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QUESTION 1 You are considering investing in a project with the following possible outcomes: Calculate the expected rate of return and standard deviation of returns

QUESTION 1

  1. You are considering investing in a project with the following possible outcomes: Calculate the expected rate of return and standard deviation of returns for this investment, respectively.

    Probabilities: Boom:0.07 Normal:0.5 Decline:0.3 Depression:0.13

    Returns: Boom:10% Normal:7% Decline:2% Depression:-11%

    3.21%, 4.77%

    2.98%, 6%

    3.37%, 6.09%

    7.43%, 5.65%

5 points

QUESTION 2

  1. A U.S. Treasury bill has a beta of _____ while the overall market has a beta of _____.

    0; 0

    0; 1

    1; 0

    1; 1

    infinity; 1

5 points

QUESTION 3

  1. Which of the following must total to 100 percent? I. rates of return for the various economic states II. portfolio weights III. probabilities of occurrence for the various economic states IV. betas of the individual securities held within a portfolio

    I and III only

    II and IV only

    II and III only

    II, III, and IV only

    I, II, III, and IV

5 points

QUESTION 4

  1. You own a portfolio that has 45% invested in asset A, and 55% invested in asset B. Asset A

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