Portfolio diversification eliminates which one of the

Question 1: Suppose the real rate is 2.98% and the inflation rate is 3.31%. Solve for the nominal rate. Use the Fisher Effect formula.

Question 2: What is the beta of the following portfolio?

• 1.08
• 1.14
• 1.17
• 1.21
• 1.23

Question3: What is the beta of the following portfolio?

• 0.98
• 1.02
• 1.11
• 1.14
• 1.20

Question 4: Portfolio diversification eliminates which one of the following?

• Total investment risk
• Portfolio risk premium
• Market risk
• Unsystematic risk
• Reward for bearing risk

Question 5: The systematic risk is same as:

• Unique risk
• Diversifiable risk
• Asset-specific risk
• Market risk
• Unsystematic risk

Question 6: Standard deviation measures _____ risk while beta measures _____ risk.

• systematic; unsystematic
• unsystematic; systematic
• total; unsystematic
• total; systematic
• asset-specific; market

Question 7: You own a portfolio of two stocks, A and B. Stock A is valued at \$6,540 and has an expected return of 11.2 percent. Stock B has an expected return of 8.1 percent. What is the expected return on the portfolio if the portfolio value is \$9,500?

• 9.58 percent
• 9.62 percent
• 9.74 percent
• 9.97 percent
• 10.23 percent

Question 8: A \$36,000 portfolio is invested in a risk-free security and two stocks. The beta of stock A is 1.29 while the beta of stock B is 0.90. One-half of the portfolio is invested in the risk-free security. How much is invested in stock A if the beta of the portfolio is 0.58?

• \$6,000
• \$9,000
• \$12,000
• \$15,000
• \$18,000

Question 9: The stock of Billingsley United has a beta of 0.92. The market risk premium is 8.4 percent and the risk-free rate is 3.2 percent. What is the expected return on this stock?

• 8.87 percent
• 9.69 percent
• 10.93 percent
• 11.52 percent
• 12.01 percent

Question 10: Suppose a stock had an initial price of \$51.82 per share, paid a dividend of \$5 per share during the year, and had an ending share price of \$87.91. What are the percentage returns?

Question 11: Suppose a stock had an initial price of \$69.44 per share, paid a dividend of \$8.8 per share during the year, and had an ending share price of \$97.46. What are the percentage returns?

Question 12: A portfolio is invested 46.5% in Stock A, 24.3% in Stock B, and the remainder in Stock C. The expected returns are 15.5%, 21.7%, and 20.7% respectively. What is the portfolio's expected returns?

Question 13:  Calculate the expected returns of your portfolio

 Stock Invest Exp Ret A \$246 8.9% B \$861 14.3% C \$1,416 25.5%

Question 14: Suppose a stock had an initial price of \$93.51 per share, paid a dividend of \$5.8 per share during the year, and had an ending share price of \$100.77. What are the percentage returns if you own 25 shares?

Question 15: Suppose a stock had an initial price of \$87.39 per share, paid a dividend of \$6.2 per share during the year, and had an ending share price of \$89.38. If you own 296 shares, what are the dollar returns?

Question 16: You own a portfolio invested 10.01% in Stock A, 12.65% in Stock B, 13.78% in Stock C, and the remainder in Stock D. The beta of these four stocks are 1.14, 1.15, 0.99, and 0.73. What is the portfolio beta?

Question 17: You own a portfolio invested 16.52% in Stock A, 17.65% in Stock B, 26.85% in Stock C, and the remainder in Stock D. The beta of these four stocks are 0.68, 1.49, 0.3, and 1.43. What is the portfolio beta?

Question 18: Suppose the returns for Stock A for last six years was 4%, 7%, 8%, -2%, 9%, and 7%.
Compute the standard deviation of the returns.

Question 19: Suppose a stock had an initial price of \$72.88 per share, paid a dividend of \$4.7 per share during the year, and had an ending share price of \$106.67. What are the dollar returns?

Question 20: You have observed the following returns on ABC's stocks over the last five years:

2.5%, 9%, -4.9%, 13.6%, -2.3%

What is the arithmetic average returns on the stock over this five-year period.

Question 21: Based on the following information, calculate the expected returns:

 Prob Return Recession 30% 33.6% Boom 70% 18.2%

Question 22: Calculate the expected returns of your portfolio

 Stock Invest Exp Ret A \$220 3.9% B \$879 12.1% C \$212 25.1%

Question 23: Semi-strong-form efficient markets are not weak-form efficient.

• True
• False

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