Question: 1. The ___ decision should take precedence over the _ decision. a asset allocation; stock selection b bond selection; mutual fund selection c stock selection;

1. The _______ decision should take precedence over the _____ decision.

a asset allocation; stock selection

b bond selection; mutual fund selection

c stock selection; asset allocation

d stock selection; mutual fund selection

2. The optimal risky portfolio can be identified by finding: I. The minimum-variance point on the efficient frontier II. The maximum-return point on the efficient frontier and the minimum-variance point on the efficient frontier III. The tangency point of the capital market line and the efficient frontier IV. The line with the steepest slope that connects the risk-free rate to the efficient frontier

a I and II only

b II and III only

c III and IV only

d I and IV only

3.A portfolio is composed of two stocks, A and B. Stock A has a standard deviation of return of 35%, while stock B has a standard deviation of return of 15%. The correlation coefficient between the returns on A and B is .45. Stock A comprises 40% of the portfolio, while stock B comprises 60% of the portfolio. The standard deviation of the return on this portfolio is _________.

a. 23%

b. 19.76%

c. 18.45%

d. 17.67%

4. A measure of the riskiness of an asset held in isolation is ____________.

a beta

b standard deviation

c covariance

d alpha

5. Which risk can be partially or fully diversified away as additional securities are added to a portfolio? I. Total risk II. Systematic risk III. Firm-specific risk

a I only

b I and II only

c I, II, and III

d I and III

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Question: 1. The _______ decision should take precedence over the _____ decision. a asset allocation; stock selection b bond selection; mutual fund selection c stock selection;

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Question: 1. The ___ decision should take precedence over the _ decision. a asset allocation; stock selection b bond selection; mutual fund selection c stock selection;