11．Based upon the given information, can Wilson compose a portfolio with any one of the three stocks and Treasury bills that is more efficient than the S& 500? A) Yes, stock B. B) Yes, stock C. C) No, the S& 500 is more efficient than any of the individual stocks. D) Yes, stock A. The correct answer was C) To investigate this, Wilson can first rule out stocks A and C. Both of them have an expected return that is less than or equal to the S& 500, but their standard deviations are higher. Wilson must perform some calculations to see if stock B is more efficient than the S& 500. Wilson would first determine the portfolio weights that can make the expected return of the stock B and T-bill portfolio equal to the S& 500 portfolio. By setting up 0.12=w*0.15+(1-w)*0.03 and solving for w, Wilson finds that a 0.75/0.25 stock B/T-bill portfolio has the same expected return of 0.12. The standard deviation of that portfolio is (0.75*35%)= 26.25%>24% which is the standard deviation of the S& 500. Thus, the portfolio using Stock B and Treasury bills is not more efficient than the S& 500. 12．With regards to the capital allocation line (CAL), moving along the CAL above the point of the tangency portfolio represents: A) buying T-bills to reduce risk yet still maximize efficiency by being on the CAL. B) shorting T-bills to hedge your investment if interest rates rise. C) borrowing at the risk-free rate to be invested in more than 100% of the tangency portfolio. D) increasing risk exposure by being above the efficient frontier. The correct answer was C) Moving along the CAL above the tangency portfolio represents borrowing at the risk free rate (shorting T-bills) to invest in more than your original capital in the tangency portfolio. The CAL becomes the efficient frontier when the risk free asset is available to invest in. 13．All of the following are assumptions of the Capital Asset Pricing Model (CAPM) EXCEPT: A) investors can borrow and lend at the risk-free rate. B) capital markets are perfectly competitive and all assets are marketable. C) the distribution of investors' forecasts of a given asset’s return is normal. D) there are no frictions to trading (i.e., taxes or transaction costs). The correct answer was C) The CAPM assumes that investors have the same forecast of a given asset’s return. Thus, according to the required assumption, the distribution will not be normal because the variance of the forecasts is zero. 14．What is the expected return on a portfolio with $10 million invested in the Value Fund, $6 million in the Growth Fund, and $4 million in the Small-Cap Fund?
| Value | Growth | Small-Cap | Expected Return | 30.0% | 20.0% | 25.0% | Standard Deviation | 24.0% | 18.0% | 16.0% |
Correlation Matrix |
| Value | Growth | Small-Cap | Value | 1.0 |
|
| Growth | 0.3 | 1.0 |
| Small-Cap | 0.5 | 0.4 | 1.0 |
A) 25.0%. B) 20.6%. C) 24.0%. D) 26.0%. The correct answer was D) First calculate the portfolio weights on each fund: WValue = $10 million/$20 million = 0.50 WGrowth = $6 million/$20 million = 0.30 WSmall-Cap = $4 million/$20 million = 0.20 Then compute the expected portfolio return as the weighted average of the individual expected returns: E(Rp) = (0.50)(30.0%) + (0.30)(20.0%) + (0.20)(25.0%) = 26.0%. 15．An analyst has estimated the returns on a specific real estate asset for three economic scenarios: contraction, expansion, and normal. The probability distribution for the state of the economy and the real estate returns are in the accompanying table. < >> | State of the Economy | < >> | Contraction | Normal
| Expansion | Probability | 20% | 65% | 15% | Scenario return | -5% | 15% | 25% |
The expected return on this real estate investment is approximately: A) 14.50 percent. B) 15.00 percent. C) 12.50 percent. D) 11.67 percent. The correct answer was C) The expected return is: Return = 0.20(-5%) + 0.65(15%) + 0.15(25%) = 12.50%. | 
发表于 2008-4-14 17:01
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