Question 1

Investment Return MedTech Corp.stock was $50.95 per share at the end of last year.Since then,it paid a $0.45 per share dividend.The stock price is currently $62.50.If you owned 500 shares of MedTech,what was your percent return?

Accepted Answer

A) 7.20 percent 
B) 8.83 percent 
C) 22.67 percent 
D) 23.55 percent

Question 2

Which of the following is incorrect?

Accepted Answer

A) It is possible to combine assets that all move in the exact same fashion over time and gain the benefits of diversification. 
B) Adding long-term Treasury bonds to a stock portfolio will reduce the risk of the portfolio. 
C) The optimal portfolio is the one with the lowest amount of risk. 
D) All of these statements are correct.

Question 3

Which of the following is correct?

Accepted Answer

A) Over a long time frame, stocks have performed better than long-term Treasury bonds. 
B) Average stock returns are not an indication of what an investor may earn in any one year. 
C) In some years, long-term Treasury bonds performed better than stocks. 
D) All of these statements are correct.

Question 4

If you own 400 shares of Xerox at $15.00,500 shares of Qwest at $10.00,and 350 shares of Liz Claiborne at $45.00,what are the portfolio weights of each stock?

Accepted Answer

A) Weight of Xerox: 22.43 percent; Weight of Qwest: 11.09 percent; Weight of Liz Claiborne: 58.88 percent 
B) Weight of Xerox: 34.67 percent; Weight of Qwest: 16.69 percent; Weight of Liz Claiborne: 48.64 percent 
C) Weight of Xerox: 22.43 percent; Weight of Qwest: 18.69 percent; Weight of Liz Claiborne: 58.88 percent 
D) Weight of Xerox: 36.98 percent; Weight of Qwest: 61.07 percent; Weight of Liz Claiborne: 1.95 percent

Question 5

Which of the following statements is correct?

Accepted Answer

A) A single stock has a lot of diversifiable risk. 
B) A single stock has more market risk than a diversified portfolio of stocks. 
C) Bonds and stocks have a high correlation because they are both financial assets. 
D) None of these statements is correct.

Question 6

Portfolio Weights An investor owns $10,000 of Adobe Systems stock,$15,000 of Dow Chemical,and $25,000 of Office Depot.What are the portfolio weights of each stock?

Accepted Answer

A) Adobe System = 0.3333, Dow Chemical = 0.3333, Office Depot = 0.3333 
B) Adobe System = 0.2, Dow Chemical = 0.3, Office Depot = 0.5 
C) Adobe System = 0.3, Dow Chemical = 0.2, Office Depot = 0.5 
D) Adobe System = 0.2667, Dow Chemical = 0.3333, Office Depot = 0.4

Question 7

Portfolio Weights An investor owns $2,000 of Adobe Systems stock,$4,000 of Dow Chemical,and $6,000 of Office Depot.What are the portfolio weights of each stock?

Accepted Answer

A) Adobe System = 0.3333, Dow Chemical = 0.3333, Office Depot = 0.3333 
B) Adobe System = 0.1667, Dow Chemical = 0.3333, Office Depot = 0.5 
C) Adobe System = 0.3333, Dow Chemical = 0.1667, Office Depot = 0.5 
D) Adobe System = 0.2, Dow Chemical = 0.4, Office Depot = 0.6

Question 8

Compute the standard deviation of Kohl's monthly returns.The past five monthly returns for Kohl's are 5.55 percent,8.62 percent,-4.44 percent,-1.52 percent,and 9.75 percent.

Accepted Answer

A) 4.92 percent 
B) 5.07 percent 
C) 6.28 percent 
D) 6.12 percent

Question 9

Define diversifiable risk and contrast it with market risk.

Accepted Answer

The answer of Define diversifiable risk and contrast it with...

Question 10

Rank the following three stocks by their risk-return relationship,best to worst.Night Ryder has an average return of 33 percent and standard deviation of 40 percent.The average return and standard deviation of WholeMart are 10 percent and 20 percent; and of Fruit Fly are 19 percent and 33 percent.

Accepted Answer

A) Night Ryder, WholeMart, Fruit Fly 
B) WholeMart, Fruit Fly, Night Ryder 
C) Night Ryder, Fruit Fly, WholeMart 
D) Fruit Fly, WholeMart, NightRyder

Question 11

Explain how to compute a portfolio's return.

Accepted Answer

The answer of Explain how to compute a portfolio's return....

Question 12

To find the percentage return of an investment:

Accepted Answer

A) multiply the dollar return by the investment's value at the beginning of the period. 
B) divide the dollar return by the investment's value at the beginning of the period. 
C) multiply the dollar return by the investment's value at the end of the period. 
D) divide the dollar return by the investment's value at the end of the period.

Question 13

Dominant Portfolios Determine which one of these three portfolios dominates another.Name the dominated portfolio and the portfolio that dominates it.Portfolio Blue has an expected return of 13 percent and risk of 17 percent.The expected return and risk of portfolio Yellow are 15 percent and 19 percent,and for the Purple portfolio are 12 percent and 18 percent.

Accepted Answer

A) Portfolio Blue dominates portfolio Yellow 
B) Portfolio Blue dominates portfolio Purple 
C) Portfolio Purple dominates portfolio Blue 
D) Portfolio Purple dominates portfolio Yellow

Question 14

Sprint Nextel Corp.stock ended the previous year at $25.00 per share.It paid a $2.57 per share dividend last year.It ended last year at $18.89.If you owned 650 shares of Sprint,what was your dollar return and percent return?

Accepted Answer

A) $2,960; 11.13 percent 
B) -$4,960; -16.13 percent 
C) -$3,960; -15.13 percent 
D) -$2,301; -14.16 percent

Question 15

Investment Return WayCo stock was $75 per share at the end of last year.Since then,it paid a $3 per share dividend last year.The stock price is currently $70.If you owned 200 shares of WayCo,what was your percent return?

Accepted Answer

A) -6.67 percent 
B) -2.67 percent 
C) 4.00 percent 
D) 4.29 percent

Question 16

Which of the following is another term for market risk?

Accepted Answer

A) Firm specific risk 
B) Modern portfolio risk 
C) Nondiversifiable risk 
D) Total risk

Question 17

Which of the following is defined as the portion of total risk that is attributable to firm or industry factors and can be reduced through diversification?

Accepted Answer

A) Firm specific risk 
B) Market risk 
C) Modern portfolio risk 
D) Total risk

Question 18

Which of the following is the concept and procedure for combining securities into a portfolio to minimize risk?

Accepted Answer

A) Firm specific theory 
B) Modern portfolio theory 
C) Optimal portfolio theory 
D) Total portfolio theory

Question 19

Risk versus Return in Bonds Assess the risk-return relationship of the following bonds:

Accepted Answer

The answer of Risk versus Return in Bonds Assess the...

Question 20

Risk,Return,and Their Relationship Consider the following annual average return,standard deviation,and coefficient of variation for Companies E and L.Which stock appears better? Why?

Accepted Answer

The answer of Risk,Return,and Their Relationship Consider the following annual...

Exam 9: Characterizing Risk and Return