You are considering creating a financial portfolio comprising two stocks

You are considering creating a financial portfolio comprising two stocks

You are considering creating a financial portfolio comprising two stocks

1.
You are considering creating a financial portfolio
comprising two stocks which have a correlation of 1
Choose one answer.

A.
The portfolio will have a risk level somewhere
between the risk of the stock with the lowest risk and the risk of the stock
with the highest risk.

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B.
The portfolio will have a higher risk than the stock
with the highest risk.

C.
The portfolio will have a lower risk than the stock
with the lowest risk.

D.
The portfolio will have zero risk as it is a
diversified portfolio.

2
You hold two investments in your share portfolio.
You hold shares in Oil Ltd currently worth $1,500 as well as shares in Paint
Ltd currently worth $3,400. The expected return of Oil Ltd is 12% per
annum, and of Paint Ltd is 8% per annum.
Estimate the expected return on your portfolio.
Answer:
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3
Investa Ltd has generated annual holding period returns
over the past four years of 12%, -8%, 5%, 7%.
Based on this historical performance, estimate the
expected return of Investa Ltd.
Answer:

4
Investa Ltd has generated annual holding period returns
over the past four years of 12%, -8%, 5%, 7%.
Based on the historical volatility of its performance,
estimate the risk of Investa Ltd.
Answer:
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5
A holding period return is:
Choose one answer.

A.
A gain or a loss on an investment over a given period
of time.

B.
A profit.

C.
A gain on an investment over a given period of time.

D.
A profit or a loss.

6

Eagle Ltd has an expected return of 8% and a historical
risk of 5%, as compared with the market’s expected return of 18% and historical
risk of 9%. The correlation of Eagle Ltd’s return with the market return
is 0.6.
Calculate the beta of Eagle Ltd.
Answer:

7
One year ago you acquired 1,000 shares in Investa Ltd
at a price of $12.80 per share. During the past year, you have received
two dividend payments for $0.20 and $0.25 per share, respectively.
Investa Ltd is currently trading at $15.00.
If you sold your shares at the current price, what
would be your holding period return?
Answer:
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8
Market risk is:
Choose one answer.

A.
Non-systematic
risk.

B.
The risk of an
individual stock.

C.
The risk component
that cannot be diversified away by holding more than one security in a
portfolio.

D.
Diversifiable
risk.

9
Nimby Ltd has a beta
of 1.3. The yield on a 10-year government bond is 5.6%. The average
return on the market is 11% per annum.
Estimate the
expected return for Nimby Ltd.
Answer:

10
The required return is equal to the
risk-free return less a risk premium.
Answer: true or false

 

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