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Question

1.      The risk of a portfolio is the weighted average of the risk for each stock in the portfolio.

True

2.      Which one of the following is an example of systematic risk?

		A company is sued by the federal government for its illegal business activities.
		The GDP growth rate is higher than expected.
		A firm just fired its CEO.
		A firm failed to raise capital on the market.

3.      A stock is expected to return 23% in an economic boom, 10% in a normal economy, and -3% in a recessionary economy. Which one of the following will decrease the overall expected rate of return on this stock?

		An increase in the probability of a recession occurring
		A decrease in the probability of a recession occurring
		An increase in the probability of an economic boom
		An increase in the rate of return in a boom economy

4.      A stock has a 50% chance of producing a 20% return, and a 50% chance of producing a -20% return.  What is the stock's expected return?

		-10.0%
		0%
		5.0%
		10.0%

5.      An investor has a $200,000 stock portfolio.  $100,000is invested in a stock with a beta of 0.8 and the remainder is invested in a stock with a beta of 1.2.  These are the only two investments in his portfolio.  What is his portfolio's beta?

		0.9
		1.2
		1.0
		1.2

6.      A company's stock has a beta of 1.20, the risk-free rate is2.25%, and the expected market return is8.25%.  What is its required rate of return?

		7.25%
		9.25%
		10.95%
		9.45%

7.      You own a $3,500 portfolio consisting of two stocks, A and B. Stock A (beta = 1.3) is valued at $1,400 and has an expected return of 12%. Stock B (beta = 0.8) has an expected return of 7%. What is the weighted average return of the portfolio?

		7.22%
		8.35%
		9.40%
		9.00%

 

8.      Based on the information from Question 7, what is the beta value of the portfolio?

		1.00
		1.04
		1.10
		1.22