 # FINC 600 FINC600 Week 3 Practice Quiz Answers (APU)

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FINC600 Week 3 Practice Quiz (APUS)

1. Which of the following portfolios have the least risk?
2. If the average annual rate of return for common stocks is 11.7%, and for treasury bills it is 4.0%, what is the market risk premium?
3. Spill Oil Company's stocks had -8%, 11% and 24% rates of return during the last three years respectively; calculate the average rate of return for the stock.
4. Given the following data: risk-free rate = 4%, average risk premium = 7.7%. Calculate the required rate of return:
5. The unique risk is also called the:
6. Market risk is also called: I) systematic risk, II) undiversifiable risk, III) firm specific risk.
7. Stock A has an expected return of 10% per year and stock B has an expected return of 20%. If 40% of the funds are invested in stock A, and the rest in stock B, what is the expected return on the portfolio of stock A and stock B?
8. If the correlation coefficient between stock C and stock D is +1.0% and the standard deviation of return for stock C is 15% and that for stock D is 30%, calculate the covariance between stock C and stock D.
9. The beta of market portfolio is:
10. The distribution of returns, measured over a short interval of time, like daily returns, can be approximated by:
11. Florida Company (FC) and Minnesota Company (MC) are both service companies. Their historical return for the past three years are: FC: - 5%,15%, 20%; MC: 8%, 8%, 20%. If FC and MC are combined in a portfolio with 50% of the funds invested in each, calculate the expected return on the portfolio.
12. Suppose you invest equal amounts in a portfolio with an expected return of 16% and a standard deviation of returns of 20% and a risk-free asset with an interest rate of 4%; calculate the expected return on the resulting portfolio:
13. Suppose you invest equal amounts in a portfolio with an expected return of 16% and a standard deviation of returns of 20% and a risk-free asset with an interest rate of 4%; calculate the standard deviation of the returns on the resulting portfolio:
14. The correlation measures the:
15. The security market line (SML) is the graph of:

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