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Hi,any question require calculations,i need to them. Document Preview: 8. In which of the following situations would get the largest reduction in risk by spreading your investment across two stocks? A. The two stocks are perfectly correlated. B. There is no correlation. C. There is modest negative correlation. D. There is perfect negative correlation. 9. As the number of stocks in a portfolio is increased: A. Unique risk decreases and approaches zero. B. Market risk decreases. C. Unique risk decreases and becomes equal to market risk. D. Total risk approaches zero. 10. If the covariance between stock A and stock B is 100, the standard deviation of stock A is 10% and that of stock B is 20%, what is the correlation coefficient between the two securities? A. –0.50 B. +0.50 C. –1.00 D. +0.75 E. None of the above. 3 of 4 11. The correlation coefficient between stock A and the market portfolio is +0.60. The standard deviation of return of the stock is 30% and that of the market portfolio is 20%. What is the beta of the stock? A. 0.90. B. 1.50 C. 0.40 D. 0.25 E. None of the above. 12. Consider Table 4. Table 4 Asset Return Treasury Bill 5% Market Portfolio 12% On the basis of the Capital Asset Pricing Model (CAPM), what is the required return on an investment with a beta of 1.50? A. 15.50% B. 11.50% C. 10.50% D. 20.50% E. None of the above. 13. Consider Table 4. If the market expects a return of 14.00% from stock X, what is its beta? A. 0.99 B. 1.29 C. 2.99 D. 1.00 E. None of the above. 14. If the average annual rate of return for common stocks is 13% and treasury bills is 3.80%, what is the average market risk premium? A. 9.20% B. 13% C. 3.80% D. 16.80% E. None of the above. 15. The Capital Asset Pricing Model (CAPM) states that: A. The expected risk premium on an investment is proportional to its beta. B. The expected rate of return on an investment is proportional to its beta. C. The expected rate of return on an... Attachments: Finance-Homew....odt Dec 14 2012 07:07 PM


Solution ID:608876 | This paper was updated on 26-Nov-2015

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