Reference no: EM132984480
Questions -
Q1. Which of the following is False?
A. Group of answer choices The coefficient of variation cannot be negative.
B. If a stock portfolio is well diversified, then the portfolio variance may be less than the variance of the least risky stock in the portfolio.
C. The capital asset pricing model (CAPM) assumes that a risk-free asset has no systematic risk and the reward-to-risk ratio is constant.
D. If an asset has annual returns of 30%, 30%, and -30% for the past three years, then the coefficient of variation for this asset is 3.464.
Q2. Given her evaluation of current economic conditions, Ima Nutt believes there is a 50 percent probability of recession, a 20 percent change of continued steady growth, and a 30 percent probability of inflationary growth. For each possibility, Ima has developed an interest rate forecast for long-term Treasury bond interest rates accordingly: 6%, 9% and 14%. What is the standard deviation under Ima's interest rate forecast?
a. 9.0%
b. 0.12%
c. 3.46%
d. 2.91%
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