1. Systematic risk is a measure of return volatility in an individual stock that is specific to __________.
a. the market
b. the weather
c. the individual firm
d. inflation
2. Consider the following information:
Your Portfolio The Market Index Portfolio
mean return 12% 10%
standard deviation 14% 12%
beta 1.2 1.0
risk-free rate = 4%
Calculate the Sharpe Measure of Performance for both Your Portfolio and The Market Index Portfolio.
D. .671; .450
A. .450; .400
C. .571; .500
B. .500; .450
The beta for firm XYZ was reported as Beta = 1.62 on S&P Market Insight. If the market return is expected to be 12% and the risk-free rate is 4.5%, calculate the expected rate of return for XYZ under assumption that the CAPM is the appropriate return generating model.
D. 17.00%
C. 16.65%
A. 15.75%
B. 15.00%