UNit 5 Assignment - C hapter 7: P ractice Questions...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 7: Practice Questions Questions 12 Your eccentric Aunt Claudia has left you $50,000 in Alcan shares plus $50,000 cash. Unfortunately her will requires that the Alcan stock not be sold for one year and the$50,000 cash must be entirely invested in one of the stocks shown in Table 7.8. What is the safest attainable portfolio under these restrictions? Half of the portfolio is invested in Alcan stock, and half of the portfolio I assume is invested in one of the other securities listed. After calculating the portfolio variance for six different portfolios to see which is the lowest, the safest attainable portfolio is Alcan and Nestle. Stocks Portfolio Variance 0.05116 0.09073 0.1415 0.10559 0.03489 0.10503 Questions 13 There are few, if any, real companies with negative betas. But suppose you found one with ___ .25. a.  How would you expect this stock’s rate of return to change if the overall market rose by an extra 5 percent? What if the market fell by an extra 5 percent? b.  You have $1 million invested in a well-diversified portfolio of stocks. Now you receive an additional $20,000 bequest. Which of the following actions will yield the safest overall portfolio return?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

UNit 5 Assignment - C hapter 7: P ractice Questions...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online