Question
1.Your portfolio has a standard deviation of 18.8 percent and an average return of 12.2 percent. Given the following information, you have a 2.5 percent
1.Your portfolio has a standard deviation of 18.8 percent and an average return of 12.2 percent. Given the following information, you have a 2.5 percent chance of losing what percentage in a given year?
Probability of Loss "z" Value
1.0% 2.326
2.5% 1.960
5.0% 1.645
A. -15.324%
B. -12.348%
C. -23.491%
D. -24.648%
2.You own a stock with an overall expected return of 18.32 percent. The economy is expected to either boom or be normal. There's a 65 percent chance the economy will boom. If the economy booms, this stock is expected to return 23 percent. What's the expected return on the stock if the economy is normal?
A. 10.25%
B. 9.63%
C. 8.51%
D. 11.84%
3.Your portfolio actually earned 9.3 percent for the year. You were expecting to earn 12.5 percent based on the CAPM formula. What's Jensen's alpha if the portfolio standard deviation is 15.2 and beta is .84?
A. -3.2%
B. 2.8%
C. 3.2%
D. -2.8%
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