1. 40% of Emilys complete portfolio is invested in the risk-free asset, while 60% is invested in the risky portfolio. The risk-free rate is 5%. The risky portfolio has a risk premium = 10% and standard deviation=40%. What is Emilys risk aversion A=?

		0.42
		0.63
		1.04
		1.56
		None of the above

1. You purchased 500 shares of common stock at $5 per share on margin. The initial margin is 50%, and the stock pays no dividend. Your rate of return would be __________ if you sell the stock at $8 per share. Ignore interest on margin. (Please round to the nearest %.)

		50%
		60%
		80%
		120%
		None of the above

1. You borrow $25,000 and buy 1000 shares of Facebook at $50 per share on margin. The interest on the loan is 5%. One year from now the price is $51.25. Assume no dividends are paid. Calculate your rate of return and the final margin %.

		rate of return=0%, final margin=50%
		rate of return=0%, final margin=47.5%
		rate of return=-5%, final margin=50%
		rate of return=-5%, final margin=47.5%
		None of the above

1. Amy has a risk-aversion A=2. The risk-free rate is 5%. The risky portfolio has an expected return=20% and standard deviation=30%. What % of her complete portfolio should she invest in the riskyportfolio?

		14.7 %
		25.0 %
		50.0 %
		83.3 %
		None of the above

1. Both investors and gamblers take on risk. The difference between an investor and a gambler is that an investor _______. [I] Is normally risk neutral [II] Requires a risk premium to take on risk [III] Will not lose money

		I only
		II only
		I & II
		I & III
		I, II & III