CHAPTER 21 QUIZ 61 TO 65

CHAPTER  21  QUIZ  61 TO  65
61. If you took all the possible investments that investors could acquire and determined the optimum basket of investments, you would come
up with point _________ on the capital market line
A. Rf
B.
B. K
C. M
D. Z
62. The risk that is assumed to be rewarded for an individual stock under the capital asset pricing model is measured by the
A. Portfolio standard deviation
B. Portfolio beta
C. Individual stock's standard deviation
D. Individual stock's beta
63. A stock with a beta of 1.9 would be most likely to be found in what industry (use your best judgment).
A. Airlines
B. Grocery stores
C. Public utilities
D. Insurance
64. Using the formula for the capital market line (Formula 21-5), if the risk-free rate (RF) is 6%, the market rate of return (KM) is 12%, the
market standard deviation (􀄱M) is 11%, and the standard deviation of the portfolio (􀄱P) is 14%, compute the anticipated return of the
portfolio (KP).
A. 20.4%
B. 16.33%
C. 13.64%
D. 13.4%
E. 13.2%
65. Using the formula for the security market line (Formula 21-7), if the risk-free rate (RF) is 6%, the market rate of return (KM) is 12% and
the beta (􀈕i) is 1.2, compute the anticipated return for stock i (Ki).
A. 20.4%
B. 16.33%
C. 13.64%
D. 13.4%
E. 13.2%