Question 1

Average Return The past five monthly returns for PG Company are 3.25 percent, -1.45 percent, 4.35 percent, 6.49 percent, and 3.75 percent. What is the average monthly return?

Accepted Answer

To find the average monthly return, we need to add up all the monthly returns and divide the sum by the number of months:

(3.25% + (-1.45%) + 4.35% + 6.49% + 3.75%) / 5 = 3.278%

Therefore, the average monthly return for PG Company over the past five months is 3.278%. Option C) is the correct answer.

Question 2

Average Return The past five monthly returns for K and Company are 2.28 percent, 2.64 percent, -1.05 percent, 4.25 percent, and 9.25 percent. What is the average monthly return?

Accepted Answer

The average monthly return is calculated by summing all the monthly returns and dividing by the number of months: (2.28 + 2.64 - 1.05 + 4.25 + 9.25) / 5 = 3.47%.

Question 3

Portfolio Return Year-to-date, Company O had earned a -2.10 percent return. During the same time period, Company V earned 8.00 percent and Company M earned 6.25 percent. If you have a portfolio made up of 40 percent Company O, 30 percent Company V, and 30 percent Company M, what is your portfolio return?

Accepted Answer

The portfolio return is calculated as: (0.40 * -2.10%) + (0.30 * 8.00%) + (0.30 * 6.25%) = -0.84% + 2.40% + 1.875% = 3.435%.

Question 4

Portfolio Return Year to date, Company Y had earned a 7 percent return. During the same time period, Company R earned 9.25 percent and Company C earned -2.25 percent. If you have a portfolio made up of 35 percent Y, 40 percent R, and 25 percent C, what is your portfolio return?

Accepted Answer

To find the portfolio return, we need to take the weighted average of the returns for each company based on their percentage allocation in the portfolio.

Portfolio return = (0.35 * 7%) + (0.40 * 9.25%) + (0.25 * -2.25%) 
Portfolio return = 2.45% + 3.70% - 0.5625% 
Portfolio return = 5.5875%

Therefore, the portfolio return is 5.5875% which is closest to option C: 5.5875%.

Question 5

Dominant Portfolios Determine which one of these three portfolios dominates another. Name the dominated portfolio and the portfolio that dominates it. Portfolio Blue has an expected return of 14 percent and risk of 19 percent. The expected return and risk of portfolio Yellow are 15 percent and 18 percent, and for the Purple portfolio are 16 percent and 21 percent.

Accepted Answer

Portfolio Yellow dominates Portfolio Blue because it has a higher expected return (15% > 14%) and lower risk (18% < 19%). Portfolio Purple dominates Portfolio Blue because it has a higher expected return (16% > 14%) and a similar level of risk (21% > 19%). However, Portfolio Yellow dominates Portfolio Purple as well because it has a similar expected return (15% vs 16%) but lower risk (18% vs 21%). Therefore, the best choice is B (Portfolio Yellow dominates Portfolio Blue), as it is the only one that is supported by the given information.

Question 6

Risk versus Return Rank the following three stocks by their risk-return relationship, best to worst. Rail Haul has an average return of 10 percent and standard deviation of 15 percent. The average return and standard deviation of Idol Staff are 15 percent and 25 percent; and of Poker-R-Us are 12 percent and 35 percent.

Accepted Answer

The risk-return relationship is determined by comparing the expected return (average return) with the risk (standard deviation). The higher the expected return for a given level of risk, the better the risk-return tradeoff.

Rail Haul has the lowest risk (standard deviation of 15%) but still offers a decent return (average return of 10%). Idol Staff has a higher average return (15%) but also a higher risk (standard deviation of 25%). Poker-R-Us has the highest risk (standard deviation of 35%) and only a slightly higher average return (12%) than Rail Haul.

Therefore, Rail Haul offers the best risk-return tradeoff, followed by Idol Staff and then Poker-R-Us.

Question 7

Dominant Portfolios Determine which one of these three portfolios dominates another. Name the dominated portfolio and the portfolio that dominates it. Portfolio Blue has an expected return of 13 percent and risk of 17 percent. The expected return and risk of portfolio Yellow are 15 percent and 19 percent, and for the Purple portfolio are 12 percent and 18 percent.

Accepted Answer

Portfolio Yellow dominates Portfolio Blue because it has a higher expected return with only slightly higher risk. Portfolio Purple does not dominate either Blue or Yellow as it has a lower expected return than Yellow and a higher risk than Blue.

Question 8

Investment Return Noble stock was $60.00 per share at the end of last year. Since then, it paid a $2.00 per share dividend last year. The stock price is currently $58. If you owned 400 shares of Noble, what was your percent return?

Accepted Answer

The answer of Investment Return Noble stock was $60.00 per...

Question 9

Investment Return TechNo stock was $25 per share at the end of last year. Since then, it paid a $1.50 per share dividend last year. The stock price is currently $23. If you owned 300 shares of TechNo, what was your percent return?

Accepted Answer

The answer of Investment Return TechNo stock was $25 per...

Question 10

Investment Return WayCo stock was $75 per share at the end of last year. Since then, it paid a $3 per share dividend last year. The stock price is currently $70. If you owned 200 shares of WayCo, what was your percent return?

