Question: need help seeing how these are worked out. im struggling 25. Stock A in a two asset portfolio has an expected return of 14% Stock
25. Stock A in a two asset portfolio has an expected return of 14% Stock B in the same portfolio has an expected retum of 22% Which of the following is the likely expected return for a portfolio containing both of these two assets? A) 14% B) 15% C) 22% D) 25% Answer: B 26. What is the standard deviation of a portfolio of two stocks given the following data? Stock A has a standard deviation of 18%. Stock B has a standard deviation of 14%. The portfolio contains 40% of stock A and the correlation coefficient between the two stocks is - 23. A) 9.73% B) 12.2% C) 14.0% D) 15.6% Answer: A 27. The expected return of portfolio is 8.9% and the risk free rate is 3.5%. If the portfolio standard deviation is 12.0%, what is the reward to variability ratio of the portfolio? A) 0.0 B) 0.45 C) 0.74 D) 1.35 Answer: B Chapter 7 28. Consider the CAPM. The risk-free rate is 5% and the expected return on the market is 15%. What is the beta on a stock with an expected return of 12%? A) 5 B) 7 C) 1.2 D) 1.4 Answer: B 29. Consider the CAPM. The expected return on the market is 18%. The expected return on a stock with a beta of 1.2 is 20%. What is the risk-free rate? A) 2% B) 6% C) 8% D) 12% Answer: C
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