QUESTION 11 Suppose you invest $7,000 in StockAand $3,000 in Stock B. The variance of Stock A is 50 percent, the variance of Stock Bis also 50 percent, and the covariance between the two stocks is 0 percent. What is the variance of your portfolio in percent? QUESTION 12 The portfolio that lies on the efficient frontier that also has the least amount of risk is called: 0 the equaliweight portfolio. 0 the minimum variance portfolio. 0 the market portfolio. 0 the maximum Sharpe ratio portfolio. You are an active portfolio manager for a large hedge fund. The overall return on your portfolio for the year is 35 percent. What is your fund's alpha if the the risk-free rate is 5 percent, the Beta for you portfolio is 1.50 and the market risk premium is 10 pertent? QUESTION 14 Consider the price paths ofthe following stocks overa six-month period: \"mmmm _Ia-mIE-IE_IE- None ofthese stocks pay dividends. Assume that you are an investor with the disposition effect and you bought each ofthese stocks in January. Suppose that it is currently the end ofjune, which stocks are you most inclined to hold? i.Taggart Transcontinental 2. Rearden Metal 3. Wyatt Oil 4. Nielson Motors (3 4only O 2 and 4 only 0 'l and 3 only 0 1 only QUESTION 3 Suppose an investment has a 50 percent chance to have a 40 percent return and a 50 percent chance to have a 20 percent return. What is the standard deviation of the return for this investment? 0.1 QUESTION 4 To nd the portfolio weights that maximize the Sharpe ratio, we used which of the following Excel AddIns? Data Solver 0 Insert Matrix 0 Table Deleter 0 Currency Converter QUESTION 5 The tendency of uninformed individuals to overestimate the precision of their knowledge is known as: Q) overconfidence bias. 0 herd behavior. 0 disposition bias. 0 familiarity bias. QUESTION 6 Which of the following Excel functions will find the Beta of a stock? 0 =SUMU =STDDEVPU O =SLOPE() O =|NTERCEPT{) QUESTION 7 Suppose an investment has a 50 percent chance to have a 40 percent return and a 50 percent chance to have a 20 percent return. What is the expected return for this investment? 30 QUESTION B Suppose you invest $60,000 in stockAand $40,000 in stock B at the beginning of the year and sell both stacks at the end of the year. What is the total return on your portfolio given the following adjusted closing prices on each stock (please enter the answer in percent format, e.g., 5% is entered as 5)? A B Stock price at beginning of the year 50 100 Stock price at the end of year 60 140 93 QUESTION 9 Testing a portfolio for alpha involves regressing the portfolio excess return on the market excess return. What does the pevalue from the regression output tell you? O the total amount of alpha 0 the total amount of beta 0 the probability that the alpha is zero whether the CAPM is useful or not QUESTION 10 For a portfolio with N-stoci-(s, the formula for portfolio variance contains: @ N covariance terms. 0 (N2 - N) covariance terms. 0 N 12 covariance terms. 0 (N 5) covariance terms
