If two stocks have the same beta, they must also have the same standard deviation of returns.

Ten years ago, you invested $50,000 in Acme common stock. The arithmetic average annual return on your investment over the past ten years is 7.0%. The geometric average annual return on your investment over the past ten years is 5.2%. The risk-free rate over the past years was 3.3% per year. Based on this information, what is your investment in Acme common stock worth today?

Assume that your portfolio consists of investments in two stocks. Information on your portfolio is provided below: Stock # of shares that you own Share Price Beta σ Bally’s 30 $20 1.6 25% True Grit 40 $10 0.9 40% What is the Beta of your portfolio?

Consider a portfolio that consists of two risky securities that are positively correlated with a correlation coefficient of 0.7. Which of the following statements is most accurate?

The one-year risk-free rate is 7% and the expected one-year return on the market portfolio is 13%. According to the Capital Asset Pricing Model, the expected one-year return on security X with a beta of 1.2 is equal to ___________. 

The Sure Tool Company is expected to pay a dividend of $2 in the upcoming year. The risk-free rate of return is 4%, and the expected return on the market portfolio is 14%. Analysts expect the price of Sure Tool shares to be $22 a year from now. The beta of Sure Tool’s stock is 1.25. What is the required rate of return on Sure Tool’s stock?

Which of the following is an example of unsystematic risk?

Suppose you invest in 220 shares of Johnson and Johnson (JNJ) at $70 per share and 240 shares of Yahoo (YHOO) at $20 per If the price of Johnson and Johnson increases to $80 and the price of Yahoo decreases to $18 per share, what is the return on your portfolio?

You have $100 and you can invest in a risky asset with an expected one-year rate of return of 11% and a standard deviation of 21% and a T-bill with a one-year rate of return of 4.5%. If these are the only two assets in which you can invest, how can you form a portfolio that has an expected value of $114 one year from today?

Your personal opinion is that a security has an expected one-year rate of return of 11%. The security has a beta of 1.5. If the one-year risk-free rate is 5% and the expected market risk premium is 4%, according to the Capital Asset Pricing Model this security is                              .