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1、Corporate Finance, 3e (Berk/DeMarzo)Chapter 11 Optimal Portfolio Choice and the Capital Asset Pricing Model11.1 The Expected Return of a Portfolio1) Which of the following statements is FALSE?A) Without trading, the portfolio weights will decrease for the stocks in the portfolio whose returns are ab
2、ove the overall portfolio return.B) The expected return of a portfolio is simply the weighted average of the expected returns of the investments within the portfolio.C) Portfolio weights add up to 1 so that they represent the way we have divided our money between the different individual investments
3、 in the portfolio.D) A portfolio weight is the fraction of the total investment in the portfolio held in an individual investment in the portfolio.Answer: AExplanation: A) Without trading, the portfolio weights will increase for the stocks in the portfolio whose returns are above the overall portfol
4、io return.Diff: 1Section: 11.1 The Expected Return of a PortfolioSkill: Conceptual2) Which of the following equations is INCORRECT?A) xi = B) Rp = i xiRiC) Rp = x1R1 + x2R2 + . + xnRnD) ERp = Ei xiRiAnswer: AExplanation: A) xi = Diff: 2Section: 11.1 The Expected Return of a PortfolioSkill: Conceptua
5、lUse the information for the question(s) below.Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share, 200 shares of Lowes (LOW) at $30 per share, and 100 shares of Ball Corporation (BLL) at $40 per share.3) The weight on Abbott Labs in your portfolio is:A) 50%B) 4
6、0%C) 30%D) 20%Answer: AExplanation: A) Value of portfolio = 200 $50 + 200 $30 + 100 $40 = $20,000xi = value of security/value of portfolio = (200 $50)/$20000 = .50 or 50%Diff: 1Section: 11.1 The Expected Return of a PortfolioSkill: Analytical4) The weight on Lowes in your portfolio is:A) 40%B) 20%C)
7、 50%D) 30%Answer: DExplanation: D) Value of portfolio = 200 $50 + 200 $30 + 100 $40 = $20,000xi = value of security/value of portfolio = (200 $30)/$20000 = .30 or 30%Diff: 1Section: 11.1 The Expected Return of a PortfolioSkill: Analytical5) The weight on Ball Corporation in your portfolio is:A) 50%B
8、) 40%C) 20%D) 30%Answer: CExplanation: C) Value of portfolio = 200 $50 + 200 $30 + 100 $40 = $20,000xi = value of security/value of portfolio = (100 $40)/$20000 = .20 or 20%Diff: 1Section: 11.1 The Expected Return of a PortfolioSkill: Analytical6) Suppose over the next year Ball has a return of 12.5
9、%, Lowes has a return of 20%, and Abbott Labs has a return of -10%. The return on your portfolio over the year is:A) 0%B) 7.5%C) 3.5%D) 5.0%Answer: CExplanation: C) StockWeightReturnW RABT0.5-0.1-0.05LOW0.30.20.06BLL0.20.1250.025Rp =0.035Diff: 2Section: 11.1 The Expected Return of a PortfolioSkill:
10、Analytical7) Suppose over the next year Ball has a return of 12.5%, Lowes has a return of 20%, and Abbott Labs has a return of -10%. The value of your portfolio over the year is:A) $21,000B) $20,000C) $20,700D) $21,500Answer: CExplanation: C) StockWeightReturnW RABT0.5-0.1-0.05LOW0.30.20.06BLL0.20.1
11、250.025Rp =0.035Value of portfolio = 20000(1 + .035) = 20700Diff: 2Section: 11.1 The Expected Return of a PortfolioSkill: Analytical8) Suppose over the next year Ball has a return of 12.5%, Lowes has a return of 20%, and Abbott Labs has a return of -10%. The weight on Ball Corporation in your portfo
12、lio after one year is closest to:A) 20.0%B) 12.5%C) 20.7%D) 21.7%Answer: DExplanation: D) StockWeightReturnW RABT0.5-0.1-0.05LOW0.30.20.06BLL0.20.1250.025Rp =0.035Value of portfolio = 20000(1 + .035) = 20700Value of BLL = $4000(1 + .125) = $4500Weight for BLL = 4500/20700 = 0.217391Diff: 3Section: 1
13、1.1 The Expected Return of a PortfolioSkill: Analytical9) Suppose over the next year Ball has a return of 12.5%, Lowes has a return of 20%, and Abbott Labs has a return of -10%. The weight on Abbott Labs in your portfolio after one year is closest to:A) -10.0%B) 43.5%C) 45.0%D) 50.0%Answer: BExplana
14、tion: B) StockWeightReturnW RABT0.5-0.1-0.05LOW0.30.20.06BLL0.20.1250.025Rp =0.035Value of portfolio = 20000(1 + .035) = 20700Value of ABT = $10000(1 + -.10) = $9000Weight for ABT = 9000/20700 = 0.434783Diff: 3Section: 11.1 The Expected Return of a PortfolioSkill: Analytical10) Suppose over the next year Ball has a return of 12.5%, Lowes has a return of 20%, and Abbott Labs has a return of -10%. The weight on Lowes in your portfolio after one year is closest to:A) 20.0%B) 34.8%C) 30.0%D) 36.0%Answer: BExplanation: B) StockWeightReturnW RABT0.5-0.1-0.05LOW0.30.20.0
