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67) You have a portfolio which is comprised of 55 percent of stock A and 45 percent of stock B.
What is the expected return on this portfolio?
State of the Economy
Probability
E(R) A
E(R) B
Weight
55
%
45
%
Boom
0.15
19
%
12
%
Normal
0.65
11
%
7
%
Recession
0.20
-16
%
1
%
A) 5.45 percent
B) 6.69 percent
C) 7.14 percent
D) 7.60 percent
E) 8.22 percent
68) You have a portfolio which is comprised of 70 percent of stock A and 30 percent of stock B.
What is the ex return on this portfolio?
State of the Economy
Probability
E(R) A
E(R) B
Weight
70
%
30
%
Boom
0.2
20
%
14
%
Normal
0.6
12
%
8
%
Recession
0.2
-8
%
5
%
A) 9.30 percent
B) 9.58 percent
C) 10.03 percent
D) 11.79 percent
E) 12.40 percent
69) You have a portfolio which is comprised of 75 percent of stock A and 25 percent of stock B.
What is the expected rate of return on this portfolio?
State of the Economy
Probability of State of
Economy
Rate of Return if State Occurs
Stock A
Stock B
Boom
0.10
24
%
15
%
Normal
0.85
12
%
12
%
Recession
0.05
-36
%
8
%
A) 10.70 percent
B) 10.87 percent
C) 11.13 percent
D) 12.11 percent
E) 12.80 percent
70) You have a portfolio which is comprised of 72 percent of stock A and 28 percent of stock B.
What is the variance of this portfolio?
State of the Economy
Probability
A
B
Boom
0.60
12
%
22
%
Normal
0.40
-12
%
-44
%
A) 190.9
B) 203.8
C) 268.1
D) 290.9
E) 306.9
71) You have a portfolio which is comprised of 40 percent of stock A and 60 percent of stock B.
What is the variance of the portfolio?
State of the Economy
Probability
E(R)A
E(R)B
40
%
60
%
Normal
0.7
12
%
14
%
Recession
0.3
-7
%
-10
%
A) 57.86
B) 62.13
C) 66.84
D) 70.15
E) 75.93
72) You have a portfolio which is comprised of 35 percent of stock A and 65 percent of stock B.
What is the standard deviation of this portfolio?
State of the Economy
Probability
A
B
Boom
0.15
22
%
19
%
Normal
0.80
12
%
10
%
Recession
0.05
-26
%
-4
%
A) 4.39 percent
B) 5.68 percent
C) 6.41 percent
D) 7.14 percent
E) 9.08 percent
73) Roger has a portfolio comprised of $8,000 of stock A and $12,000 of stock B. What is the
standard deviation of this portfolio?
State of the Economy
Probability of State of
Economy
Rate of return if state occurs
Stock A
Stock B
Normal
0.84
11
%
15
%
Recession
0.16
-6
%
-19
%
A) 4.67 percent
B) 9.97 percent
C) 7.23 percent
D) 8.83 percent
E) 10.42 percent
74) You have a portfolio which is comprised of 30 percent of stock A and 70 percent of stock B.
What is the portfolio standard deviation?
State of the Economy
Probability
E(R) A
E(R) B
30%
70%
Boom
0.15
20.00
14.00
Normal
0.75
11.00
9.00
Recession
0.10
(23.00
)
(5.00
)
A) 4.00 percent
B) 5.56 percent
C) 6.06 percent
D) 6.82 percent
E) 7.47 percent
75) You have a portfolio which is comprised of 48 percent of stock A and 52 percent of stock B.
What is the standard deviation of this portfolio?
State of the Economy
Probability of State of
Economy
Rate of return if state occurs
Stock A
Stock B
Boom
0.20
8
%
17
%
Normal
0.75
11
%
12
%
Recession
0.05
14
%
-8
%
A) 1.98 percent
B) 2.06 percent
C) 2.13 percent
D) 2.27 percent
E) 2.30 percent
76) Stock A has a standard deviation of 15 percent per year and stock B has a standard deviation
of 8 percent per year. The correlation between stock A and stock B is .40. You have a portfolio
of these two stocks wherein stock B has a portfolio weight of 40 percent. What is your portfolio
variance?
