## Mirror for Humanity Study Set 1

Anthropology

## Quiz 7 :

An Introduction to Portfolio Management

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Q01 Q01 Q01

Exhibit 7B.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The general equation for the weight of the first security to achieve the minimum variance (in a two stock portfolio) is given by:
W

_{1}= [E(_{1})^{2} r_{1.2}E(_{1}) E(_{2})] [E(_{1})^{2}+ E(_{2})^{2} 2 r_{1.2}E(_{1}) E(_{2})] -Refer to Exhibit 7B.1. Show the minimum portfolio variance for a portfolio of two risky assets when r_{1.2}= 1.Free

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Multiple Choice

C

Q02 Q02 Q02

Exhibit 7B.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The general equation for the weight of the first security to achieve the minimum variance (in a two stock portfolio) is given by:
W

_{1}= [E(_{1})^{2} r_{1.2}E(_{1}) E(_{2})] [E(_{1})^{2}+ E(_{2})^{2} 2 r_{1.2}E(_{1}) E(_{2})] -Refer to Exhibit 7B.1. What is the value of W_{1}when r_{1.2}= 1 and E(_{1}) = .10 and E(_{2}) = .12?Free

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Multiple Choice

D

Q03 Q03 Q03

Exhibit 7A.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The general equation for the weight of the first security to achieve the minimum variance (in a two stock portfolio) is given by:
W

_{1}= [E(_{2})^{2} r_{1.2}E(_{1})E(_{2})] [E(_{1})^{2}+ E(_{2})^{2} 2 r_{1.2}E(_{1})E(_{2})] -Refer to Exhibit 7A.1. What weight of security 1 gives the minimum portfolio variance when r_{1.2}= .60, E(_{1}) = .10 and E(_{2}) = .16?Free

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Multiple Choice

E

Q04 Q04 Q04

Exhibit 7A.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The general equation for the weight of the first security to achieve the minimum variance (in a two stock portfolio) is given by:
W

_{1}= [E(_{2})^{2} r_{1.2}E(_{1})E(_{2})] [E(_{1})^{2}+ E(_{2})^{2} 2 r_{1.2}E(_{1})E(_{2})] -Refer to Exhibit 7A.1. Show the minimum portfolio variance for a two stock portfolio when r_{1.2}= 1.Free

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Multiple Choice

Q05 Q05 Q05

Exhibit 7A.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The general equation for the weight of the first security to achieve the minimum variance (in a two stock portfolio) is given by:
W

_{1}= [E(_{2})^{2} r_{1.2}E(_{1})E(_{2})] [E(_{1})^{2}+ E(_{2})^{2} 2 r_{1.2}E(_{1})E(_{2})] -A good portfolio is a collection of individually good assets.Free

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True False

Q06 Q06 Q06

Exhibit 7A.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The general equation for the weight of the first security to achieve the minimum variance (in a two stock portfolio) is given by:
W

_{1}= [E(_{2})^{2} r_{1.2}E(_{1})E(_{2})] [E(_{1})^{2}+ E(_{2})^{2} 2 r_{1.2}E(_{1})E(_{2})] -Risk is defined as the uncertainty of future outcomes.Free

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True False

Q07 Q07 Q07

Exhibit 7A.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The general equation for the weight of the first security to achieve the minimum variance (in a two stock portfolio) is given by:
W

_{1}= [E(_{2})^{2} r_{1.2}E(_{1})E(_{2})] [E(_{1})^{2}+ E(_{2})^{2} 2 r_{1.2}E(_{1})E(_{2})] -Prior to the work of Markowitz in the late 1950's and early 1960's, portfolio managers did not have a well-developed, quantitative means of measuring risk.Free

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True False

Q61 Q61 Q61

Exhibit 7.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 7.1. What is the expected return of a portfolio of two risky assets if the expected return E(R

_{i}), standard deviation (_{i}), covariance (COV_{i,j}), and asset weight (W_{i}) are as shown above?Free

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Multiple Choice

Q63 Q63 Q63

Exhibit 7.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 7.2. What is the expected return of a portfolio of two risky assets if the expected return E(R

_{i}), standard deviation (_{i}), covariance (COV_{i,j}), and asset weight (W_{i}) are as shown above?Free

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Multiple Choice

Q65 Q65 Q65

Exhibit 7.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 7.3. What is the expected return of a portfolio of two risky assets if the expected return E(R

_{i}), standard deviation (_{i}), covariance (COV_{i,j}), and asset weight (W_{i}) are as shown above?Free

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Multiple Choice

Q67 Q67 Q67

Exhibit 7.4
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 7.4. What is the expected return of a portfolio of two risky assets if the expected return E(R

_{i}), standard deviation (_{i}), covariance (COV_{i,j}), and asset weight (W_{i}) are as shown above?Free

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Multiple Choice

Q69 Q69 Q69

Exhibit 7.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 7.5. What is the expected return of a portfolio of two risky assets if the expected return E(R

