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# Quiz 11: Risk and Return: the Capital Asset Pricing Model

If the covariance of stock 1 with stock 2 is -.0065, then what is the covariance of stock 2 with stock 1?
(Multiple Choice)

A

A portfolio is entirely invested into Buzz's Bauxite Boring Equity, which is expected to return 16%, and Zum's Inc. bonds, which are expected to return 8%. Sixty percent of the funds are invested in Buzz's and the rest in Zum's. What is the expected return on the portfolio?
(Multiple Choice)

B

A portfolio will usually contain:
(Multiple Choice)

C

Stock A has an expected return of 20%, and stock B has an expected return of 4%. However, the risk of stock A as measured by its variance is 3 times that of stock B. If the two stocks are combined equally in a portfolio, what would be the portfolio's expected return?
(Multiple Choice)
Systematic risk is measured by:
(Multiple Choice)
Idaho Slopes (IS) and Dakota Steppes (DS) are both seasonal businesses. IS is a downhill skiing facility, while DS is a tour company that specializes in walking tours and camping. The equally likely returns on each company over the next year is expected to be: The correlation between the returns of IS and DS is:
(Multiple Choice)
Idaho Slopes (IS) and Dakota Steppes (DS) are both seasonal businesses. IS is a downhill skiing facility, while DS is a tour company that specializes in walking tours and camping. The equally likely returns on each company over the next year is expected to be: The variances of IS and DS are:
(Multiple Choice)
When stocks with the same expected return are combined into a portfolio:
(Multiple Choice)
GenLabs has been a hot stock the last few years, but is risky. The expected returns for GenLabs are highly dependent on the state of the economy as follows: The variance and standard deviation of GenLabs returns are:
(Multiple Choice)
The rate of return on the common stock of Flowers by Flo is expected to be 14% in a boom economy, 8% in a normal economy, and only 2% in a recessionary economy. The probabilities of these economic states are 20% for a boom, 70% for a normal economy, and 10% for a recession. What is the variance of the returns on the common stock of Flowers by Flo?
(Multiple Choice)
You have plotted the data for two securities over time on the same graph, ie., the month return of each security for the last 5 years. If the pattern of the movements of the two securities rose and fell as the other did, these two securities would have:
(Multiple Choice)
If you have a portfolio of two risky stocks which turns out to have no diversification. The reason you have no diversification is:
(Multiple Choice)
Idaho Slopes (IS) and Dakota Steppes (DS) are both seasonal businesses. IS is a downhill skiing facility, while DS is a tour company that specializes in walking tours and camping. The equally likely returns on each company over the next year is expected to be: The covariance between the IS and DS returns is:
(Multiple Choice)
GenLabs has been a hot stock the last few years, but is risky. The expected returns for GenLabs are highly dependent on the state of the economy as follows: The expected return on GenLabs is:
(Multiple Choice)
Standard deviation measures ________________ risk.
(Multiple Choice)
Idaho Slopes (IS) and Dakota Steppes (DS) are both seasonal businesses. IS is a downhill skiing facility, while DS is a tour company that specializes in walking tours and camping. The equally likely returns on each company over the next year is expected to be: If IS and DS are combined in a portfolio with 50% invested in each, the expected return and risk would be:
(Multiple Choice)
If the correlation between two stocks is -1, the returns:
(Multiple Choice)
Idaho Slopes (IS) and Dakota Steppes (DS) are both seasonal businesses. IS is a downhill skiing facility, while DS is a tour company that specializes in walking tours and camping. The equally likely returns on each company over the next year is expected to be: The means of IS and DS are:
(Multiple Choice)
Covariance measures the interrelationship between two securities in terms of:
(Multiple Choice)
When a security is added to a portfolio the appropriate return and risk contributions are:
(Multiple Choice)
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