7. A portfolio i 25% while stock B has a standard deviation of return of 5%. Stock portfolio while stock B comprises 80% of the portfolio. If the variance o is.0050, the correlation coefficient between the returns on A and B is A)-225 B)-474 s composed of two stocks, A and B. Stock A has a standard deviation of return of A comprises 20% of the f return on the portfolio C) 474 D) .225 8. Consider a treasury bill with a rate of return of 5% and the following risky securities: Security A: E(r)-, 15; -2 Security B: E(r) ,10: -15 Security C: E(r) , 12; -.3 Security D: E(r)" .13; -25 The investor must develop a portfolio by combining the risk-free asset with one of the securities mentioned above. The security the investor would choose as part of his portfolio would be A. security A B. security B C. security C D. security D 9. According to the capital asset pricing model, A. all securities must lie on the capital market line B. all securities must lie on the security market line C. underpriced securities lie below the security market line D. overpriced securities lie above the security market line 10. Consider the CAPM. The risk-free rate is 6% and the expected return on the market is 18%. What is the expected return on a stock with a beta of 1.3? A) 6% B) 15.6% c) 18% D) 21.6% Consider the CAPM. The risk-free rate is 5% and the expected return on the market is 15%. What is the beta on a stock with an expected return of 12%? A) .5 B) .7 C) 1.2 D) 1.4 11. 12. In the context of the capital asset pricing model, the measure of systematic risk is A) unique risk B) beta C) standard deviation of returns D) variance of returns