A) 0.01143
B) 0.01214
C) 0.01329
D) 0.01437
E) 0.01470
77) Stock A has a standard deviation of 20 percent per year and stock B has a standard deviation
of 15 percent per year. The correlation between stock A and stock B is .35. You have a portfolio
of these two stocks wherein stock B has a portfolio weight of 40 percent. What is your portfolio
variance?
A) 0.02022
B) 0.02156
C) 0.02239
D) 0.02247
E) 0.02304
78) Stock A has a standard deviation of 15 percent per year and stock B has a standard deviation
of 21 percent per year. The correlation between stock A and stock B is 0.30. You have a
portfolio of these two stocks wherein stock B has a portfolio weight of 60 percent. What is your
portfolio standard deviation?
A) 14.87 percent
B) 15.50 percent
C) 16.91 percent
D) 17.45 percent
E) 18.03 percent
79) Stock X has a standard deviation of 21 percent per year and stock Y has a standard deviation
of 6 percent per year. The correlation between stock A and stock B is 0.38. You have a portfolio
of these two stocks wherein stock X has a portfolio weight of 42 percent. What is your portfolio
standard deviation?
A) 8.89 percent
B) 9.85 percent
C) 10.64 percent
D) 11.84 percent
E) 12.92 percent
80) A stock fund has a standard deviation of 18 percent and a bond fund has a standard deviation
of 10 percent. The correlation of the two funds is .15. What is the approximate weight of the
stock fund in the minimum variance portfolio?
A) 11 percent
B) 15 percent
C) 20 percent
D) 24 percent
E) 27 percent
81) A stock fund has a standard deviation of 16 percent and a bond fund has a standard deviation
of 4 percent. The correlation of the two funds is .11. What is the weight of the stock fund in the
minimum variance portfolio?
A) 3.47 percent
B) 6.48 percent
C) 11.92 percent
D) 14.67 percent
E) 18.22 percent
82) What is the expected return on this stock given the following information?
State of the Economy
Probability
E(R)
Boom
0.4
15
%
Recession
0.6
-20
%
A) -8.07 percent
B) -7.69 percent
C) -6.00 percent
D) -5.70 percent
E) -5.20 percent
83) The risk-free rate is 3.0 percent. What is the expected risk premium on this security given the
following information?
State of the Economy
Probability
E(R)
Boom
0.30
16
%
Normal
0.55
8
%
Recession
0.20
-12
%
A) 2.90 percent
B) 3.01 percent
C) 3.20 percent
D) 3.80 percent
E) 4.15 percent
84) What is the variance of the expected returns on this stock?
State of the Economy
Probability
E(R)
Boom
0.35
18.00
Recession
0.65
8.00
A) 18.75
B) 22.75
C) 31.53
D) 48.97
E) 50.03
85) A portfolio consists of the following securities. What is the portfolio weight of stock A?
Stock
#Shares
PPS
A
200
$
48
B
100
$
33
C
250
$
21
A) 0.336
B) 0.389
C) 0.445
D) 0.451
E) 0.529
86) You have a portfolio which is comprised of 70 percent of stock A and 30 percent of stock B.
What is the expected return on this portfolio?
State of the Economy
Probability
E(R) A
E(R) B
Weight
60
%
40
%
Boom
0.2
20
%
15
%
Normal
0.6
12
%
8
%
Recession
0.2
-10
%
3
%
A) 7.30 percent
B) 7.58 percent
C) 8.03 percent
D) 8.88 percent
E) 9.40 percent
87) You have a portfolio which is comprised of 40 percent of stock A and 60 percent of stock B.
What is the portfolio standard deviation?
State of the Economy
Probability
E(R) A
E(R) B
40%
60%
Boom
0.10
20.00
14.00
Normal
0.75
11.00
9.00
Recession
0.15
(20.00
)
(5.00
)
A) 4.00 percent
B) 5.56 percent
C) 6.06 percent
D) 6.82 percent
E) 7.42 percent
88) A stock fund has a standard deviation of 28 percent and a bond fund has a standard deviation
of 16 percent. The correlation of the two funds is .15. What is the approximate weight of the
stock fund in the minimum variance portfolio?
A) 11 percent
B) 15 percent
C) 21 percent
D) 24 percent
E) 27 percent
