Practice_MCQs_4410_2014_Answers

Practice_MCQs_4410_2014_Answers - York University Economics...

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York University Economics 4410, Winter 2014 Final Exam Practice Problems with Answers 1.When a security is added to a portfolio the appropriate return and risk contributions are: A) the expected return of the asset and its standard deviation. B) the most probable return and the beta. C) the expected return and the beta. D) the most probable return and the beta. E) these both can not be measured. Answer: C 2. When stocks with the same expected return are combined into a portfolio: 3. Covariance measures the interrelationship between two securities in terms of: 4. Stock A has an expected return of 20%, and stock B has an expected return of 4%. However, the risk of stock A as measured by its variance is 3 times that of stock B. If the two stocks are combined equally in a portfolio, what would be the portfolio's expected return? A) 20.0%. D) Greater than 20%. B) 4.0%. E) Need more information to answer. C) 12.0%. Answer: C 5. If you have a portfolio of two risky stocks which turns out to have no diversification. The reason you have no diversification is:
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6. A stock with a beta of zero would be expected to: A) have a rate of return equal to the risk-free rate. B) have a rate of return equal to the market rate. C) have a rate of return equal to zero. D) have a rate of return equal to the one. Answer: A 7. The combination of the efficient set of portfolios with a riskless lending and borrowing rate results in:
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