1. A stock has an annual standard deviation of 14.1 percent and an expected annual return of 11.5 percent. What is the smallest expected loss for the next 3 months given a probability of 2.5 percent? TIP: Smallest loss= E(R) x 1/T - z x ( x (1/T). z of 2.5%=1.96

1. -9.94%

2. -10.94%

3. -11.94%

4. -13.79%

5. None

6. A portfolio has a beta of 1.52 and an actual return of 13.7 percent. The risk-free rate is 2.7 percent and the market risk premium is 7.8 percent. What is the value of Jensen's alpha?

TIP: Jensens alpha

1. -0.66%

2. -0.76%

3. -0.86%

4. -0.086%

5. None

6. You put half of your money in a stock portfolio that has an expected return of 14% and a standard deviation of 25%. You put the rest of your money in a risky bond portfolio that has an expected return of 6% and a standard deviation of 15%. The stock and bond portfolio have a correlation 0.55. The standard deviation of the resulting portfolio will be ________________.

TIP:

A. more than 18% but less than 24%

B. equal to 18%

C. more than 12% but less than 18%

D. equal to 12%

E. None

4. An investor can design a risky portfolio based on two stocks, A and B. The standard deviation of return on stock A is 20% while the standard deviation on stock B is 15%. The correlation coefficient between the return on A and B is 0%. The standard deviation of return on the minimum variance portfolio is _________.

TIP: WA= 2B/[2A + 2B] -2C0VA B where -2COVAB 0

A. 0%

B. 6%

C. 12%

D. 17%

E. none