% =7\% =10\% =0.4 =0.6 =0.0006 -Refer to Exhibit 6-5. What is the standard deviation of this portfolio?

(Multiple Choice)

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Question 41

Between 2000 and 2010, the standard deviation of the returns for the TSX Venture and the S&P/TSX indexes were 0.27 and 0.14, respectively, and the covariance of these index returns was 0.03. What was the correlation coefficient between the two market indicators?

(Multiple Choice)

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Question 42

Exhibit 6-8 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Asset () Asset () =10\% =14\% =7\% =8\% =0.7 =0.3 =0.0013 -Refer to Exhibit 6-8. What is the standard deviation of this portfolio?

(Multiple Choice)

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Question 43

Exhibit 6-13 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) A financial analyst covering Magnum Oil has determined the following four possible returns given four different states of the economy over the next period. Probability Return 0.10 -.20 0.25 -.05 0.40 0.15 0.25 0.30 -Refer to Exhibit 6-13. Calculate the standard deviation for Magnum Oil.

(Multiple Choice)

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Question 44

The probability of an adverse outcome is a definition of

(Multiple Choice)

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Question 45

Exhibit 6-12 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Asset 1 Asset 2 E =.12 E =.16 E =.04 E =.06 -Refer to Exhibit 6-12. Calculate the expected return and expected standard deviation of a two-stock portfolio when r?,? = -.60 and w? = .75.

(Multiple Choice)

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Question 46

Exhibit 6-13 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) A financial analyst covering Magnum Oil has determined the following four possible returns given four different states of the economy over the next period. Probability Return 0.10 -.20 0.25 -.05 0.40 0.15 0.25 0.30 -Refer to Exhibit 6-13. Calculate the expected return for Magnum Oil.

(Multiple Choice)

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Question 47

A portfolio is efficient if no other asset or portfolios offer higher expected return with the same (or lower) risk or lower risk with the same (or higher) expected return.

(True/False)

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Question 48

In a two-stock portfolio, if the correlation coefficient between two stocks were to decrease over time everything else remaining constant the portfolio's risk would

(Multiple Choice)

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Question 49

The purpose of calculating the covariance between two stocks is to provide a(n) ____ measure of their movement together.

(Multiple Choice)

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Question 50

Prior to the work of Markowitz in the late 1950s and early 1960s, portfolio managers did not have a well developed, quantitative means of measuring risk.

(True/False)

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Question 51

Exhibit 6-5 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Asset () Asset () =8\% =15\% =7\% =10\% =0.4 =0.6 =0.0006 -Refer to Exhibit 6-5. What is the expected return of a portfolio of two risky assets if the expected return E(R_i), standard deviation (?_i), covariance (COV_i,j), and asset weight (W_i) are as shown above?

(Multiple Choice)

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Question 52

What is the expected return of the three-stock portfolio described below? Common Stock Market Value Expected Return Delton Inc. 50,000 10\% Efley Co. 40,000 11\% Grippon Inc. 60,000 16\%

(Multiple Choice)

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Question 53

A portfolio of two securities that are perfectly positively correlated has

(Multiple Choice)

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Question 54

A measure that only considers deviations above the mean is semi-variance.

(True/False)

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Question 55

Exhibit 6-4 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Asset () Asset () =10\% =8\% =6\% =5\% =0.3 =0.7 =0.0008 -Refer to Exhibit 6-4. What is the standard deviation of this portfolio?

(Multiple Choice)

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Question 56

Exhibit 6-2 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Asset (A) Asset (B) =25\% =15\% =18\% =11\% =0.75 =0.25 =-0.0009 -Refer to Exhibit 6-2. What is the standard deviation of this portfolio?

(Multiple Choice)

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Question 57

The combination of two assets that are completely negatively correlated provides maximum returns.

(True/False)

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Question 58

Between 1989 and 1999, the standard deviation of the returns for the S&P/TSX and the DJIA indexes were 0.19 and 0.06, respectively, and the covariance of these index returns was 0.0014. What was the correlation coefficient between the two market indicators?

(Multiple Choice)

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Question 59

Markowitz believes that any asset or portfolio of assets can be described by ____ parameter(s).

(Multiple Choice)

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Question 60

Exhibit 6-5 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Asset () Asset () =8\% =15\% =7\% =10\% =0.4 =0.6 =0.0006 -Refer to Exhibit 6-5. What is the standard deviation of this portfolio?

Between 2000 and 2010, the standard deviation of the returns for the TSX Venture and the S&P/TSX indexes were 0.27 and 0.14, respectively, and the covariance of these index returns was 0.03. What was the correlation coefficient between the two market indicators?

Exhibit 6-8 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Asset () Asset () =10\% =14\% =7\% =8\% =0.7 =0.3 =0.0013 -Refer to Exhibit 6-8. What is the standard deviation of this portfolio?

The probability of an adverse outcome is a definition of

Exhibit 6-12 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Asset 1 Asset 2 E =.12 E =.16 E =.04 E =.06 -Refer to Exhibit 6-12. Calculate the expected return and expected standard deviation of a two-stock portfolio when r?,? = -.60 and w? = .75.

A portfolio is efficient if no other asset or portfolios offer higher expected return with the same (or lower) risk or lower risk with the same (or higher) expected return.

In a two-stock portfolio, if the correlation coefficient between two stocks were to decrease over time everything else remaining constant the portfolio's risk would

The purpose of calculating the covariance between two stocks is to provide a(n) ____ measure of their movement together.

Prior to the work of Markowitz in the late 1950s and early 1960s, portfolio managers did not have a well developed, quantitative means of measuring risk.

What is the expected return of the three-stock portfolio described below? Common Stock Market Value Expected Return Delton Inc. 50,000 10\% Efley Co. 40,000 11\% Grippon Inc. 60,000 16\%

A portfolio of two securities that are perfectly positively correlated has

A measure that only considers deviations above the mean is semi-variance.

Exhibit 6-4 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Asset () Asset () =10\% =8\% =6\% =5\% =0.3 =0.7 =0.0008 -Refer to Exhibit 6-4. What is the standard deviation of this portfolio?

Exhibit 6-2 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Asset (A) Asset (B) =25\% =15\% =18\% =11\% =0.75 =0.25 =-0.0009 -Refer to Exhibit 6-2. What is the standard deviation of this portfolio?

The combination of two assets that are completely negatively correlated provides maximum returns.

Between 1989 and 1999, the standard deviation of the returns for the S&P/TSX and the DJIA indexes were 0.19 and 0.06, respectively, and the covariance of these index returns was 0.0014. What was the correlation coefficient between the two market indicators?

Markowitz believes that any asset or portfolio of assets can be described by ____ parameter(s).

The Investment Setting

The Asset Allocation Decision

Selecting Investments in a Global Market

Securities Markets and the Economy

Efficient Capital Markets

Asset Pricing Models: Capm and Apt

Economic and Industry Analysis

Company Analysis and Stock Valuation

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

An Introduction to Derivative Markets and Securities

Derivatives: Analysis and Valuation

Equity Portfolio Management Strategies

Bond Portfolio Management Strategies

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Analysis of Financial Statements

An Introduction to Security Valuation

Web Appendix: A Review of Statistics and the Security Market Line

Web Appendix: A Review of Statistics and the Security Market Line

Appendix: Objectives and Constraints of Institutional Investors

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