Use the following information for questions

	Stock A	Stock B	Index
Expected return	20%	30.00%	25%
Variance	1.00%	2.25%	1.69%
Standard deviation	10%	15%	13%

8. Assume the portfolio is made by purchasing equal amounts of each stock ( 50% of your money in each). How much is the portfolios expected return? a)20% b)25% c)30% d)35%

9. Assume the correlation between the two stocks is zero. How much is the standard deviation of the portfolio? a)12.5% b) 0.813% c) 9.01% d) 35.36%

10. Assume the correlation between the two stocks is -.50. How much is the standard deviation of the portfolio? a) 0.813% b) 0.438% c) 9.01% d) 6.61%

12. 95% Confidence lower limit for the portfolio with expected return 25% and standard deviation a) 4.70% b) 55%c -4.70%d) -5.25%

13.The Markowitz Efficient a.k.a. the tangent portfolio is located a point a, b, c, d

14.Some money in the bank and the rest in a diversified portfolio is locate

at point a, b, c, d

15.All money in the bank is located at point a, b, c, d

16.Sloppy Louie said he has a diversified portfolio consisting of three stocks, General Motors, Ford Motors and Nissan. His portfolio is

a) good because he has three good companies

b) good because he has two American companies and one foreign stock

c) poor because Nissan is foreign

d) poor because the stocks probably have a high positive correlation because in same industry, the Auto industry

	Stock A	Stock B	Portfolio	portfolio	RF = 7%
Portfolio	allocation	allocation	Mean %	standard Dev %	Sharpe Ratio
1	10%	90%	29	12.64	1.74
2	20%	80%	28	11.38
3	30%	70%	27	10.25
4	40%	60%	26	9.3	2.04
5	50%	50%	25	8.6	2.09
6	60%	40%	24	8.21	2.07
7	70%	30%	23	8.16	1.96
8	80%	20%	22	8.48	1.77
9	90%	10%	21	9.11	1.54

17.Which of the portfolios above is the minimum risk portfolio? a) 1b) 3c) 5d) 7

18.Which portfolios make up the efficient frontier? A) 1-4 b) 1-7c) 7-9d) 5-9

19.How much is the Sharpe ratio for portfolio #2?

A) 1.80b) 1.80 C) 1.90 D) 1.95

20..If the risk free rate is 7 percent, which is the tangent portfolio to mix with ownership of treasury securities? A) 4b) 5 C) 6 D) 7

11. How much is the coefficient of variation for the portfolio with expected return 25% and standard deviation 18%?

a) .72 b) 1.38 c) 1.00 d) 0.045