_{i}), standard deviation (_{i}), covariance (COV_{i,j}), and asset weight (W_{i}) are as shown above?Free

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Multiple Choice

Q71 Q71 Q71

Exhibit 7.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 7.6. What is the expected return of a portfolio of two risky assets if the expected return E(R

_{i}), standard deviation (_{i}), covariance (COV_{i,j}), and asset weight (W_{i}) are as shown above?Free

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Multiple Choice

Q73 Q73 Q73

Exhibit 7.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 7.7. What is the expected return of a portfolio of two risky assets if the expected return E(R

_{i}), standard deviation (_{i}), covariance (COV_{i,j}), and asset weight (W_{i}) are as shown above?Free

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Multiple Choice

Q75 Q75 Q75

Exhibit 7.8
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 7.8. What is the expected return of a portfolio of two risky assets if the expected return E(R

_{i}), standard deviation (_{i}), covariance (COV_{i,j}), and asset weight (W_{i}) are as shown above?Free

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Multiple Choice

Q77 Q77 Q77

Exhibit 7.9
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 7.9. What is the expected return of a portfolio of two risky assets if the expected return E(R

_{i}), standard deviation (_{i}), covariance (COV_{i,j}), and asset weight (W_{i}) are as shown above?Free

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Multiple Choice

Q79 Q79 Q79

Exhibit 7.10
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 7.10. What is the expected return of a portfolio of two risky assets if the expected return E(R

_{i}), standard deviation (_{i}), covariance (COV_{i,j}), and asset weight (W_{i}) are as shown above?Free

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Multiple Choice

Q85 Q85 Q85

Exhibit 7.12
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Consider two securities, A and B. Security A and B have a correlation coefficient of 0.65. Security A has standard deviation of 12, and security B has standard deviation of 25. Calculate the covariance between these two securities.

Free

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Multiple Choice

Q88 Q88 Q88

Exhibit 7.13
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A financial analyst covering Magnum Oil has determined the following four possible returns given four different states of the economy over the next period.
-Refer to Exhibit 7.13. Calculate the expected return for Magnum Oil.

Free

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Multiple Choice

Q89 Q89 Q89

Exhibit 7.13
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A financial analyst covering Magnum Oil has determined the following four possible returns given four different states of the economy over the next period.
-Refer to Exhibit 7.13. Calculate the standard deviation for Magnum Oil.

Free

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Multiple Choice

Q90 Q90 Q90

Exhibit 7.14
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks A and B have a correlation coefficient of 0.8. The stocks' expected returns and standard deviations are in the table below. A portfolio consisting of 40% of stock A and 60% of stock B is constructed.
-Refer to Exhibit 7.14. What is the expected return of the stock A and B portfolio?

Free

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Multiple Choice

Q91 Q91 Q91

Exhibit 7.14
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks A and B have a correlation coefficient of 0.8. The stocks' expected returns and standard deviations are in the table below. A portfolio consisting of 40% of stock A and 60% of stock B is constructed.
-Refer to Exhibit 7.14. What is the standard deviation of the stock A and B portfolio?

Free

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Multiple Choice

Q92 Q92 Q92

Exhibit 7.14
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks A and B have a correlation coefficient of 0.8. The stocks' expected returns and standard deviations are in the table below. A portfolio consisting of 40% of stock A and 60% of stock B is constructed.
-Refer to Exhibit 7.14. What percentage of stock A should be invested to obtain the minimum risk portfolio that contains stock A and B?

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Multiple Choice

Q93 Q93 Q93

Exhibit 7.14
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks A and B have a correlation coefficient of 0.8. The stocks' expected returns and standard deviations are in the table below. A portfolio consisting of 40% of stock A and 60% of stock B is constructed.
-What is the standard deviation of an equally weighted portfolio of two stocks with a covariance of 0.009, if the standard deviation of the first stock is 15% and the standard deviation of the second stock is 20%?

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Multiple Choice

Q94 Q94 Q94

Exhibit 7.15
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 7.15. What is the expected return of a portfolio of two risky assets if the expected return E(R

_{i}), standard deviation (_{i}), covariance (COV_{i,j}), and asset weight (W_{i}) are as shown above?Free

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Multiple Choice

Q96 Q96 Q96

Exhibit 7.16
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Based on the economic outlook for the industry a financial analyst covering Top Choice Corporation has determined the following three possible returns given three different states of the economy over the next period.
-Refer to Exhibit 7.16. What is the expected return for Top Choice Corporation?

Free

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Multiple Choice

Q97 Q97 Q97

Exhibit 7.16
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Based on the economic outlook for the industry a financial analyst covering Top Choice Corporation has determined the following three possible returns given three different states of the economy over the next period.
-Refer to Exhibit 7.16. What is the standard deviation for Top Choice Corporation?

Free

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Multiple Choice