MULTIPLE CHOICE QUESTIONS 1. Given the following information: Standard deviation for stock X = 12% Standard deviation

Question:

MULTIPLE CHOICE QUESTIONS

1. Given the following information:

Standard deviation for stock X = 12% Standard deviation for stock Y = 20% Expected return for stock X = 16% Expected return for stock Y = 22% Correlation coefficient between X and Y = 0.30

The covariance between stock X and Y is

a. .048

b. 72.00

c. 3.60

d. 105.6

2 Given the information in Problem 8-1 regarding risk, the expected return for a portfolio consisting of 50 percent invested in X and 50 percent invested in Y can be seen to be

a. 19%

b. 16%

c. Less than 16%

d. More than 22%

3. Given the information in Problem 8-1, assume now that the correlation coefficient between stocks X and Y is +1.0. Choose the investment below that represents the minimum-risk portfolio.

a. 100% investment in stock Y

b. 100% investment in stock X

c. 50% investment in stock X and 50% investment in stock Y

d. 80% investment in stock Y and 20% investment in stock X

4. Assumes a family member is approaching retirement. Her retirement assets include her house and Social Security payments. She also has a 401(k) plan representing one-third of her assets. If she wants to own some foreign securities and decides to invest 75 percent of her 401(k) assets accordingly, what percentage of her total assets will this constitute?

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