CH.12
11) UPS, a delivery services company, has a beta of 1.1, and Wal-Mart has a beta of 0.7. The risk-free rate of interest is 4% and the market risk premium is 7%. What is the expected return on a portfolio with 30% of its money in UPS and the balance in Wal -Mart? A) 9.74% B) 10.23% C) 9.25% D) 9.55%
a
6) A stock market comprises 1500 shares of stock A and 3000 shares of stock B. The share prices for stocks A and B are $24 and $34, respectively. What is the capitalization of the market portfolio? A) $138,000 B) $117,300 C) $110,400 D) $151,800
a
7) A portfolio comprises Coke (beta of 1.4) and Wal-Mart (beta of 0.8). The amount invested in Coke is $20,000 and in Wal-Mart is $30,000. What is the beta of the portfolio? A) 1.04 B) 1.20 C) 1.35 D) 1.25
a
7) Suppose you invest in 100 shares of Harley-Davidson (HOG) at $40 per share and 230 shares of Yahoo (YHOO) at $25 per share. If the price of Harley-Davidson increases to $50 and the price of Yahoo decreases to $20 per share, what is the return on your portfolio? A) -1.54% B) 12.25% C) -10.50% D) -5.20%
a
8) A portfolio comprises Coke (beta of 1.6) and Wal-Mart (beta of 0.6). The amount invested in Coke is $10,000 and in Wal-Mart is $20,000. What is the beta of the portfolio? A) 0.93 B) 0.84 C) 1.03 D) 0.98
a
12) Your retirement portfolio comprises 200 shares of the S&P 500 fund (SPY) and 100 shares of iShares Barclays Aggregate Bond Fund (AGG). The price of SPY is $134 and that of AGG is $110 . If you expect the return on SPY to be 10% in the next year and the return on AGG to be 8%, what is the expected return for your retirement portfolio? A) 8.48% B) 154.10 % C) 9.89% D) 9.42%
d
19) Suppose you have $10,000 in cash and you decide to borrow another $10,000 at a(n) 6% interest rate to invest in the stock market. You invest the entire $20,000 in an exchange -traded fund (ETF) with a 10% expected return and a 20% volatility. Assume that the ETF you invested in returns -10%. Then the realized return on your investment is closest to ________. A) -18% B) -10% C) -23% D) -26%
d
19) Suppose you invest $22,500 by purchasing 200 shares of Abbott Labs (ABT) at $55 per share, 200 shares of Lowes (LOW) at $35 per share, and 100 shares of Ball Corporation (BLL) at $45 per share. The weight of Lowes in your portfolio is ________. A) 40.44% B) 21.78% C) 49.78% D) 31.11%
d
6) A portfolio has 40% of its value in IBM shares and the rest in Microsoft (MSFT). The volatility of IBM and MSFT are 40% and 30%, respectively, and the correlation between IBM and MSFT is -0.3. What is the standard deviation of the portfolio? A) 19.17% B) 18.16% C) 22.20% D) 20.18%
d
7) A portfolio has 45% of its value in IBM shares and the rest in Microsoft (MSFT). The volatility of IBM and MSFT are 33% and 35%, respectively, and the correlation between IBM and MSFT is 0. What is the standard deviation of the portfolio? A) 19.45% B) 27.96% C) 34.04% D) 24.31%
d
The covariance between Lowesʹ and Home Depotʹs returns is closest to ________. A) 0.10 B) 0.31 C) 0.12 D) 0.73
a
The volatility on Lowesʹ returns is closest to ________. A) 35% B) 11% C) 14% D) 42%
a
13) A stock market comprises 4600 shares of stock A and 1600 shares of stock B. Assume the share prices for stocks A and B are $15 and $30, respectively. If you have $15,000 to invest and you want to hold the market portfolio, how much of your money will you invest in Stock A? A) $10,615.38 B) $8846.15 C) $6153.85 D) $5307.69
b
14) The price of Microsoft is $25 per share and that of Apple is $50 per share. The price of Microsoft increases to $36 per share after one year and to $41 after two years. Also, shares of Apple increase to $56 after one year and to $66 after two years. If your portfolio comprises 100 shares of each security, what is your portfolio return over year 1 and year 2? Assume no dividends are paid. A) 21.53%, 14.67% B) 22.67%, 16.30% C) 24.93%, 18.75% D) 22.21%, 18.26%
b
10) UPS, a delivery services company, has a beta of 1.6, and Wal-Mart has a beta of 0.9. The risk-free rate of interest is 6% and the market risk premium is 9%. What is the expected return on a portfolio with 40% of its money in UPS and the balance in Wal -Mart? A) 14.96% B) 15.79% C) 16.62% D) 18.28%
c
