CHAPTER 21 QUIZ 66 TO 69
66. An investment has the following range of outcomes and probabilities.
Calculate the expected value and the standard deviation (round to two places after the decimal point where necessary).
67. Given another investment with an expected value of 15 percent and a standard deviation of 2.7 percent that is counter cyclical to the
investment in problem 1, what is the expected value of the portfolio and its standard deviation if both are combined into a portfolio with
55 percent invested in the first investment and 45 percent in the second? Assume the correlation coefficient (rij) is -.30.
68. Using the formula for the capital market line if the risk-free rate (Rf) is 7 percent, the market rate of return (Km) is 12 percent, the market
standard deviation (sm) is 6 percent, and the standard deviation of the portfolio (sp) is 15 percent, compute the anticipated return (Kp).
69. Using the formula for the security market line if the risk free rate (Rf) is 6 percent, the market rate of return (Km) is 12 percent, the beta
(bi) is 1.5, compute the anticipated rate of return (Ki).
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