Question 40. (2 marks) Suppose that you observe the following annual returns on the Toronto Stock Exchange, and returns are normally distributed. Suppose the average annual return is 14% and the standard deviation of the returns is 22%. Based on this information what is the approximate probability that the return on the Toronto Stock Exchange will be less than minus 30% (-30%) in a given year?

1. 4.54%
2. 2.27%
3. 31.74%
4. 15.87%
5. None of the above

Question 41. (2 marks) An investor wishes to create a portfolio that has a beta of 0.9. The investor has $900,000 to invest. The investor is choosing from 3 stocks and the risk-free asset. The investor has already invested some of her money as shown in the table below:

Asset	Investment	Beta
A	$300,000	0.70
B	$200,000	1.30
C		1.60
Risk-free bond

How much must the investor invest in asset C?

a) $156,250

b) $184,375

c) $212,500

d) $240,625

e) None of the above

Question 42. (2 marks) Your grandfather purchased a zero coupon Government Bond one year ago. You grandfather paid $955 for the bond. The bond matured today. Its face value is $1,000. If inflation over the past year was 3.55% what was your grandfathers real rate of return?

a) 1.12%

b) 1.65%

c) 2.19%

d) 0.60%

e) None of the above

Use the following information to answer the next 3 questions. You have been supplied with the historical returns for two stock over the past 5 years. This information is shown in the table below.

	Stock A	Stock B
2017	20%	-21%
2016	30%	46%
2015	-25%	11%
2014	15%	26%
2013	35%	31%

Question 43. (2 marks) What is the average annual return of Stock A?

1. 10.20%
2. 15.00%
3. 18.60%
4. 11.20%
5. None of the above

Question 44. (2 marks) What was the geometric average of Stock Bs annual returns?

1. 9.62%
2. 12.68%
3. 16.14%
4. 6.37%
5. None of the above

Question 45. (2 marks) What is the sample standard deviation of Stock As annual returns?

1. 23.72%
2. 21.21%
3. 22.74%
4. 25.42%
5. None of the above

Question 46. (2 marks) You have decided to set up a portfolio. You will invest 40% of your wealth in 123 Inc and 60% of your wealth in 456 Inc. Information regarding these stocks is shown in the table below. Based on this information what was the standard deviation of the portfolios returns?

	123 Inc	456 Inc
Expected Return	14.0%	8.70%
Standard Deviation	28%	16%
Correlation coefficient of 123 with 456	0.3

1. 17.42%
2. 16.80%
3. 17.73%
4. 17.11%
5. None of the above

Use the following information to answer the next 4 questions. You have been supplied with the forecasted returns for fours stocks. This information is shown in the table below.

	Probability	Stock A	Stock B	Stock C	Stock D
Very Weak	10%	40%	-50%	60%	-40%
Weak	20%	25%	-15%	35%	-10%
Average	40%	20%	30%	15%	20%
Strong	20%	-15%	40%	-25%	30%
Very Strong	10%	-25%	60%	-35%	50%
	100%

Question 47. What is the expected return on Stock A?

1. 18.0%
2. 11.5%
3. 10.5%
4. 13.0%
5. None of the above

Question 48. What is the standard deviation of stock B?

1. 20.50%
2. 31.80%
3. 28.85%
4. 24.52%
5. None of the above

Question 49. You invested 40% of your money in Stock A, 30% in Stock B, 20% in Stock C and 10% in Stock D. What is the expected return on the portfolio?

1. 13.30%
2. 12.20%
3. 14.10%
4. 13.40%
5. None of the above

Question 50. Assuming you invested 40% of your money in Stock A, 30% in Stock B, 20% in Stock C, and 10% in Stock D. What is the standard deviation of the portfolios returns?

1. 9.77%
2. 7.87%
3. 9.52%
4. 7.44%
5. None of the above