11) Your retirement portfolio comprises 300 shares of the S&P 500 fund (SPY) and 100 shares of iShares Barclays Aggregate Bond Fund (AGG). The price of SPY is $136 and that of AGG is $97. If you expect the return on SPY to be 11% in the next year and the return on AGG to be 10%, what is the expected return for your retirement portfolio? A) 9.73% B) 8.65% C) 10.81% D) 10.27%
c
15) The price of Microsoft is $37 per share and that of Apple is $43 per share. The price of Microsoft increases to $42 per share after one year and to $47 after two years. Also, shares of Apple increase to $49 after one year and to $59 after two years. If your portfolio comprises 100 shares of each security, what is your portfolio return in year 1 and year 2? Assume no dividends are paid. A) 13.06%, 14.84% B) 10.31%, 18.96% C) 13.75%, 16.48% D) 11.69%, 19.78%
c
20) Suppose you invest $15,000 by purchasing 200 shares of Abbott Labs (ABT) at $40 per share, 200 shares of Lowes (LOW) at $20 per share, and 100 shares of Ball Corporation (BLL) at $30 per share. The weight of Ball Corporation in your portfolio is ________. A) 50.00% B) 40.00% C) 20.00% D) 30.00%
c
21) Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share, 200 shares of Lowes (LOW) at $30 per share, and 100 shares of Ball Corporation (BLL) at $40 per share. Suppose over the next year Ball has a return of 12.5%, Lowes has a return of 21%, and Abbott Labs has a return of -10%. The return on your portfolio over the year is ________. A) 0% B) 7.6% C) 3.8% D) 5.7%
c
10) Your retirement portfolio comprises 100 shares of the Standard & Poorʹs 500 fund (SPY) and 100 shares of iShares Barclays Aggregate Bond Fund (AGG). The price of SPY is $118 and that of AGG is $97. If you expect the return on SPY to be 11% in the next year and the return on AGG to be 6%, what is the expected return for your retirement portfolio? A) 8.74% B) 10.06% C) 7.43% D) 7.87%
a
12) UPS, a delivery services company, has a beta of 1.4, and Wal-Mart has a beta of 0.9. The risk-free rate of interest is 4% and the market risk premium is 6%. What is the expected return on a portfolio with 50% of its money in UPS and the balance in Wal -Mart? A) 10.9% B) 10.4% C) 12.0% D) 13.1%
a
13) The price of Microsoft is $30 per share and that of Apple is $58 per share. The price of Microsoft increases to $39 per share after one year and to $42 after two years. Also, shares of Apple increase to $66 after one year and to $71 after two years. If your portfolio comprises 100 shares of each security, what is your portfolio return over year 1 and year 2? Assume no dividends are paid. A) 19.32%, 7.62% B) 28.01%, 8.38% C) 23.18%, 11.43% D) 22.22%, 13.71%
a
18) Suppose you have $10,000 in cash and you decide to borrow another $10,000 at a(n) 6% interest rate to invest in the stock market. You invest the entire $20,000 in an exchange -traded fund (ETF) with a 11% expected return and a 20% volatility. The expected return on your of your investment is closest to ________. A) 7% B) 8% C) 4% D) 9.1%
a
18) Suppose you invest $22,500 by purchasing 200 shares of Abbott Labs (ABT) at $55 per share, 200 shares of Lowes (LOW) at $35 per share, and 100 shares of Ball Corporation (BLL) at $45 per share. The weight of Abbott Labs in your portfolio is ________. A) 48.89% B) 39.11% C) 29.33% D) 19.56%
a
2) A stock market comprises 4600 shares of stock A and 2000 shares of stock B. Assume the share prices for stocks A and B are $25 and $35, respectively. What is the capitalization of the market portfolio? A) $185,000 B) $157,250 C) $175,750 D) $203,500
a
3) A stock market comprises 4700 shares of stock A and 2300 shares of stock B. Assume the share prices for stocks A and B are $25 and $30, respectively. What proportion of the market portfolio is comprised of stock A? A) 63.0% B) 62.0% C) 61.3% D) 79%
a
4) A portfolio has three stocks 240 shares of Yahoo (YHOO), 150 Shares of General Motors (GM), and 40 shares of Standard and Poorʹs Index Fund (SPY). If the price of YHOO is $30, the price of GM is $30, and the price of SPY is $130, calculate the portfolio weight of YHOO and GM. A) 42.6%, 26.6% B) 23.4%, 49.3% C) 12.8%, 16.0% D) 40.5%, 28.0%
a
5) A stock market comprises 2100 shares of stock A and 2100 shares of stock B. The share prices for stocks A and B are $25 and $15, respectively. What proportion of the market portfolio is comprised of each stock? A) Stock A is 62.5% and Stock B is 37.5%. B) Stock A is 37.5% and Stock B is 62.5%. C) Stock A is 50% and Stock B is 50%. D) Stock A is 200% and Stock B is 100%.
