question 18 assessneht/také/launch.jsp?course assessment id-_164851 1&course; id
ID: 2802307 • Letter: Q
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question 18
assessneht/také/launch.jsp?course assessment id-_164851 1&course; id- 194480 1&content; jd- 5826332 18step null Remaining Time: 3 hours, 44 minutes, 53 seconds. Question Completion Status: All rational investors hold efficient portfolios. Efficient portfolios are those which offer: A. Highest expected return for a given level of risk. B. The overall maximum return. C. Lowest risk for a given expected return. D. Both A and C QUESTION 18 3 points Save Answer The Capital Market Line describes the relationship between expected return and portfolio standard deviation for efficient portfolios. According to the Capital Market Line, all investors are holding what portfolio? A" Zero beta portfolio B. Market portfolio C. Minimum variance portfolio D. Minimum beta portfolio E. The average portfolio 3 points Save Answer QUESTION 19 BPJ stock is expected to earn 6.3 percent in a normal economy, 14.8 percent in a booming economy, and lose 4.7 percent in a recession. The probability of a recession is while the probability of a normal economy is 55 percent and the probability of a booming economy is 25 percent. What is the expected rate of retum on this A. 6.23% B. 6.72% C.6.81%Explanation / Answer
Correct answer is B, The capital market line is a special case of the capital allocation line, where the risky portfolio is the market portfolio. The S&P 500 is a proxy of the market portfolio, which is the optimal risky portfolio.
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