You are considering investing in a portfolio consisting of 40% Electric General and 60% Buckstar. If the expected rate of return on Electric General is 16% and the expected return on Buckstar is 9%, what is the expected return on the portfolio?
A) 12.50%
B) 13.20%
C) 11.80%
D) 10.00%
Which of the following portfolios is clearly preferred to the others?
Expected Standard
Return Deviation
A 14% 12%
B 22% 20%
C 18% 16%
A) Investment A
B) Investment B
C) Investment C
D) Cannot be determined
You are considering investing in U.S. Steel. Which of the following is an example of nondiversifiable risk?
A) Risk resulting from foreign expropriation of U.S. Steel property
B) Risk resulting from oil exploration by Marathon Oil (a U.S. Steel subsidy)
C) Risk resulting from a strike against U.S. Steel
D) None of the above
You are considering buying some stock in Continental Grain. Which of the following is an example of nondiversifiable risk?
A) Risk resulting from a general decline in the stock market
B) Risk resulting from a news release that several of Continental's grain silos were tainted
C) Risk resulting from an explosion in a grain elevator owned by Continental
D) Risk resulting from an impending lawsuit against Continental
If there is a 20% chance we will get a 16% return, a 30% chance of getting a 14% return, a 40% chance of getting a 12% return, and a 10% chance of getting an 8% return, what is the expected rate of return?
A) 12%
B) 13%
C) 14%
D) 15%
If there is a 20% chance we will get a 16% return, a 30% chance of getting a 14% return, a 40% chance of getting a 12% return, and a 10% chance of getting an 8% return, what would be the standard deviation?
A) 2.24
B) 2.56
C) 2.83
D) 2.98
