1. In portfolio management, risk reduction is achieved by investing in a portfolio in which the securities.

a. Have a low correlation.

b. Have a high correlation.

c. Are perfectly positively pustulated.

d. Have a high covariance.

e. Have a low coefficient of variation.

2. Bosco, Inc. has a beta coefficient of 1.5 and a required rate of return of 17%. The market risk premium is currently 5%. If inflation premium increases by 3 percentage points and Bosco invests in a new project which increases its bata by 70 percent, what will be the company’s new required rate of return according to the CAPM?

a. 12.55%.

b.9.5%.

C. 25.25%.

d. None of the above.

e. 2.55%.

3. Steve Bricksuo currently has an Ines linen portfolio that contains four blocks with a total value equal to $80,000. The portfolio has a Bela (B) equal to 1.4. lo, order lo earn higher returns, Sleeve wants to invest an additional $20,000 in a stuck that has equal to 2.4. After Steve adds the new stock to his portfolio, what will the portfolio’s beta be?

a. 1.9.

b. 1.8.

c. 2.0.

d, 1.6.

e. 21.

4. The standard deviation of the returns of Stock A is 45.95%, and the standard deviation of the returns of Stock B is 52.7%. Both stocks have the same mean. Which of the following statements about the stocks is correct?

a. Stock A has a less tight probability distribution, and hence lower total risk.

b. Stock B has a lower risk, but nothing can be said about the probability distribution.

C. Stock A has a tighter probability distribution and hence lower total risk.

d. Stock B has a less tight probability distribution, and hence lower total risk.

e. Slock B has lighter probability distributive, and be a lower luteal task. Get Finance Help Today

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