Deck 5: Risk, Return, and the Capital Asset Pricing Model

Question 1

If the market portfolio has an expected return of 0.12 and a standard deviation of 0.40, and the risk-free rate is 0.04, what is the slope of the security market line?

A) 0.08
B) 0.20
C) 0.04
D) 0.12

Answer 1

0.08

Question 2

-Given Exhibit 7-1, what is the expected return?

A) 13.00%
B) 15.96%
C) 16.00%
D) 17.75%

Answer 2

17.75%

Question 3

-Given Exhibit 7-1, what is the expected variance?

A) 957.38%
B) 1058.69%
C) 49.27%
D) 32.54%

Answer 3

1058.69%

Question 4

-Given Exhibit 7-1, what is the expected standard deviation?

A) 957.38%
B) 1058.69%
C) 49.27%
D) 32.54%

Question 5

-Given Exhibit 7-2, what is the expected variance?

A) 943.19%
B) 1058.69%
C) 49.27%
D) 32.54%

Question 6

-Given Exhibit 7-2, what is the expected standard deviation?

A) 957.38%
B) 1058.69%
C) 30.71%
D) 32.54%

Question 7

The beta of the risk-free asset is:

A) -1.0
B) 0.0
C) 0.5
D) 1.0

Question 8

-Given Exhibit 7-3, what is the expected return on the portfolio?

A) 14.1%
B) 15.0%
C) 16.3%
D) 17.9%

Question 9

-Given Exhibit 7-6, what is the portfolio beta?

A) 0.4987
B) 0.9273
C) 0.3791
D) 1.2367

Question 10

?

-Given Exhibit 7-7, what is the portfolio beta?

A) 0.4987
B) 0.9273
C) 0.3791
D) 1.2667

Question 11

An investor has $10,000 invested in Treasury securities and $15,000 invested in stock UVW. UVW has a beta of 1.2. What is the beta of the portfolio?

A) 0.00
B) 0.72
C) 1.20
D) 1.60