1.An investor holds a single stock, Amgen, in her portfolio. She would like to add one additional stock to her portfolio. Which stock should she add to achieve the most diversification benefits? Correlation Matrix | Fund | Amgen | WW | XX | YY | ZZ | Amgen | 1.0 |
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| WW | 0.5 | 1.0 |
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| XX | 0.1 | -0.2 | 1.0 |
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| YY | 0.3 | 0.4 | 0.8 | 1.0 |
| ZZ | 0.0 | 0.8 | 0.9 | 0.3 | 1.0 |
A) Stock WW. B) Stock XX. C) Stock YY. D) Stock ZZ. The correct answer was D) As the correlation between assets decreases, the benefits of diversification increase. Of the four stocks, ZZ has the lowest correlation with Amgen. 2.Jill Matton, CFA, has been asked to invest $100,000, choosing one or more of the following three stocks. All stocks have the same expected return and standard deviation. The correlation matrix for the three stocks is given below: Stock Correlations |
| X | Y | Z | X | 1.00 | 0.15 | 0.70 | Y | 0.15 | 1.00 | 0.51 | Z | 0.70 | 0.51 | 1.00 |
Which of the three stocks, X, Y, and Z, should be included in the portfolio? A) All three. B) Only X and Y. C) Only Y and Z. D) Any investment in the three stocks will result in the exact same expected return and risk. The correct answer was A) Diversification benefits occur whenever a stock is added that is not perfectly positively correlated with other stocks in the portfolio. Since none of the stocks are perfectly positively correlated with the other stocks, it would be beneficial to purchase all three rather than just one or two stocks. 3.Which of the following statements regarding the risk-free asset is least accurate? A) Markowitz portfolio theory develops into capital market theory with the inclusion of a risk-free asset. B) The covariance of the risk-free asset with other assets is +1. C) The variance of the risk-free asset is zero. D) The risk/return relationship is linear when investors invest in a combination of the risk-free asset and the risky asset. The correct answer was B) The risk-free rate is constant so it does not co-vary with other assets. Thus the covariance is zero. | 
发表于 2008-4-14 17:11
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