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Marks: 2 You have a portfolio consisting solely of stock A and stock B. The portfolio has an expected return of 8.7 percent. Stock A has an expected return of 11.4 percent while stock B is expected to return 6.4 percent. What is the portfolio weight of stock A?
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Marks: 2 Suzie owns five different bonds valued at $36,000 and twelve different stocks valued at $82,500 total. Which one of the following terms most applies to Suzie's investments?
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Marks: 2 You have $10,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 13 percent and Stock Y with an expected return of 8 percent. Your goal is to create a portfolio with an expected return of 12.4 percent. All money must be invested. How much will you invest in stock X?
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Marks: 2 Which of the following are examples of diversifiable risk?
I. earthquake damages an entire town
II. federal government imposes a $100 fee on all business entities
III. employment taxes increase nationally
IV. toymakers are required to improve their safety standards
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Marks: 2 Which one of the following events would be included in the expected re
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Marks: 2 The expected risk premium on a stock is equal to the expected return on the stock minus the:
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Marks: 2 Which one of the following stocks is correctly priced if the risk-free rate of return is 3.7 percent and the market risk premium is 8.8 percent?
Stock Beta Expected Return
A 0.64 9.47%
B 0.97 12.03%
C 1.22 14.44%
D 1.37 15.80%
E 1.68 18.37%
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Marks: 2 The returns on the common stock of New Image Products are quite cyclical. In a boom economy, the stock is expected to return 32 percent in comparison to 14 percent in a normal economy and a negative 28 percent in a recessionary period. The probability of a recession is 25 percent while the probability of a boom is 10 percent. What is the standard deviation of the returns on this stock?
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Marks: 2 Which one of the following measures the amount of systematic risk present in a particular risky asset relative to the systematic risk present in an average risky asset?
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Marks: 2 What is the expected return on a portfolio which is invested 25 percent in stock A, 55 percent in stock B, and the remainder in stock C?
Rate of return if state occurs
State of Economy Probability of State of Economy Stock S Stock T
Boom 20% 17% 7%
Normal 80% 13% 10%
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Marks: 2 Which one of the following is represented by the slope of the security market line?
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Marks: 2 The excess return earned by an asset that has a beta of 1.34 over that earned by a risk-free asset is referred to as the:
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Marks: 2 You own a portfolio with the following expected returns given the various states of the economy. What is the overall portfolio expected return?
State of Economy Probability of State of Economy Rate of return if state occurs
Boom 27% 14%
Normal 70% 8%
Recession 3% -11%
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Marks: 2 The market risk premium is computed by:
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Marks: 2 Your portfolio is invested 26 percent each in Stocks A and C, and 48 percent in Stock B. What is the standard deviation of your portfolio given the following information?
Rate of return if state occurs
State of Economy Probability of State of Economy Stock A Stock B Stock C
Boom 0.25 0.25 0.25 0.45
Good 0.25 0.10 0.13 0.11
Poor 0.25 0.03 0.05 0.05
Bust 0.25 -0.04 -0.09 -0.09
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Marks: 2 The common stock of United Industries has a beta of 1.34 and an expected return of 14.29 percent. The risk-free rate of return is 3.7 percent. What is the expected market risk premium?
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Marks: 2 Your portfolio is comprised of 40 percent of stock X, 15 percent of stock Y, and 45 percent of stock Z. Stock X has a beta of 1.16, stock Y has a beta of 1.47, and stock Z has a beta of 0.42. What is the beta of your portfolio?
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Marks: 2 According to CAPM, the amount of reward an investor receives for bearing the risk of an individual security depends upon the:
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Marks: 2 Which one of the following is an example of unsystematic risk?
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Marks: 2 At a minimum, which of the following would you need to know to estimate the amount of additional reward you will receive for purchasing a risky asset instead of a risk-free asset?
I. asset's standard deviation
II. asset's beta
III. risk-free rate of return
IV. market risk premium
USA 
India