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Ce 7
Ce 7
Ce 7
New information regarding a security, when received by the market, leads to a(n):
A) Unexpected return.
B) Expected return.
C) Actual return.
D) Systematic return.
E) Non-diversifiable return.
Answer: A
12. You own 50 shares of stock A, which has a price of $12 per share, and 100 shares of stock B,
which has a price of $3 per share. What is the portfolio weight for stock A in your portfolio?
A) 25%
B) 33%
C) 50%
D) 67%
E) 75%
Answer: D
Response: 50($12) + 100(3) = $900; wA = $600 / 900 = .67
A) .05
B) .08
C) .09
D) .10
E) .12
Answer: C
Response: 50(.25) + .35(.05) + .15(-.35) = .09
14. What is the risk premium for the following returns if the risk-free rate is 4%?
A) 0.3325
B) 0.1525
C) 0.0525
D) 0.1825
E) 0.2225
Answer: D
Response: .20(.75) + .55(.25) + .15(-10)+ .10(-50) = .2225; RP = .2225 - .04 = .1825
15. What is the expected portfolio return given the following information:
Asset Portfolio weight Return
A .35 20%
B .15 35%
C .25 6%
D .25 12%
A) 6.75%
B) 9.50%
C) 16.75%
D) 18.25%
E) 21.50%
Answer: C
Response: .35(.20) + .15(.35) + .25(.06) + .25(.12) = .1675