a
4) A stock market comprises 2400 shares of stock A and 2400 shares of stock B. The share prices for stocks A and B are $15 and $5, respectively. What is the capitalization of the market portfolio? A) $43,200 B) $48,000 C) $55,200 D) $52,800
b
5) A portfolio has 30% of its value in IBM shares and the rest in Microsoft (MSFT). The volatility of IBM and MSFT are 35% and 30%, respectively, and the correlation between IBM and MSFT is 0.5. What is the standard deviation of the portfolio? A) 23.61% B) 27.78% C) 31.95% D) 30.56%
b
8) Suppose you invest in 220 shares of Johnson and Johnson (JNJ) at $70 per share and 240 shares of Yahoo (YHOO) at $20 per share. If the price of Johnson and Johnson increases to $80 and the price of Yahoo decreases to $18 per share, what is the return on your portfolio? A) 12.77% B) 8.51% C) 9.37% D) 10.22%
b
The volatility of a portfolio that is equally invested in Duke Energy and Microsoft is closest to ________. A) 8.1% B) 9.0% C) 10.8% D) 5.4%
b
22) Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share, 200 shares of Lowes (LOW) at $30 per share, and 100 shares of Ball Corporation (BLL) at $40 per share. Suppose over the next year Ball has a return of 12.3%, Lowes has a return of 23%, and Abbott Labs has a return of -10%. The value of your portfolio over the year is ________. A) $21,916 B) $19,828 C) $20,872 D) $22,959
c
4) Your estimate of the market risk premium is 9%. The risk-free rate of return is 3.8% and General Motors has a beta of 1.4. According to the Capital Asset Pricing Model (CAPM), what is its expected return? A) 14.8% B) 15.6% C) 16.4% D) 17.2%
c
5) A portfolio has three stocks 300 shares of Yahoo (YHOO), 300 Shares of General Motors (GM), and 80 shares of Standard and Poorʹs Index Fund (SPY). If the price of YHOO is $20, the price of GM is $30, and the price of SPY is $150, calculate the portfolio weight of YHOO and GM. A) 11.1%, 20.0% B) 16.7%, 28.3% C) 22.2%, 33.3% D) 22.2%, 43.3%
c
5) Your estimate of the market risk premium is 6%. The risk-free rate of return is 4%, and General Motors has a beta of 1.6. According to the Capital Asset Pricing Model (CAPM), what is its expected return? A) 12.2% B) 12.9% C) 13.6% D) 14.3%
c
9) A portfolio comprises Coke (beta of 1.3) and Wal-Mart (beta of 0.7). The amount invested in Coke is $20,000 and in Wal-Mart is $20,000. What is the beta of the portfolio? A) 0.9 B) 0.95 C) 1.00 D) 1.10
c
9) Suppose you invest in 110 shares of Merck (MRK) at $40 per share and 120 shares of Yahoo (YHOO)at $25 per share. If the price of Merck increases to $45 and the price of Yahoo decreases to $22 per share, what is the return on your portfolio? A) 7.70% B) 4.11% C) 2.57% D) 3.47%
c
The expected return of a portfolio that is equally invested in Duke Energy and Microsoft is closest to ________. A) 15% B) 14% C) 30% D) 45%
c
The volatility of a portfolio that is equally invested in Wal-Mart and Duke Energy is closest to ________. A) 4.0% B) 0.7% C) 6.7% D) 20.1%
c
The volatility on Home Depotʹs returns is closest to ________. A) 35% B) 32% C) 42% D) 17%
c
6) A portfolio has three stocks 110 shares of Yahoo (YHOO), 210 Shares of General Motors (GM), and 70 shares of Standard and Poorʹs Index Fund (SPY). If the price of YHOO is $20, the price of GM is $20, and the price of SPY is $130, calculate the portfolio weight of YHOO and GM. A) 10.6%, 13.5% B) 9.9%, 25.7% C) 13.5%, 24.4% D) 14.2%, 27.1%
d
6) Your estimate of the market risk premium is 7%. The risk-free rate of return is 4%, and General Motors has a beta of 1.4. According to the Capital Asset Pricing Model (CAPM), what is its expected return? A) 10.4% B) 11.7% C) 13.1% D) 13.8%
d
