SampleExam_MID2_wans

SampleExam_MID2_wans - TIPPIE THE UNIVERSITY OF IOWA HENRY...

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TIPPIE THE UNIVERSITY OF IOWA H ENRY B. T IPPIE C OLLEGE OF B USINESS 6F:100 I NTRODUCTORY F INANCIAL M ANAGEMENT Mid-term Exam (II) GENERAL INSTRUCTIONS: Fill in the answer sheet using a #2 lead pencil. Fill out your name and student number and fill in the corresponding circles. Hand in both the exam and the answer sheet. A STRICT TIME LIMIT WILL BE ENFORCED! Budget your time accordingly. MULTIPLE CHOICE INSTRUCTIONS: On the answer sheet, fill in the circle for the choice that represents the correct answer. If no choice matches your answer exactly, fill in the choice that comes closest to your answer. (4 points each) 1. Stocks that have negative correlation tend to: a. have higher than average returns b. have lower than average returns c. reduce risk when held together in a portfolio* d. increase risk when held together in a portfolio 2. Given the following probability distribution, what are the expected return and the standard deviation of returns for Stock J? State P i k J ___ ___ ____ 1 0.2 10% 2 0.6 15% 3 0.2 20% a. 12%; 5.18% b. 15%; 3.16%* c. 15%; 10.00% d. 20%; 5.00% 3. Find the variance of the two-asset portfolio where 17% is invested in Asset 1 and 83% is invested in Asset 2. The variance of returns on Asset 1 is 0.03787 and the variance of returns on Asset 2 is 0.10378. The correlation coefficient of returns is 0.483. a. 0.0811* b. 0.0730 c. 0.0649 d. 0.0568
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4. Janet Gates expects states of nature and returns on Cadence Design Systems stock and the S&P500 as given in the table below. What is the covariance of returns of Cadence Design Systems stock with the S&P500? State of Nature Prob Cadence Design Systems Return Index Return State A 54% 14.25% 17.89% State B 46% 6.42% 6.28% a. 0.0016 b. 0.0018 c. 0.0020 d. 0.0023* 5. Two securities, Golden Bridge, and TJ Max, are to be combined in a portfolio in
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This test prep was uploaded on 04/07/2008 for the course BUS 100 taught by Professor Collins during the Spring '07 term at University of Iowa.

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SampleExam_MID2_wans - TIPPIE THE UNIVERSITY OF IOWA HENRY...

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