1) Your invest $4,000 in Stock A and $6,000 in Stock B. Your forecast a 12% rate of return for A and a 15% for B. Your forecasted wealth in one year is (a) $11,380. (b) $11,960. (c) $ 1,380. (d) $12,420. (e) $ 2,420.

17) You have developed a market model with a forecasted market return of 15% and an intercept of 6%. A security with a beta of 0.8 would have an expected return of (a) 21.0%. (b) 18.0%. (c) 12.8%. (d) 16.8%.

18) Your market model has an intercept of 4%, and you forecast a market return of 10%. If your security has a beta of 1.3 and has an actual return of 12%, the error term is (a) -8.3%. (b) -5.0%. (c) 3.2%. (d) 4.6%.

15) When plotting the risk/return relationships for possible portfolios of two securities, the lowest standard deviation of the portfolio possibilities would occur if the correlation were (a) 0. (b) - 1. (c) 0.5. (d) 1.

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