Question 1

You have invested $12,000 in RBC stock,$8,000 in TD stock,and $6,000 in WestJet stock.If you expect the return on RBC to be 5% in the next year,the return on TD to be 3%,and the return on WestJet to be 8%,what is the expected return for your portfolio?

Accepted Answer

C) Portfolio return = (12 × 0.05)/(12 + 8 + 6) + (8 × 0.03)/(12 + 8 + 6) + (6 × 0.08 )/(12 + 8 + 6) = 5.1%

Question 2

You have invested $25,000 in RBC stock and $18,000 in TD stock.If you expect the return on RBC to be 6% in the next year,and the return on TD to be 4%,what is the expected return for your portfolio?

Accepted Answer

C) Portfolio return = (25,000 × .06)/(25,000 + 18,000) + (18,000 × .04)/(25,000 + 18,000) = 5.2%

Question 3

Your investment portfolio contains 200 shares of RBC and 450 shares of Air Canada.The price of RBC is currently $92 per share,and the price of Air Canada is currently $11 per share.If you expect the return on RBC to be 6% in the next year,and the return on Air Canada to be 8%,what is the expected return for your portfolio?

Accepted Answer

A) Initial portfolio value = 200 × 92 + 450 × 11 = $23,350.
Final portfolio value = 200 × 92 × 1.06 + 450 × 11 × 1.08 = $24,850.
Portfolio return = (24,850 - 23,350)/23,350 = 0.064 or 6.4%

Question 4

Use the information for the question(s) below.
Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share, 200 shares of Lowes (LOW) at $30 per share, and 100 shares of Ball Corporation (BLL) at $40 per share.
-The weight of Lowes in your portfolio is:

Accepted Answer

D) Value of portfolio = 200 × $50 + 200 × $30 + 100 × $40 = $20,000
xᵢ = value of security / value of portfolio = (200 × $30) / $20,000 = 0.30 or 30%

Question 5

What role does the standard deviations of two assets play in computation of the expected return of the two asset portfolio?

Accepted Answer

The answer of What role does the standard deviations of...

Question 6

Suppose you buy 100 shares of RBC at $85 per share,and 80 shares of TD at $75 per share.If RBC's stock goes up to $88.50 per share and TD's stock goes up to $77 per share,what is your portfolio return?

Accepted Answer

C) Initial portfolio value = 100 × 85 + 80 × 75 = $14,500
New portfolio value = 100 × 88.50 + 80 × 77 = $15,010
Portfolio return = (15,010 - 14,500)/14,500 = 3.5%

Question 7

A portfolio has three stocks - 300 shares of Yahoo (YHOO),300 Shares of General Motors (GM),and 100 shares of Standard and Poor's Index Fund (SPY).If the price of YHOO is $20,the price of GM is $30,and the price of SPY is $150,calculate the portfolio weight of YHOO and GM.

Accepted Answer

C) Compute the value of each stock in the portfolio by multiplying stock price by number of shares of each. Compute total portfolio value by adding each component in part A. Divide YHOO value by portfolio value to compute weight and similarly for GM.
Thus total portfolio value = 300 × 20 + 300 × 30 + 100 × 150 = 30,000;
weight of YHOO = 6000 / 30,000 = 20%; weight of GM = 9000 / 30,000 = 30%.

Question 8

Suppose over the next year Ball has a return of 12.5%,Lowes has a return of 20%,and Abbott Labs has a return of -10%.The value of your portfolio over the year is:

Accepted Answer

C)
 11ea4813_56cd_60e6_a73a_056399720ed6_TB1618_00 
Value of portfolio = 20,000(1 + 0.035) = 20,700

Question 9

You have invested $5,000 in RBC stock,$12,000 in TD stock,and $18,000 in WestJet stock.If you expect the return on RBC to be 4% in the next year,the return on TD to be 5%,and the return on WestJet to be 6%,what is the expected return for your portfolio?

