Given the information in the table below calculate the Beta of a portfolio that combines investments A, B, and C in the proportions given.
Investment
Beta
Weight
A
0.6
.2
B
1.2
.3
C
1.6
.5
 
 
 
Your answer should be accurate to two decimal places. _______
Increasing the amount of wealth in Asset A whilst maintaining the entire wealth invested in a portfolio consisting of two assets only, A and B (assume that the expected return and standard deviation of both assets are A: 0.10 and 0.03, and B: 0.15 and 0.05, respectively):
Answer
a.
will decrease the expected return of the portfolio, but the expected return will be closer to 15% than before.
b.
will increase the expected return of the portfolio.
c.
More information is needed before the impact on expected return can be determined.
d.
will decrease the expected return of the portfolio, but the expected return will still be greater than if the portfolio consisted of Asset A only.
e.
may reduce the variance of the portfolio regardless of the correlation coefficient between Assets A and B.
Systematic risk represents:
Answer
a.
diversifiable risk.
b.
risk that is not diversifiable.
c.
unique risk
d.
none of the options given.
e.
risk that is diversifiable.
The capital market line [CML]:
Answer
a.
describes the equilibrium risk-return relationship for riskless portfolios.
b.
does not have anything to do with efficient portfolios
c.
describes the equilibrium risk-return relationship for risky portfolios.
d.
describes the equilibrium risk-return relationship for efficient portfolios.
e.
describes the equilibrium risk-return relationship for all portfolios.
Given the information in the table below calculate the standard deviation of a portfolio combining Asset A and Asset B in the proportions of 40% and 60%, respectively. A correlation of .5 exists between A and B.
Asset
SD
Weight
A
.10
.4
B
.15
.6
 
Give your answer as a decimal accurate to three decimal…