76) What is the expected return on a portfolio that is equally weighted between Stocks M and N
given the following information?
State of
Economy
Probability of
State of Economy
Rate of Return
if State Occurs
Stock M
Stock N
Boom
.13
.18
−
.14
Normal
.82
.06
.06
Recession
.05
−
.14
.18
A) 5.28 percent
B) 5.87 percent
C) 6.00 percent
D) 6.32 percent
E) 6.40 percent
77) What is the expected return on a portfolio comprised of $9,750 of Stock X and $4,520 of
Stock Y if the economy enjoys a boom period?
State of
Economy
Probability of
State of Economy
Rate of Return
if State Occurs
Stock X
Stock Y
Boom
.25
.108
.156
Normal
.65
.087
.097
Recession
.10
.024
−
.069
A) 11.93 percent
B) 11.67 percent
C) 12.55 percent
D) 12.78 percent
E) 12.32 percent
78) What is the variance of the returns on a portfolio that is invested 40 percent in Stock S and
60 percent in Stock T?
State of
Economy
Probability of
State of Economy
Rate of Return
if State Occurs
Stock S
Stock T
Boom
.06
.22
.18
Normal
.92
.15
.14
Bust
.02
−
.26
−
.09
A) .00107
B) .00091
C) .00118
D) .00136
E) .00083
79) What is the variance of the returns on a portfolio comprised of $4,200 of Stock G and $5,300
of Stock H?
State of
Economy
Probability of
State of Economy
Rate of Return
if State Occurs
Stock G
Stock H
Boom
.18
.18
.08
Normal
.82
.14
.11
A) .000209
B) .000248
C) .000000
D) .001324
E) .000168
80) What is the standard deviation of the returns on a portfolio that is invested 37 percent in
Stock Q and 63 percent in Stock R?
State of
Economy
Probability of
State of Economy
Rate of Return
if State Occurs
Stock Q
Stock R
Boom
.15
.16
.15
Normal
.85
.09
.13
A) 1.37 percent
B) 2.47 percent
C) 1.63 percent
D) 1.28 percent
E) 2.09 percent
81) What is the standard deviation of the returns on a $30,000 portfolio that consists of Stocks S
and T? Stock S is valued at $18,000.
State of
Economy
Probability of
State of Economy
Rate of Return
if State Occurs
Stock S
Stock T
Boom
.05
.11
.09
Normal
.85
.08
.07
Bust
.10
−
.05
.04
A) 2.07 percent
B) 2.80 percent
C) 3.36 percent
D) 2.49 percent
E) 3.63 percent
82) What is the standard deviation of the returns on a portfolio that is invested in Stocks A, B,
and C? Twenty percent of the portfolio is invested in Stock A and 35 percent is invested in Stock
C.
State of
Economy
Probability of
State of Economy
Rate of Return
if State Occurs
Stock A
Stock B
Stock C
Boom
.04
.17
.09
.09
Normal
.81
.08
.06
.08
Recession
.15
−
.24
.02
−
.13
A) 6.31 percent
B) 6.49 percent
C) 7.38 percent
D) 5.65 percent
E) 7.72 percent
83) What is the beta of the following portfolio?
Stock
Amount
Invested
Security
Beta
A
$
14,200
1.39
B
$
23,900
.98
C
$
8,400
1.52
A) 1.12
B) 1.01
C) 1.05
D) 1.20
E) 1.23
84) Your portfolio is comprised of 36 percent of Stock X, 18 percent of Stock Y, and 46 percent
of Stock Z. Stock X has a beta of 1.19, Stock Y has a beta of .87, and Stock Z has a beta of 1.26.
What is the beta of your portfolio?
A) 1.16
B) 1.09
C) 1.13
D) 1.18
E) 1.11
85) Your portfolio has a beta of 1.28. The portfolio consists of 35 percent U.S. Treasury bills, 31
percent Stock A, and 34 percent Stock B. Stock A has a risk-level equivalent to that of the
overall market. What is the beta of Stock B?
A) 1.47
B) 1.52
C) 2.04
D) 1.84
E) 2.85
86) You would like to combine a risky stock with a beta of 1.76 with U.S. Treasury bills in such
a way that the risk level of the portfolio is equivalent to the risk level of the overall market. What
percentage of the portfolio should be invested in the risky stock?
A) 63.3 percent
B) 49.6 percent
C) 47.2 percent
D) 56.8 percent
E) 52.0 percent
87) You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks
has a beta of 1.46 and the total portfolio is equally as risky as the market. What is the beta of the
second stock?
A) 1.38
B) .87
C) 1.94
D) 1.72
E) 1.54
88) You want your portfolio beta to be .95. Currently, your portfolio consists of $4,000 invested
in Stock A with a beta of 1.26 and $7,000 in Stock B with a beta of .94. You have another $8,000
to invest and want to divide it between an asset with a beta of 1.74 and a risk-free asset. How
much should you invest in the risk-free asset?
A) $3,966
B) $4,425
C) $4,902
D) $4,305
E) $5,083
89) You have a $15,000 portfolio which is invested in Stocks A and B, and a risk-free asset.
$6,000 is invested in Stock A. Stock A has a beta of 1.63 and Stock B has a beta of .95. How
much needs to be invested in Stock B if you want a portfolio beta of 1.10?
A) $8,998.90
B) $8,333.33
C) $7,706.20
D) $7,073.68
E) $9,419.27