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What is the weighted average return of the portfolio

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Reference no: EM13829197

1.      The risk of a portfolio is the weighted average of the risk for each stock in the portfolio.

True

2.      Which one of the following is an example of systematic risk?

  

A company is sued by the federal government for its illegal business activities.

 

The GDP growth rate is higher than expected.

 

A firm just fired its CEO.

 

A firm failed to raise capital on the market.

3.      A stock is expected to return 23% in an economic boom, 10% in a normal economy, and -3% in a recessionary economy. Which one of the following will decrease the overall expected rate of return on this stock?

  

An increase in the probability of a recession occurring

 

A decrease in the probability of a recession occurring

 

An increase in the probability of an economic boom

 

An increase in the rate of return in a boom economy

4.      A stock has a 50% chance of producing a 20% return, and a 50% chance of producing a -20% return.  What is the stock's expected return?

  

-10.0%

 

0%

 

5.0%

 

10.0%
 

5.      An investor has a $200,000 stock portfolio.  $100,000is invested in a stock with a beta of 0.8 and the remainder is invested in a stock with a beta of 1.2.  These are the only two investments in his portfolio.  What is his portfolio's beta?

  

0.9

 

1.2

 

1.0

 

1.2

6.      A company's stock has a beta of 1.20, the risk-free rate is2.25%, and the expected market return is8.25%.  What is its required rate of return?

  

7.25%

 

9.25%

 

10.95%

 

9.45%

7.      You own a $3,500 portfolio consisting of two stocks, A and B. Stock A (beta = 1.3) is valued at $1,400 and has an expected return of 12%. Stock B (beta = 0.8) has an expected return of 7%. What is the weighted average return of the portfolio?

  

7.22%

 

8.35%

 

9.40%

 

9.00%

 

8.      Based on the information from Question 7, what is the beta value of the portfolio?

  

1.00

 

1.04

 

1.10

 

1.22

Reference no: EM13829197

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