Accepted Answer

A) Portfolio return = (5 × 0.04)/(5 + 12 + 18) + (12 × 0.05)/(5 + 12 + 18) + (18 × 0.06)/(5 + 12 + 18) = 5.4%

Question 10

Suppose over the next year Ball has a return of 12.5%,Lowes has a return of 20%,and Abbott Labs has a return of -10%.The return on your portfolio over the year is:

Accepted Answer

C)
 11ea4813_56cd_60e5_a73a_cd0bf8bb5b38_TB1618_00

Question 11

Use the information for the question(s) below.
Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share, 200 shares of Lowes (LOW) at $30 per share, and 100 shares of Ball Corporation (BLL) at $40 per share.
-The weight of Abbott Labs in your portfolio is:

Accepted Answer

A) Value of portfolio = 200 × $50 + 200 × $30 + 100 × $40 = $20,000
xᵢ = value of security / value of portfolio = (200 × $50) / $20000 = 0.50 or 50%

Question 12

A portfolio comprises two stocks,A and B,with equal amounts of money invested in each.If stock A's stock price increases and that of stock B decreases,the weight of stock A in the portfolio will increase.

Accepted Answer

Since the portfolio has equal amounts of money invested in both stocks, if the price of stock A increases, the total value of the portfolio will increase, which means the weight of stock A in the portfolio will increase. On the other hand, if the price of stock B decreases, the total value of the portfolio will decrease, which means the weight of stock B in the portfolio will decrease. Therefore, the answer is A.

Question 13

Your investment portfolio contains 100 shares of RBC,75 shares of TD,and 200 shares of WestJet.The price of RBC is currently $75 per share,the price of TD is $55 and the price of WestJet is currently $21 per share.If you expect the return on RBC to be 5% in the next year,the return on TD to be 6.5%,and the return on WestJet to be 10%,what is the expected return for your portfolio?

Accepted Answer

B) Initial portfolio value =100 × 75 + 75 × 55 + 200 × 21 = $15,825
Final portfolio value = 100 × 75 × 1.05 + 75 × 55 × 1.065 + 200 × 21 × 1.10 = $16,888
Portfolio return = (16,888 - 15,825)/15,825 = 6.7%

Question 14

A portfolio has three stocks - 100 shares of Yahoo (YHOO),200 Shares of General Motors (GM),and 50 shares of Standard and Poor's Index Fund (SPY).If the price of YHOO is $20,the price of GM is $20,and the price of SPY is $130,calculate the portfolio weight of YHOO and GM.

Accepted Answer

D) Compute the value of each stock in the portfolio by multiplying stock price by number of shares of each. Compute total portfolio value by adding each component in part A. Divide YHOO value by portfolio value to compute weight and similarly for GM.
Thus total portfolio value = 100 × 20 + 200 × 20 + 50 × 130 = 12,500;
weight of YHOO = 2000 / 12,500 = 16%; weight of GM = 4000 / 12,500 = 32%.

Question 15

Suppose you have $10,000 in cash to invest.You decide to sell short $5000 worth of Kinston stock and invest the proceeds from your short sale plus your $10,000 into one-year Treasury bills earning 5%.At the end of the year,you decide to liquidate your portfolio.Kinston Industries has the following realized returns: 
The return on your portfolio is closest to:

Accepted Answer

C) You short sold $5000 / $25 = 200 shares of Kinston and invested the $5000 + $10,000 in T-notes. In one year you will have (15,000)(1.05) = $15,750 - 200 × ($29 + $1) = $9750.
So, your total return is equal to 11ea4813_56cc_ebb4_a73a_119d81bb3f14_TB1618_11 = -0.025 or -2.5%

Question 16

What role does the correlation of two assets play in computation of the expected return of the two asset portfolio?

Accepted Answer

The answer of What role does the correlation of two...

Question 17

Suppose you buy 50 shares of RBC at $90 per share,and 70 shares of TD at $78 per share.If RBC's stock goes up to $94 per share and TD's stock falls to $72 per share,what is your portfolio return?

Accepted Answer

A) Initial portfolio value = 50 × 90 + 70 × 78 = $9,960
New portfolio value = 50 × 94 + 70 × 72 = $9,740
Portfolio return = (9,740 - 9,960)/9,960 = -2.2%

Question 18

You have invested $10,000 in RBC stock and $21,000 in TD stock.If you expect the return on RBC to be 5% in the next year,and the return on TD to be 6.5%,what is the expected return for your portfolio?

Accepted Answer

D) Portfolio return = (10,000 × 0.05)/(10,000 + 21,000) + (21,000 × 0.065)/(10,000 + 21,000) = 6%

Question 19

Use the information for the question(s) below.
Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share, 200 shares of Lowes (LOW) at $30 per share, and 100 shares of Ball Corporation (BLL) at $40 per share.
-The weight of Ball Corporation in your portfolio is:

Accepted Answer

C) Value of portfolio = 200 × $50 + 200 × $30 + 100 × $40 = $20,000
xᵢ = value of security / value of portfolio = (100 × $40) / $20,000 = 0.20 or 20%

Question 20

A portfolio has three stocks - 200 shares of Yahoo (YHOO),100 Shares of General Motors (GM),and 50 shares of Standard and Poor's Index Fund (SPY).If the price of YHOO is $30,the price of GM is $30,and the price of SPY is $130,calculate the portfolio weight of YHOO and GM.

