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98. If you invested $1,000 in Disney and $5,000 in Oracle and the two companies returned 15
percent and 18 percent respectively, what was your portfolio's return?
99. JoJo's portfolio's return is 12 percent. She is invested in Cisco and IBM which had returns
of 15 percent and 9 percent respectively. What percentage of JoJo's assets are invested in each
firm?
100. Sharif's portfolio generated returns of 12 percent, 15 percent, -15 percent, 19 percent,
and -12 percent over five years. What was his average return over this period?
101. Which of the following is correct?
102. Which of the following is correct?
103. A stock has an expected return of 12 percent and a standard deviation of 20 percent.
Long-term Treasury bonds have an expected return of 9 percent and a standard deviation of 15
percent. Given this data, which of the following statements is correct?
104. A stock has an expected return of 15 percent and a standard deviation of 20 percent.
Long-term Treasury bonds have an expected return of 9 percent and a standard deviation of 11
percent. Given this data, which of the following statements is correct?
105. From 1950 to 2007, the average return in the stock market, as measured by the S&P 500,
was 13.2 percent and a standard deviation of 17 percent. Given this information, which of the
following statements is correct?
106. You are a risk-averse investor with a low-risk portfolio of bonds. How is it possible that
adding some stocks (which are riskier than bonds) to the portfolio can lower the total risk of the
portfolio?
107. Describe the diversification potential of two assets with a -0.7 correlation. What is the
potential if the correlation is +0.7?
108. What does diversification do to the risk and return characteristics of a portfolio?
109. What is the source of firm-specific risk? What is the source of market risk?
110. Risk versus Return in Bonds Assess the risk-return relationship of the following bonds:
111. Diversifying Consider the characteristics of the following three stocks:
The correlation between T&Company and A&Company is -0.2. The correlation between
T&Company and S&Company is -0.21. The correlation between A&Company and S&Company is
0.95. If you can pick only two stocks for your portfolio, which would you pick? Why?
112. Risk, Return, and Their Relationship Consider the following annual average return,
standard deviation, and coefficient of variation for Companies E and L. Which stock appears
better? Why?
113. Risk, Return, and Their Relationship Consider the following stocks' annual average
return, standard deviation, and coefficient of variation. Which stock appears better? Why?
114. Explain how to compute a portfolio's return.
115. Define an efficient portfolio and an efficient frontier.
116. Why is the percentage return a more useful measure than the dollar return?
117. How do we define risk in this chapter and how do we measure it?
118. Define diversifiable risk and contrast it with market risk.
119. Identify and explain a common measure for risk-return relationship.