Accepted Answer

The answer of Investment Return WayCo stock was $75 per...

Question 11

Average Return The past five monthly returns for K and Company are 4.25 percent, 4.13 percent, -2.05 percent, 3.25 percent, and 7.25 percent. What is the average monthly return?

Accepted Answer

The average monthly return is calculated by summing all the monthly returns and dividing by the number of months: (4.25 + 4.13 - 2.05 + 3.25 + 7.25) / 5 = 3.366%.

Question 12

Total Risk Rank the following three stocks by their level of total risk, highest to lowest. Rail Haul has an average return of 8 percent and standard deviation of 10 percent. The average return and standard deviation of Idol Staff are 10 percent and 20 percent; and of Poker-R-Us are 6 percent and 15 percent.

Accepted Answer

The answer of Total Risk Rank the following three stocks...

Question 13

Total Risk Rank the following three stocks by their level of total risk, highest to lowest. Rail Haul has an average return of 10 percent and standard deviation of 15 percent. The average return and standard deviation of Idol Staff are 15 percent and 25 percent; and of Poker-R-Us are 12 percent and 35 percent.

Accepted Answer

The answer of Total Risk Rank the following three stocks...

Question 14

Portfolio Return Year to date, Company Y had earned a 10.8 percent return. During the same time period, Company R earned 12.20 percent and Company C earned -1.56 percent. If you have a portfolio made up of 45 percent Y, 35 percent R, and 20 percent C, what is your portfolio return?

Accepted Answer

To calculate the portfolio return, we need to find the weighted average of returns of the three companies:

Portfolio Return = (Weight of Y * Return of Y) + (Weight of R * Return of R) + (Weight of C * Return of C)

Substituting the given values, we get:

Portfolio Return = (0.45 * 10.8) + (0.35 * 12.20) + (0.20 * -1.56)

= 4.86 + 4.27 - 0.31

= 8.82%

So, the portfolio return is 8.82%. Therefore, the correct answer is C.

Question 15

Risk versus Return Rank the following three stocks by their risk-return relationship, best to worst. Rail Haul has an average return of 8 percent and standard deviation of 10 percent. The average return and standard deviation of Idol Staff are 10 percent and 20 percent; and of Poker-R-Us are 6 percent and 15 percent.

Accepted Answer

The answer of Risk versus Return Rank the following three...

Question 16

Dominant Portfolios Determine which one of these three portfolios dominates another. Name the dominated portfolio and the portfolio that dominates it. Portfolio Blue has an expected return of 7 percent and risk of 10 percent. The expected return and risk of portfolio Yellow are 13 percent and 17 percent, and for the Purple portfolio are 9 percent and 14 percent.

Accepted Answer

Portfolio Yellow dominates Portfolio Blue because it has a higher expected return (13% vs. 7%) with a proportionally higher risk (17% vs. 10%), making it more efficient in terms of risk-return trade-off.

Question 17

Investment Return Rx Corp stock was $60.00 per share at the end of last year. Since then, it paid a $1.00 per share dividend last year. The stock price is currently $62.50. If you owned 400 shares of Rx, what was your percent return?

Accepted Answer

First, we need to calculate the total value of the investment at the end of the year, which would be:
400 shares x $60.00 = $24,000

Then, we need to add the dividend received:
400 shares x $1.00 = $400

Total value at the end of the year would be:
$24,000 + $400 = $24,400

Now, we can calculate the current value of the investment:
400 shares x $62.50 = $25,000

The total return would be the difference between the current value and the initial value, plus any dividends received, divided by the initial value:
($25,000 - $24,400 + $400) / $24,000 = 0.0583 or 5.83%

Therefore, the answer is D.

Question 18

Standard Deviation The past five monthly returns for K and Company are 4.25 percent, 4.13 percent, -2.05 percent, 3.25 percent, and 7.75 percent. What is the standard deviation of these returns?

Accepted Answer

Using the formula for sample standard deviation, we get:

s = sqrt[(1/(n-1))*((x1-xbar)^2+(x2-xbar)^2+...+(xn-xbar)^2)]

where n is the sample size, xi is the ith observation, and xbar is the sample mean.

Plugging in the values, we get:

s = sqrt[(1/4)*((0.0425-0.0057)^2+(0.0413-0.0057)^2+(-0.0205-0.0057)^2+(0.0325-0.0057)^2+(0.0775-0.0057)^2)]

s = 0.0353 or 3.53%

Therefore, the best choice is C.

Question 19

Portfolio Weights An investor owns $10,000 of Adobe Systems stock, $15,000 of Dow Chemical, and $25,000 of Office Depot. What are the portfolio weights of each stock?

Accepted Answer

The answer of Portfolio Weights An investor owns $10,000 of...

Question 20

Portfolio Weights An investor owns $2,000 of Adobe Systems stock, $4,000 of Dow Chemical, and $6,000 of Office Depot. What are the portfolio weights of each stock?

Accepted Answer

The answer of Portfolio Weights An investor owns $2,000 of...

Quiz 9: Characterizing Risk and Return