Reference no: EM132775954

Question 1

Consider a portfolio P comprised of two risky assets (A and B) whose returns have a correlation of 0.61. Risky asset A has an expected return of 10% and standard deviation of 15%. Risky asset B has an expected return of 7% and standard deviation of 11%. What is the Sharpe ratio of portfolio P if 75% of the assets are invested in risky asset A and the risk-free rate is 2.5%?

Question 2

Consider a portfolio P comprised of two risky assets (A and B) whose returns have a correlation of Zero. Risky asset A has an expected return of 10% and standard deviation of 15%. Risky asset B has an expected return of 7% and standard deviation of 11%. Assuming a risk-free rate of 2.5%, What is the expected return on the optimal risky portfolio? 

Question 3

Consider a portfolio P comprised of two risky assets (A and B) whose returns have a correlation of Zero. Risky asset A has an expected return of 10% and standard deviation of 15%. Risky asset B has an expected return of 7% and standard deviation of 11%. Assuming a risk-free rate of 2.5%, What is the standard deviation of returns on the optimal risky portfolio?

Question 4

Which of the following statistics for daily stocks returns is always positive?

• Expected return
• Standard deviation of returns
• Covariance of returns
• Correlation of returns

Question 5

Which of the following is the best example of systematic Risk?

• Department of labor releases employment figures that are below the market's expectations.
• A snowstorm in the northeast causes the cancelation of airline flights in the northeast for two days.
• The SEC announces a large fine on a bank for violation of SEC regulations.
• FDA rejects the application of a diabetes drug for a major pharmaceutical company.