QUESTION 1 You are considering investing in a project with the following possibl

Question

QUESTION 1

You are considering investing in a project with the following possible outcomes: Calculate the expected rate of return and standard deviation of returns for this investment, respectively.

Probabilities: Boom:0.07 Normal:0.5 Decline:0.3 Depression:0.13

Returns: Boom:10% Normal:7% Decline:2% Depression:-11%

3.21%, 4.77%

2.98%, 6%

3.37%, 6.09%

7.43%, 5.65%

5 points   

QUESTION 2

A U.S. Treasury bill has a beta of _____ while the overall market has a beta of _____.

0; 0

0; 1

1; 0

1; 1

infinity; 1

5 points   

QUESTION 3

Which of the following must total to 100 percent?
I. rates of return for the various economic states
II. portfolio weights
III. probabilities of occurrence for the various economic states
IV. betas of the individual securities held within a portfolio

I and III only

II and IV only

II and III only

II, III, and IV only

I, II, III, and IV

5 points   

QUESTION 4

3.21%, 4.77%

2.98%, 6%

3.37%, 6.09%

7.43%, 5.65%

Explanation / Answer

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