TEST FORNM 21. Consider the following three securities: Security Standard Return 12% 20% 13% 1.0 2.0 40% 15% Which one would be best to hold as a single stock portfolio? A. Stock A B. Stock B C. Stock C 22. For the data in the previous question, which stock would be best to incorporate in a well- diversified tangent portfolio? A. Stock A B. Stock B C. Stock C 23. The rate of return on stock 'a' is described in terms of a regression on the rate of return on the rate of return on index 1 as follows: R.-1.7% + 0.65T! + el. It can also be described in terms of a regression the rate of return on index 2 as follows: Ra =-1.4% + 1.2"c+ e2. You also know that the risk-free rate is 2% and the expected rate of return on index 1 and 2 are 10% and 8% respectively If one of these indexes is in fact the market portfolio, can you tell which one? A. Yes, index 1 B. Yes index 2 C. No, either one could be the market portfolio D. No, neither one can be the market portfolio. TEST FORNM 21. Consider the following three securities: Security Standard Return 12% 20% 13% 1.0 2.0 40% 15% Which one would be best to hold as a single stock portfolio? A. Stock A B. Stock B C. Stock C 22. For the data in the previous question, which stock would be best to incorporate in a well- diversified tangent portfolio? A. Stock A B. Stock B C. Stock C 23. The rate of return on stock 'a' is described in terms of a regression on the rate of return on the rate of return on index 1 as follows: R.-1.7% + 0.65T! + el. It can also be described in terms of a regression the rate of return on index 2 as follows: Ra =-1.4% + 1.2"c+ e2. You also know that the risk-free rate is 2% and the expected rate of return on index 1 and 2 are 10% and 8% respectively If one of these indexes is in fact the market portfolio, can you tell which one? A. Yes, index 1 B. Yes index 2 C. No, either one could be the market portfolio D. No, neither one can be the market portfolio