Expose and Concede

Question 1 of 20

Accumulation A has a beta of 1.2 and a exemplar flexuosity of 20 percent. Accumulation B has a beta of 0.8 and a exemplar flexuosity of 25 percent. Portfolio P is a $200,000 portfolio consisting of $100,000 invested in Accumulation A and $100,000 invested in Accumulation B. Which of the subjoined statements is most chasten? (Assume that the required concede is attached by the Security Communicate Direction.)

A. a. Accumulation B has a surpassing required reprimand of concede than accumulation A.

B. b. Portfolio P has a exemplar flexuosity of 22.5 percent.

C. c. Portfolio P has a beta resembling to 1.0.

D. d. Statements a and b are chasten.

E. e. Statements a and c are chasten.

Question 2 of 20

Which of the subjoined statements is chasten?

A. a. Portfolio shelveing reduces the variability of the concedes on the unmarried accumulations held in the portfolio.

B. b. If an investor buys plenty accumulations, he or she can, through shelveing, elucidate virtually integral of the non-communicate (or congregation-specific) expose congenital in owning accumulations. Indeed, if the portfolio contained integral publicly traded accumulations, it would be exposeless.

C. c. The required concede on a firm’s low accumulation is attached by its essential (or communicate) expose. If the essential expose is referableorious, and if that expose is controleseeed to rest penny, then no other referableice is required to state the firm’s required concede.

D. d. A security’s beta gauges its nondiversifiefficacious (systematic, or communicate) expose referable-absolute to that of an medium accumulation.

E. e. A accumulation’s beta is hither applicefficacious as a gauge of expose to an investor with a well-behaved-heterogeneous portfolio than to an investor who confides solely that unmarried accumulation.

Question 3 of 20

You accept exposed the subjoined facts on three accumulations:

Stock Exemplar Flexuosity Beta

A 0.15 0.79

B 0.25 0.61

C 0.20 1.29

If you are a expose minimizer, you should prefer Accumulation _____ if it is to be held in segregation and Accumulation _____ if it is to be held as disunite of a well-behaved-heterogeneous portfolio.

A. A; A

B. A; B

C. B; A

D. C; A

E. C; B

Question 4 of 20

The expose-free reprimand, rRF, is 6 percent and the communicate expose bounty, (rM – rRF), is 5 percent. Assume that required concedes are fixed on the CAPM. Your $1 darling portfolio consists of $700,000 invested in a accumulation that has a beta of 1.2 and $300,000 invested in a accumulation that has a beta of 0.8. Which of the subjoined statements is chasten?

A. a. The portfolio’s required concede is hither than 11 percent.

B. b. If the expose-free reprimand rests unnatural still the communicate expose bounty growths by 2 percentage subject-matters, the required concede on your portfolio obtain growth by aggravate than 2 percentage subject-matters.

C. c. If the communicate expose bounty rests unnatural still controleseeed inflation growths by 2 percentage subject-matters, the required concede on your portfolio obtain growth by aggravate than 2 percentage subject-matters.

D. d. If the accumulation communicate is prolific, your portfolio’s controleseeed concede should resembling the controleseeed concede on the communicate, which is 11 percent.

E. e. Nunmarried of the aggravatehead answers is chasten.

Question 5 of 20

Which of the subjoined statements is chasten?

A. a. Communicate disuniteicipants are efficacious to elucidate virtually integral communicate expose if they confide a ample heterogeneous portfolio of accumulations.

B. b. Communicate disuniteicipants are efficacious to elucidate virtually integral congregation inequitable expose if they confide a ample heterogeneous portfolio of accumulations.

C. c. It is likely to accept a top where the communicate expose of a unmarried accumulation is hither than that of a well-behaved-behaved heterogeneous portfolio.

D. d. Answers a and c are chasten.

E. e. Answers b and c are chasten.

Question 6 of 20

Inflation, recession, and violent curiosity-behalf reprimands are economic events which are characterized as

A. a. Congregation-inequitable expose that can be heterogeneous loose.

B. b. Communicate expose.

C. c. Essential expose that can be heterogeneous loose.

D. d. Diversifiefficacious expose.

E. e. Unessential expose that can be heterogeneous loose.

Question 7 of 20

Calculate the required reprimand of concede control Mercury Inc., grand that investors controlesee a 5 percent reprimand of inflation in the coming. The authentic expose-free reprimand is resembling to 3 percent and the communicate expose bounty is 5 percent. Mercury has a beta of 2.0, and its authenticized reprimand of concede has mediumd 15 percent aggravate the decisive 5 years.

A. a. 15%

B. b. 16%

C. c. 17%

D. d. 18%

E. e. 20%

Question 8 of 20

An investor is controlming a portfolio by investing $50,000 in accumulation A which has a beta of 1.50, and $25,000 in accumulation B which has a beta of 0.90. The concede on the communicate is resembling to 6 percent and Treasury bonds accept a concede of 4 percent. What is the required reprimand of concede on the investor’s portfolio?

A. a. 6.6%

B. b. 6.8%

C. c. 5.8%

D. d. 7.0%

E. e. Nunmarried of the answers aggravatehead is chasten.

Question 9 of 20

Ripken Iron Works faces the subjoined chance distribution:

State of the Economy

Boom

Normal

Recession Chance of State

Occurring

0.25

0.50

0.25 Stock’s Controleseeed Concede if this State Occurs

25%

15

5

What is the coprolific of diversity on the congregation’s accumulation? (Assume that the exemplar flexuosity is adapted using the population statistic.)

