A stock has a variance of 1000bpts. It's beta is 0.8 and the market's variance is 600bpts. The firm's firm specific risk (variance) in basis points is

A. 520

B. 877

C. 384

D. 616

Variance...

A. is negative when two asset move in the opposite direction.

B. Is between -1 and +1.

C. is the square of standard deviation

D. Is measured in percent.

When two assets have -1 correlation...

A. The Minimum Variance Portfolios return is the risk free rate.

B. The investment opportunity set is the line connecting the two assets.

C. Knowing that one assets return is above its expected return tells you nothing about the other assets return.

D. The assets covariance can be positive or negative.

Canary Properties has a beta of 0.9 and expected return of 14%. The risk free rate is 2% and the expected market return is 11%. The stock __________.

A. ..is correctly priced.

B. ...is overpriced.

C. ...plots above the SML

D. ...plots on the SML.

Imagine that tomorrow a $50 stock in the Dow has a 1:2 reverse split. How does this change affect the divisor? (There is no other change to the index)

A. The divisor will stay the same

B. The divisor will go up

C. The divisor will go down

D. There is not enough information to determine