Please submit your Unit #8 Quiz Answer Sheet in MS Word format with the following file name: LastNameFirstInitial_Unit 08_QuizAnswerSheet.docx. For example, if you name is John Smith, the file name of your Answer Sheet should be SmithJ_Unit08_QuizAnswerSheet.docx.If you have any questions or comments, please do not hesitate to contact me.NAME: _____________________________________Question NumberQuestion1Which of the following portfolios would be most appropriate for a moderately aggressive investor with an intermediate-term time horizon?50% money market securities; 5% real estate; 45% precious metals40% money market securities; 10% real estate; 50% foreign securities90% small-cap domestic equity securities; 10% collectibles30% domestic equity securities; 30% fixed-income domestic securities; 20% real estate; 20% foreign securities2Overall asset allocation for a portfolio is performed using the expected returns, ________________, and correlations between asset classes.A.CovarianceB.Standard deviationC.Weighted average returnsD.Beta3Which of the following statements concerning the Markowitz efficient frontier is correct?A portfolio that offers the highest rate of return with the lowest degree of risk is on the efficient frontier.A portfolio that offers the lowest rate of return for a higher degree of risk is on the efficient frontier.A portfolio that offers the lowest degree of risk for a given rate of return is above the efficient frontier.A portfolio that offers the highest rate of return for a given degree of risk is on the efficient frontier.4When a company changes its capital structure, what happens?The Weighted Average Cost of Captial (WACC) changesThe discount rate does not changeInvestors buy or sell sharesInvestors perceive the firm as having more riskI, II, IIIII, III, IVI, III, IVI, II, IV5Assume a portfolio has the following four stocks and associated rates of return:Stock Rate of Return InvestedM 9.2% 50%N 11.1% 25%O 4.4% 15%P 6.9% 10%Assume that 50% of the portfolio is invested in Stock M, in Stock N, 25%, in Stock O, 15%, and 10% in Stock P. Based on this information, which of the following is the weighted-average rate of return on the portfolio?8.03%8.46%8.73%9.05%For questions # 6, 7 and 8 use the following information. Assume the following information concerning a two-stock portfolio:Stock X Stock YPercent of portfolio 75% 25%Average annual return 11% 9%Standard deviation of returns 2.0 3.0Covariance of returns -56What is the correlation coefficient of Stocks X and Y, based on the above information?-.5000-.7169-.8333-.99817What is the standard deviation of the portfolio based on the above information?0.96821.00614.31775.00008Which fo the following facts explains why the standard deviation of the portfolio is less than the standard deviation of either of the two stocks that make up the portfolio?The fact that Stock X has a lower standard deviation than Stock YThe fact that the portfolio consists of two stocks rather than oneThe fact that Stock Y has a lower average annual return than Stock XThe fact that Stocks X and Y have a negative correlation coefficient9Which of the following definitions of investor returns is false?Can be decided for a given level or riskCan be determined by using “classical” statistical analysisHave an investment outcome with the lowest expected riskAre not based on capital appreciation10What is the objective of calculating the standard deviation of an investment portfolio?Achieve an overall standard deviation that is lower than its component partsUsed for analysis of investment averagesEmployed to verify the geometric averageImplemented to determine each stock’s beta11Proponents of CAPM have concluded that all of the following are correct EXCEPT one:CAPM determines the equilibriumCAPM is capbalble of eliminating unsystematic riskCAPM can be used for the mean rate of return for any investments using its beta valueCAPM can be used for multiple-period plans12A risk-free investment as a beta of zero because its covariance with the makret is zero.TrueFalseView as PageDownloadToggle Fullscreen