This preview shows pages 1–2. Sign up to view the full content.
MAN303 PRACTİCE PROBLEMS 3 (Questions from Chp 5)
Correct answer is in
bold
.
(1) You observe the following information regarding Company X and Company
Y:
•
Company X has a higher expected mean return than Company Y.
•
Company X has a lower standard deviation than Company Y.
•
Company X has a higher beta than Company Y.
Given this information, which of the following statements is most
correct?
a. Company X has a lower coefficient of variation than Company Y.
b. Company X has more companyspecific risk than Company Y.
c. Company X is a better stock to buy than Company Y.
d. Statements a and b are correct.
e. Statements a, b, and c are correct.
(2) Bob has a $50,000 stock portfolio with a beta of 1.2, an expected return of 10.8 percent,
and a standard deviation of 25 percent.
Becky has a $50,000 portfolio with a beta of 0.8, an
expected return of 9.2 percent, and a standard deviation of 25 percent.
The correlation
coefficient, r, between Bob’s and Becky’s portfolios is 0.
Bob and Becky are engaged to be
married.
Which of the following best describes their combined $100,000 portfolio?
a.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview. Sign up
to
access the rest of the document.
 Spring '10
 Argg

Click to edit the document details