You are considering a portfolio invested 40% in stock A and 60% in stock B. Stock A has a standard deviation of 12% and Stock B has a standard deviation of 16%. The correlation between the two stocks is 0.54. What is the portfolio's standard deviation?

	0.016
	0.128
	0.144
	0.271

What is the expected return (expressed in %) of a portfolio that has $7500 in Stock M and $5000 in Stock N? Assume the following three scenarios: Recession (with 15% probability), Normal (with 70% probability), boom (with 15% probability).The returns on Stock M in each scenario are the following:-12% in Recession, 6% in Normal, 12% in Boom. The returns on Stock N in each scenario are the following:10% in Recession, -2% in Normal, 5% in Boom.

	4.32
	3.19
	1.98
	2.86

If investors can consistently profit from thorough reading of published financial information, then the market can, at best, be characterized as:

	weak-form efficient.
	semi-strong-form efficient.
	strong-form efficient.
	inefficient.

An analyst who relies upon past cycles of stock pricing to make investment decisions is:

	performing fundamental analysis.
	relying upon the strong-form of market efficiency.
	assuming that the market is not weak-form efficient.
	relying upon the random walk of stock prices.

Which of the following would likely have the greatest amount of systematic risk?

	A portfolio made up entirely of Treasury bills.
	The market portfolio (a portfolio of all stocks traded).
	A portfolio half invested in the market portfolio and half invested in Treasury bills.
	A portfolio half invested in the market portfolio and half invested in stocks with betas equal to 1.5

Which of the following is a correct statement about diversification?

	Diversification is least effective when security returns are always moving in opposite directions.
	It is possible to form a portfolio with zero risk if two perfectly negatively correlated securities are available.
	When a stock is combined into a portfolio, the standard deviation of that portfolio always remains unchanged.
	There is no limit to the amount of risk that can be eliminated through diversification.