FIN 620.

**Question 1**

1. Your portfolio is comprised of 30% of stock X, 50% of stock Y, and 20% of stock Z. Stock X has a beta of .64, stock Y has a beta of 1.48, and stock Z has a beta of 1.04. What is the beta of your portfolio?

[removed] | A. 1.01 | |

[removed] | B. 1.05 | |

[removed] | C. 1.09 | |

[removed] | D. 1.14 | |

[removed] | E. 1.18 |

**2 points **

**Question 2**

1. Which one of the following is an example of systematic risk?

[removed] | A. the price of lumber declines sharply | |

[removed] | B. airline pilots go on strike | |

[removed] | C. the Federal Reserve increases interest rates | |

[removed] | D. a hurricane hits a tourist destination | |

[removed] | E. people become diet conscious and avoid fast food restaurants |

**2 points **

**Question 3**

1. The dominant portfolio with the lowest possible risk is:

[removed] | A. the efficient frontier. | |

[removed] | B. the minimum variance portfolio. | |

[removed] | C. the upper tail of the efficient set. | |

[removed] | D. the tangency portfolio. | |

[removed] | E. None of these. |

**2 points **

**Question 4**

1. Beta measures:

[removed] | A. the ability to diversify risk. | |

[removed] | B. how an asset covaries with the market. | |

[removed] | C. the actual return on an asset. | |

[removed] | D. the standard deviation of the assets’ returns. | |

[removed] | E. All of these. |

**2 points **

**Question 5**

1. The measure of beta associates most closely with:

[removed] | A. idiosyncratic risk. | |

[removed] | B. risk-free return. | |

[removed] | C. systematic risk. | |

[removed] | D. unexpected risk. | |

[removed] | E. unsystematic risk. |

**2 points **

**Question 6**

1. The separation principle states that an investor will:

[removed] | A. choose any efficient portfolio and invest some amount in the riskless asset to generate the expected return. | |

[removed] | B. choose an efficient portfolio based on individual risk tolerance or utility. | |

[removed] | C. never choose to invest in the riskless asset because the expected return on the riskless asset is lower over time. | |

[removed] | D. invest only in the riskless asset and tangency portfolio choosing the weights based on individual risk tolerance. | |

[removed] | E. All of these. |

**2 points **

**Question 7**

1. The diversification effect of a portfolio of two stocks:

[removed] | A. increases as the correlation between the stocks declines. | |

[removed] | B. increases as the correlation between the stocks rises. | |

[removed] | C. decreases as the correlation between the stocks rises. | |

[removed] | D. Both increases as the correlation between the stocks declines; and decreases as the correlation between the stocks rises. | |

[removed] | E. None of these. |

**2 points **

**Question 8**

1. You purchased 300 shares of Deltona, Inc. stock for $44.90 a share. You have received a total of $630 in dividends and $14,040 in proceeds from selling the shares. What is your capital gains yield on this stock?

[removed] | A. 4.06% | |

[removed] | B. 4.23% | |

[removed] | C. 4.68% | |

[removed] | D. 8.55% | |

[removed] | E. 8.91% |

**2 points **

**Question 9**

1. You bought 100 shares of stock at $20 each. At the end of the year, you received a total of $400 in dividends, and your stock was worth $2,500 total. What was your total dollar capital gain and total dollar return?

[removed] | A. $400; $500 | |

[removed] | B. $400; $900 | |

[removed] | C. $500; $900 | |

[removed] | D. $900; $2,500 | |

[removed] | E. None of these |

**2 points **

**Question 10**

1. One year ago, you purchased a stock at a price of $32 a share. Today, you sold the stock and realized a total return of 25%. Your capital gain was $6 a share. What was your dividend yield on this stock?

[removed] | A. 1.25% | |

[removed] | B. 3.75% | |

[removed] | C. 6.25% | |

[removed] | D. 18.75% | |

[removed] | E. 21.25% |

**2 points **

**Question 11**

1. The market portfolio of common stocks earned 14.7% in one year. Treasury bills earned 5.7%. What was the real risk premium on equities?

[removed] | A. 5.0% | |

[removed] | B. 6.5% | |

[removed] | C. 9.0% | |

[removed] | D. 12.2% | |

[removed] | E. 18.7% |

**2 points **

**Question 12**

1. A stock has an expected rate of return of 8.3% and a standard deviation of 6.4%. Which one of the following best describes the probability that this stock will lose 11% or more in any one given year?

[removed] | A. less than 0.5% | |

[removed] | B. less than 1.0% | |

[removed] | C. less than 1.5% | |

[removed] | D. less than 2.5% | |

[removed] | E. less than 5% |

**2 points **

**Question 13**

1. You just sold 200 shares of Langley, Inc. stock at a price of $38.75 a share. Last year you paid $41.50 a share to buy this stock. Over the course of the year, you received dividends totaling $1.64 per share. What is your capital gain on this investment?

[removed] | A. -$550 | |

[removed] | B. -$222 | |

[removed] | C. -$3 | |

[removed] | D. $550 | |

[removed] | E. $878 |

**2 points **

**Question 14**

1. Today, you sold 200 shares of SLG, Inc. stock. Your total return on these shares is 12.5%. You purchased the shares one year ago at a price of $28.50 a share. You have received a total of $280 in dividends over the course of the year. What is your capital gains yield on this investment?

[removed] | A. 4.80% | |

[removed] | B. 5.00% | |

[removed] | C. 6.67% | |

[removed] | D. 7.59% | |

[removed] | E. 11.67% |

**2 points **

**Question 15**

1. Winslow, Inc. stock is currently selling for $40 a share. The stock has a dividend yield of 3.8%. How much dividend income will you receive per year if you purchase 500 shares of this stock?

[removed] | A. $152 | |

[removed] | B. $190 | |

[removed] | C. $329 | |

[removed] | D. $760 | |

[removed] | E. $1,053 |