Order Systematic Risk Is Relevant in Portfolios
1. An investor put 60% of his portfolio into a risky asset offering a 10% return with a standard
deviation of returns of 8% and put the balance of his portfolio in a risk-free asset offering 5%.
What is the expected return and standard deviation of his portfolio?
2. What is the risk measure associated with the capital market line (CML)?
A. Beta risk.
B. Unsystematic risk.
C. Total risk.
3. A portfolio to the right of the market portfolio on the CML is:
A. a lending portfolio.
B. a borrowing portfolio.
C. an inefficient portfolio.
4. As the number of stocks in a portfolio increases, the portfolio’s systematic risk:
A. can increase or decrease.
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B. decreases at a decreasing rate.
C. decreases at an increasing rate.
5. Total risk equals:
A. unique plus diversifiable risk.
B. market plus nondiversifiable risk.
C. systematic plus unsystematic risk.
6. A return generating model is least likely to be based on a security’s exposure to:
A. statistical factors.
B. macroeconomic factors.
C. fundamental factors.
7. The covariance of the market’s returns with a stock’s returns is 0.005 and the standard deviation
of the market’s returns is 0.05. What is the stock’s beta?
A. 1.0.
B. 1.5.
C. 2.0
Order Systematic Risk Is Relevant in Portfolios
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