Accepted Answer

A) Compute the value of each stock in the portfolio by multiplying stock price by number of shares of each. Compute total portfolio value by adding each component in part A. Divide YHOO value by portfolio value to compute weight and similarly for GM.
Thus, total portfolio value = 200 × 30 + 100 × 30 + 50 × 130 = 15,500;
weight of YHOO = 6000 / 15,500 = 38.7%; weight of GM = 3000 / 15,500 = 19.4%.

Quiz 11: Systematic Risk and the Equity Risk Premium

You have invested $12,000 in RBC stock,$8,000 in TD stock,and $6,000 in WestJet stock.If you expect the return on RBC to be 5% in the next year,the return on TD to be 3%,and the return on WestJet to be 8%,what is the expected return for your portfolio?

You have invested $25,000 in RBC stock and $18,000 in TD stock.If you expect the return on RBC to be 6% in the next year,and the return on TD to be 4%,what is the expected return for your portfolio?

Use the information for the question(s) below. Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share, 200 shares of Lowes (LOW) at $30 per share, and 100 shares of Ball Corporation (BLL) at $40 per share. -The weight of Lowes in your portfolio is:

What role does the standard deviations of two assets play in computation of the expected return of the two asset portfolio?

Suppose you buy 100 shares of RBC at $85 per share,and 80 shares of TD at $75 per share.If RBC's stock goes up to $88.50 per share and TD's stock goes up to $77 per share,what is your portfolio return?

A portfolio has three stocks - 300 shares of Yahoo (YHOO) ,300 Shares of General Motors (GM) ,and 100 shares of Standard and Poor's Index Fund (SPY) .If the price of YHOO is $20,the price of GM is $30,and the price of SPY is $150,calculate the portfolio weight of YHOO and GM.

Suppose over the next year Ball has a return of 12.5%,Lowes has a return of 20%,and Abbott Labs has a return of -10%.The value of your portfolio over the year is:

You have invested $5,000 in RBC stock,$12,000 in TD stock,and $18,000 in WestJet stock.If you expect the return on RBC to be 4% in the next year,the return on TD to be 5%,and the return on WestJet to be 6%,what is the expected return for your portfolio?

Suppose over the next year Ball has a return of 12.5%,Lowes has a return of 20%,and Abbott Labs has a return of -10%.The return on your portfolio over the year is:

Use the information for the question(s) below. Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share, 200 shares of Lowes (LOW) at $30 per share, and 100 shares of Ball Corporation (BLL) at $40 per share. -The weight of Abbott Labs in your portfolio is:

A portfolio comprises two stocks,A and B,with equal amounts of money invested in each.If stock A's stock price increases and that of stock B decreases,the weight of stock A in the portfolio will increase.

A portfolio has three stocks - 100 shares of Yahoo (YHOO) ,200 Shares of General Motors (GM) ,and 50 shares of Standard and Poor's Index Fund (SPY) .If the price of YHOO is $20,the price of GM is $20,and the price of SPY is $130,calculate the portfolio weight of YHOO and GM.

What role does the correlation of two assets play in computation of the expected return of the two asset portfolio?

Suppose you buy 50 shares of RBC at $90 per share,and 70 shares of TD at $78 per share.If RBC's stock goes up to $94 per share and TD's stock falls to $72 per share,what is your portfolio return?

You have invested $10,000 in RBC stock and $21,000 in TD stock.If you expect the return on RBC to be 5% in the next year,and the return on TD to be 6.5%,what is the expected return for your portfolio?

Use the information for the question(s) below. Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share, 200 shares of Lowes (LOW) at $30 per share, and 100 shares of Ball Corporation (BLL) at $40 per share. -The weight of Ball Corporation in your portfolio is:

A portfolio has three stocks - 200 shares of Yahoo (YHOO) ,100 Shares of General Motors (GM) ,and 50 shares of Standard and Poor's Index Fund (SPY) .If the price of YHOO is $30,the price of GM is $30,and the price of SPY is $130,calculate the portfolio weight of YHOO and GM.