QUESTION 1 Investors can form risky portfolios out of more than 2 risky assets Which of the following statements is correct Out of all feasible risky portfolios, an efficient portfolio should have the lowest volatility Out of all feasible risky portfolios, the minimum variance portfolio should have the lowest volatility Out of all feasible risky portfolios, an efficient portfolio should have the highest expected return It is efficient to invest 100 in the risky asset with the highest expected return and highest volatility QUESTION 2 Assume that investors can invest in a risk free asset and more than 2 risky assets Which of the following statements is correct, according to portfolio theory If an investor is more risk averse, he would choose the risky portfolio with a lower volatility All investors, regardless of risk aversion levels, will choose optimal complete portfolios on the same capital allocation line The optimal risky portfolio for all investors should have the lowest volatility If an investor is more risk averse, he would allocate a smaller fraction of his entire complete portfolio to the risk free asset QUESTION 3 Assume the CAPM is correct Which of the following statements is correct The optimal risky portfolio consists of all risky assets The optimal risky portfolio has 100 invested in TESLA stock 100 invested in the market portfolio gives investors the highest expected return Investors risk aversion levels does not affect their optimal portfolio decisions QUESTION 4 In a simple CAPM world which of the following statements is (are) correct I All investors will choose to hold the market portfolio, which includes all risky assets in the world II Investors' complete portfolios do not depend on their risk aversion III All individual assets are below the Capital Market Line IV The market portfolio will be on the efficient frontier, and it will be the optimal risky portfolio I, II, and III only I, II, III, and IV I, II, and IV only I, III, and IV only QUESTION 5 Investors can form complete portfolios out of a risk free asset and a risky portfolio The risky portfolio can be formed out of 2 risky stocks AAPL with an expected return of 10 and volatility of 15 , and MSFT with an expected return of 14 and volatility of 18 Mary is more risk averse than Tom and both has a total of $1000 to invest in the risky assets According to portfolio theory, which of the following is consistent with both investors making the optimal portfolio choices Mary invests $500 in AAPL and $500 in MSFT Tom invests $900 in AAPL and $100 in MSFT Mary invests $200 in AAPL and $800 in MSFT Tom invests $200 in AAPL and $800 in MSFT Mary invests $0 in AAPL and $1000 in MSFT Tom invests $1000 in AAPL and $0 in MSFT Mary invests $1000 in AAPL and $0 in MSFT Tom invests $0 in AAPL and $1000 in MSFT

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QUESTION 1 Investors can form risky portfolios out of more than 2 risky assets. Which of the following statements is correct? Out of all feasible

QUESTION 1

Investors can form risky portfolios out of more than 2 risky assets. Which of the following statements is correct?

		Out of all feasible risky portfolios, an efficient portfolio should have the lowest volatility.
		Out of all feasible risky portfolios, the minimum variance portfolio should have the lowest volatility.
		Out of all feasible risky portfolios, an efficient portfolio should have the highest expected return.
		It is efficient to invest 100% in the risky asset with the highest expected return and highest volatility.

QUESTION 2

Assume that investors can invest in a risk-free asset and more than 2 risky assets. Which of the following statements is correct, according to portfolio theory?

		If an investor is more risk averse, he would choose the risky portfolio with a lower volatility.
		All investors, regardless of risk aversion levels, will choose optimal complete portfolios on the same capital allocation line.
		The optimal risky portfolio for all investors should have the lowest volatility.
		If an investor is more risk averse, he would allocate a smaller fraction of his entire complete portfolio to the risk-free asset.

QUESTION 3

Assume the CAPM is correct. Which of the following statements is correct?

		The optimal risky portfolio consists of all risky assets.
		The optimal risky portfolio has 100% invested in TESLA stock.
		100% invested in the market portfolio gives investors the highest expected return.
		Investors risk aversion levels does not affect their optimal portfolio decisions.

QUESTION 4

In a simple CAPM world which of the following statements is (are) correct?

I. All investors will choose to hold the market portfolio, which includes all risky assets in the world. II. Investors' complete portfolios do not depend on their risk aversion. III. All individual assets are below the Capital Market Line. IV. The market portfolio will be on the efficient frontier, and it will be the optimal risky portfolio.

I, II, and III only

I, II, III, and IV

I, II, and IV only

I, III, and IV only

QUESTION 5

Investors can form complete portfolios out of a risk-free asset and a risky portfolio. The risky portfolio can be formed out of 2 risky stocks: AAPL with an expected return of 10% and volatility of 15%, and MSFT with an expected return of 14% and volatility of 18%. Mary is more risk averse than Tom and both has a total of $1000 to invest in the risky assets. According to portfolio theory, which of the following is consistent with both investors making the optimal portfolio choices?

		Mary invests $500 in AAPL and $500 in MSFT; Tom invests $900 in AAPL and $100 in MSFT.
		Mary invests $200 in AAPL and $800 in MSFT; Tom invests $200 in AAPL and $800 in MSFT.
		Mary invests $0 in AAPL and $1000 in MSFT; Tom invests $1000 in AAPL and $0 in MSFT.
		Mary invests $1000 in AAPL and $0 in MSFT; Tom invests $0 in AAPL and $1000 in MSFT.