A. 0.06

B. 0.47

C. 0.54

D. 0.67

E. 0.71

Question 10 of 20

Congregation X has a beta of 1.6, opportunity Congregation Y’s beta is 0.7. The expose-free reprimand is 7 percent, and the required reprimand of concede on an medium accumulation is 12 percent. Now the controleseeed reprimand of inflation built into rRF rises by 1 percentage subject-matter, the authentic expose-free reprimand rests penny, the required concede on the communicate rises to 14 percent, and betas rest penny. After integral of these shelves accept been reflected in the facts, by how plenteous obtain the required concede on Accumulation X achieve that on Accumulation Y?

A. a. 3.75%

B. b. 4.20%

C. c. 4.82%

D. d. 5.40%

E. e. 5.75%

Question 11 of 20

If rRF = 5%, rM = 11%, and b = 1.6 control Accumulation X, what is rx, the required reprimand of concede control Accumulation X?

A. a. 13.7%

B. b. 16.8%

C. c. 14.6%

D. d. 15.8%

E. e. 12.9%

Question 12 of 20

Jan Middleton owns a 3-accumulation portfolio with a completion cannonade prize resembling to $600,000.

Accumulation

A

B

C

Total Cannonade

$200,000

200,000

200,000

$600,000 Beta

0.5

1.0

1.5

What is the weighted medium beta of Jan’s 3-accumulation portfolio?

A. 0.8

B. 1.4

C. 1.0

D. 2.4

E. 1.8

Question 13 of 20

Accumulation A has a beta of 1.6, Accumulation B has a beta of 0.6, the controleseeed reprimand of concede on an medium accumulation is 12 percent, and the expose-free reprimand of concede is 7 percent. By how plenteous does the required concede on the exposeier accumulation achieve the required concede on the hither exposey accumulation?

A. a. 5.00%

B. b. 4.25%

C. c. 6.00%

D. d. 3.75%

E. e. 4.75%

Question 14 of 20

You are managing a portfolio of 10 accumulations which are held in resembling dollar amounts. The running beta of the portfolio is 1.55, and the beta of Accumulation A is 2.0. If Accumulation A is sold and the allowance are used to lapse a reanimation accumulation, what does the beta of the reanimation accumulation accept to be to shelve the portfolio beta to 1.7?

A. a. 4.4

B. b. 5.3

C. c. 3.2

D. d. 3.5

E. e. 4.1

Question 15 of 20

Consider the subjoined referableice control the Alachua Retirement Fund, with a completion cannonade of $6 darling.

Accumulation

A

B

C

D

Total Cannonade

$600,000

900,000

1,500,000

3,000,000

$6,000,000 Beta

1.2

-0.4

1.5

0.8

The communicate required reprimand of concede is 12 percent, and the expose-free reprimand is 6 percent. What is its required reprimand of concede?

A. 8.98%

B. 9.45%

C. 10.50%

D. 11.56%

E. 11.01%

Question 16 of 20

If the expose-free reprimand is 8 percent, the controleseeed concede on the communicate is 13 percent, and the controleseeed concede on Security J is 18 percent, then what is the beta of Security J?

A. a. 1.90

B. b. 2.00

C. c. 2.20

D. d. 1.75

E. e. 2.75

Question 17 of 20

Which is the best gauge of expose control an asset held in a well-behaved-heterogeneous portfolio?

A. a. Variance

B. b. Exemplar flexuosity

C. c. Beta

D. d. Semi-variance

E. e. Controleseeed prize

Question 18 of 20

In a portfolio of three irrelative accumulations, which of the subjoined could referable be penny?

A. a. The exposeiness of the portfolio is hither than the exposeiness of each accumulation held in segregation.

B. b. The exposeiness of the portfolio is main than the exposeiness of unmarried or couple of the accumulations.

C. c. The beta of the portfolio is hither than the beta of each of the unmarried accumulations.

D. d. The beta of the portfolio is main than the beta of unmarried or couple of the unmarried accumulations

E. e. The beta of the portfolio is resembling to the beta of unmarried of the unmarried accumulations.

Question 19 of 20

If investors controleseeed inflation to growth in the coming, and they to-boot became aggravate expose reluctant, what could be said environing the shelve in the Security Communicate Direction (SML)?

A. a. The SML would shelve up and the excel would growth.

B. b. The SML would shelve up and the excel would hitheren.

C. c. The SML would shelve down and the excel would growth.

D. d. The SML would shelve down and the excel would hitheren.

E. e. The SML would rest unnatural.

Question 20 of 20

Which of the subjoined statements is chasten?

A. a. The SML relates required concedes to firms’ communicate expose. The excel and catch of this direction canreferable be inferior by the financial overseer.

B. b. The excel of the SML is attached by the prize of beta.

C. c. If you plotted the concedes of a fond accumulation opposing those of the communicate, and if you base that the excel of the repay direction was privative, then the CAPM would evidence that the required reprimand of concede on the accumulation should be hither than the expose-free reprimand control a well-behaved-heterogeneous investor, grand that the observed harmony is controleseeed to abide on into the coming.

D. d. If investors grace hither expose reluctant, the excel of the Security Communicate Direction obtain growth.

E. e. Statements a and c are twain penny.

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