In: Finance
1. On a standard expected return versus standard deviation graph, what can you say about the desired sharpe ratio? (Points : 3.33) want the ratio to be as high as possible
want the ratio to be as low as possible
want the return to be as high as possible
want the risk to be as low as possible
want the downside risk to be as low as possible
2. A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 15%, while stock B has a standard deviation of return of 35%. Stock A comprises 55% of the portfolio. If the variance of return on the portfolio is .0280, the correlation coefficient between the returns on A and B is _________. (Points : 3.33) -0.139 0.345 0.327 0.460 0.292 3.The standard deviation of return on investment A is .15, while the standard deviation of return on investment B is .05. If the covariance of returns on A and B is .0030, the correlation coefficient between the returns on A and B is _________. (Points : 3.33)
.35 .40 .60 .65 0.50
4. A portfolio is composed of two stocks, A and B. Stock A has a
standard deviation of return of 20%, while stock B has a standard
deviation of return of 25%. The correlation coefficient between the
returns on A and B is .35. Stock B comprises 25% of the portfolio.
The standard deviation of the return on this portfolio is
_________. (Points : 3.33)
18.03% 4.43% 18.17% 21.05% 3.30%
5.The variance of return on investment A is 0.68, while the variance of return on investment B is 0.55. If the correlation coefficient between the returns on A and B is -.50, the covariance of returns on A and B is _________. (Points : 3.33)
-.3058 -.1870 .0210 .8477 .2168
6. Semitool Corp. has an expected excess return of 6% for next
year. However, for every unexpected 2% change in the market,
Semitool's return normally responds by a factor of 1.2. Suppose it
turns out that the economy and the stock market had an unexpected
increase by 4% and Semitool's products experience more rapid growth
than anticipated, pushing up the stock price by another 1% than
normal. Based on this information, what was Semitool's actual
excess return? (Points : 3.33)
7% 8.5% 8.8% 9.40% 11.80%
9. A stock has a correlation with the market of .65. The variance
of the market is 0.0121, and the variance of the stock is 0.2025.
What is the stock's beta? (Points : 3.33)
1.62 .75 2.66 1.55 0.82
24.You own a portfolio which is invested equally in two stocks
and a risk-free security. The stock betas are .89 for Stock A and
1.26 for Stock B. Which one of the following will decrease the
portfolio beta, all else constant? (Points : 3.33)
decrease the amount invested in the risk-free security
decreasing the weight of Stock A and increasing the weight of Stock B
replacing Stock A with a security that has a beta of .77
increasing the weight of Stock A and decreasing the weight of the risk-free security replacing Stock B with Stock C, which has a beta equal to that of the market