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Which one of the following is the slope of the security market line?


A) Risk-free rate
B) Market risk premium
C) Beta coefficient
D) Risk premium on an individual asset
E) Market rate of return

F) A) and B)
G) D) and E)

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A $36,000 portfolio is invested in a risk-free security and two stocks. The beta of stock A is 1.29 while the beta of stock B is 0.90. One-half of the portfolio is invested in the risk-free security. How much is invested in stock A if the beta of the portfolio is 0.58?


A) $6,000
B) $9,000
C) $12,000
D) $15,000
E) $18,000

F) A) and B)
G) C) and D)

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Stock A comprises 28 percent of Susan's portfolio. Which one of the following terms applies to the 28 percent?


A) Portfolio variance
B) Portfolio standard deviation
C) Portfolio weight
D) Portfolio expected return
E) Portfolio beta

F) B) and D)
G) A) and E)

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You would like to invest $18,000 and have a portfolio expected return of 12.3 percent. You are considering two securities, A and B. Stock A has an expected return of 15.6 percent and B has an expected return of 10.3 percent. How much should you invest in stock A if you invest the balance in stock B?


A) $5,807
B) $6,792
C) $7,410
D) $7,936
E) $8,626

F) A) and C)
G) None of the above

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The systematic risk principle states that the expected return on a risky asset depends only on which one of the following?


A) Unique risk
B) Diversifiable risk
C) Asset-specific risk
D) Market risk
E) Unsystematic risk

F) C) and D)
G) D) and E)

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Northern Wear stock has an expected return of 14.6 percent. Given the information below, what is the expected return on this stock if the economy is normal? Northern Wear stock has an expected return of 14.6 percent. Given the information below, what is the expected return on this stock if the economy is normal?   A)  13 percent B)  16 percent C)  18 percent D)  21 percent E)  23 percent


A) 13 percent
B) 16 percent
C) 18 percent
D) 21 percent
E) 23 percent

F) B) and C)
G) A) and D)

Correct Answer

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