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Breanna Ollech verified

Numerade educator

You invest 50% of your portfolio in Stock H, 20% in Stock I, and 30% in Stock J. The three stocks are all uncorrelated with one another. Stock H has an expected return of 18% and a standard deviation of 70%. Stock I has an expected return of 8% and a standard deviation of 30%. Stock J has an expected return of 12% and a standard deviation of 50%. What is the expected return of the portfolio? Go out three decimals - for example, write 46.3% as .463. Answer:

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Breanna Ollech verified

Numerade educator

Stock A's annual returns have a standard deviation of 27%. Stock B's annual returns have a standard deviation of 46%. The two stocks have a correlation of 0. Use calculus to find out what percentage of your money you should invest in Stock A in order to minimize the standard deviation of a portfolio of A and B. Go out four decimals - in other words, you should write 22.57% as .2257. Answer:

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Breanna Ollech verified

Numerade educator

Assume that 3 years ago, the exchange rate between Currency A and Currency B was B10.092/A. Today, B10.121/A. What was the arithmetic average annual return on Currency A (relative to B) over the last 3 years? Go out four decimals - for example, write 3.72% as .0372. Answer:

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Aparna Shakti verified

Numerade educator

A mutual fund is invested in a total of 9 million shares across 60 different stocks. The average price per share of stock held by the fund is $11. The fund itself is divided into 7 million mutual fund shares. What is the net asset value of this mutual fund? Round to the nearest penny.

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Breanna Ollech verified

Numerade educator

A price-weighted index has 2 stocks. Stock Y has an initial price of $29 and Stock Z has an initial price of $45. 9 years later, Stock Y costs $82 and Stock Z costs $126. Assume that there have been no dividends, stock splits, repurchases, delistings or replacements in the index since its inception. What is the geometric average annual return on the index over that 9-year period? Go out three decimals - for example, write 5.1% as .051. Answer:

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Aparna Shakti verified

Numerade educator

Which of the following statements about diversification is true? Select one: Diversification can help reduce a portfolio's risk, but can never reduce it below the level of its safest asset. If correlation equals +1, diversification does not reduce the risk of the portfolio to a level below the weighted average of the risks inside the portfolio. A correlation of zero means that the two stocks generally move opposite one another. Diversification, when done correctly, increases the expected return of a portfolio.

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Breanna Ollech verified

Numerade educator

Stock O's standard deviation is 39%. Stock P's standard deviation is 72%. The two stocks always move opposite; when O is at its best, P is at its worst and when O is at its worst, P is at its best. You already own $1000 of Stock O. To make your portfolio risk-free, how much (in dollars) do you need to invest in P? Write a positive number to buy Stock P and a negative number to short-sell Stock P. Round to the nearest dollar (but, as always, don't include the dollar sign). Answer:

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Breanna Ollech verified

Numerade educator

A value-weighted index created right now consists of 3 stocks: Stock D (50 million shares, $40 per share), Stock E (100 million shares, $12 per share), and Stock F (30 million shares, $60 per share). The divisor is set so that the index starts off at a level of 100. Tomorrow, the price per share and number of shares outstanding of each stock have remained unchanged, but the index has delisted Stock D and replaced it with Stock G (24 million shares, $29 per share). What is the new divisor? Be careful - there should be quite a few zeros in your answer.

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Breanna Ollech verified

Numerade educator

A price-weighted index consists of three stocks: Stock A (10 million shares, $41 per share), Stock B (60 million shares, $50 per share), and Stock C (30 million shares, $30 per share). Tomorrow, Stock A is worth $37 per share, B is worth $53 per share, and C is worth $29 per share. What is the return on the stock index? Go out three decimals - for example, write 8.1% as .081.

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Breanna Ollech verified

Numerade educator

There is a 30% chance that the economy booms, a 50% chance that it performs "okay", and a 20% chance that there's a bust. Stock Y will have a return of 17% in a boom, 12% in a "medium" economy, and -7% in a bust. What is the expected return for Stock Y? Go out three decimals - write 8.7% as .087.

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