Alan, a chartered financial analyst (CFA), is willing to invest two stocks, Yoyo stock and Zizi stock. He has collected the data on both stocks from Bursa Malaysia. The data as follows:

		Stock Yoyo	Stock Zizi
State of Economy	Probability	Return (%)	Return (%)
Recession	0.35	19	31
Normal	0.40	28	24
Boom	0.25	23	17

The beta for Yoyo stock and Zizi stock are 1.5 and 1.15 respectively. Alan plan to invest 50,000 shares, 30,000 shares in Yoyo stock and the remainder in Zizi stock. Currently, Yoyo stock is RM4/share and Zizi stock is RM2.50/share. Yoyo stock is preferred stock while Zizi stock is a common stock. The treasury bills rate is at 1.75% and the market risk premium is 8%. Beta for Yoyo is 1.2 and beta for Zizi is 0.7.

Required:

1. What is the expected return for both stocks?
2. Yoyo Stock 23.6%, Zizi stock 24.7%.
3. Yoyo Stock 23.6%, Zizi stock 26.2%.
4. Yoyo Stock 14.5%, Zizi stock 24.7%.
5. Yoyo Stock 18.1%, Zizi stock 12.4%.

1. What is the standards deviation for both stocks?
2. Yoyo Stock 3.6%, Zizi stock 24.7%.
3. Yoyo Stock 13.6%, Zizi stock 26.2%.
4. Yoyo Stock 3.9%, Zizi stock 5.4%.
5. Yoyo Stock 5.7%, Zizi stock 7.8%.

1. What is the covariance between Yoyo Stock and Zizi stock?
2. 22.
3. -10.22.
4. 12%.
5. 13.2.

1. What is the correlation for both stocks?
2. 38.55.
3. 2.4%.
4. -0.49.
5. -0.57.
6. What is the expected portfolio and standard deviation of portfolio?
7. 23.92%, 2.43%.
8. 2.4%, 5.4%.
9. 21.2%, 5.54%.
10. 24.04%, 2.28%.
11. What is the beta portfolio?

A. 0.755.

B. 1.235.

C. 1.06.

D. None of the above.

1. What is the correlation for both stocks?

A. Negative correlation means both are opposite directions.

B. Positive correlation means both are opposite directions.

C. Negative correlation means both are same directions.

D. Positive correlation means both are same directions.

1. Which stock is worth to invest, and why?
2. Yoyo stock, as it has the highest expected return and less risky.
3. Zizi, as it has the highest expected return and less risky.
4. Portfolio, as it has the highest expected return and less risky
5. Zizi, as it has the highest expected return and highest standard deviation.

1. From beta portfolio and beta for each stock, which are more volatile?

A. Yoyo stocks.

B. Zizi stocks.

C. Portfolio.

D. None.

1. What is beta?

A. To measure the unsystematic risk.

B. To measure both systematic risk and unsystematic risk.

C. To measure the volatility of the portfolio relative to the market.

D. To measure the volatility of the market relative to the portfolio.

1. Below are about Treasury bill EXCEPT.

A. It is one of the capital market instrument

B. Issued by the government.

C. It is known as a risk-free rate or zero risk asset.

D. The return is guaranteed.

1. Which stock is more liquid?

A. Yoyo stock.

B. Zizi stock.

C. Both stocks.

D. None.

1. What is market risk premium?

A. The formula used is (rm rf).

B. It is an excess between the expected return and the required rate of return.

C. It is the difference between the expected return on a market portfolio and the risk-free rate.

D. The formula used is k = rf + (rm rf).

1. What is the difference between Yoyo stock and Zizi stock?

A. Shareholder of Zizi stock will receive a fixed dividend.

B. Shareholder of Yoyo stock having a voting right to elect the Board of Director (BOD).

C. The risk and return for both stock is higher.

D. Shareholder of Yoyo stock will receive dividend before shareholder of Zizi stock

1. Below all about primary market and secondary market, EXCEPT:

A. Primary market is where the companies and government sell stocks and bonds to the public for the first time.

B. Initial Public Offerings (IPO) is the process of offering shares of a private corporation to the public in a new stock issuance for the first time.

C. Secondary market is where securities are traded after the company has sold its offering on the primary market.

D. The shares that are traded in the secondary market can be bought directly from the investment bank.