Portfolio Theory

1. What type of risk does a portfolio have with a beta of 1.5?

a. Systematic risk only. b. Unsystematic risk only. c. Systematic and unsystematic risk. d. Cannot determine from the question.

2. Which tools can help to determine an optimal investment portfolio?

1. Mean-variance optimization model. 2. Risk tolerance questionnaire. 3. Tactical asset allocation.

a. 1 only. b. 2 only. c. 1 and 2. d. All of the above.

3. The highest annual range of returns for the S&P 500 has occurred for which of the following?

a. 1-year rolling returns. b. 5-year rolling returns. c. 10-year rolling returns. d. 20-year rolling returns.

4. The _____ is a graphical representation of expected return and risk, as measured by beta.

a. ALA. b. CML. c. SML. d. Efficient frontier

5. Jocko was just told that the expected return for Echo stock was 20%, based on the CAPM. Assuming that the market return and the risk-free rate are 12% and 4%, respectively, what is the beta for Echo?

a. 1.0. b. 1.5. c. 2.0. d. 2.5.