Which of the following indexes requires frequentrebalancing?
[I] Value-weighted index
[II] Price-weighted index
[III] Equally-weighted
| | I only |
| | II only |
| | III only |
| | II and III only |
| | I, II and III |
An investor invests 60% of her wealth in the market portfoliowith an expected rate of return of 12% and a variance of 0.01, andshe puts the rest in Treasury bills that pay 2% per year. What isthe standard deviation of the portfolio?
| | 4% |
| | 6% |
| | 7.5% |
| | 10% |
| | None of the above |
You are an investment advisor for Alan and Jimmy. You've helpedthem optimally allocate their investment portfolios along the samecapital allocation line (CAL). If Alan's portfolio has a higherweight on risk-free asset than Jimmy's portfolio, then which of thefollowing statements MUST be true:
[I]   Alan’s portfolio has lower expected returnsthan Jimmy’s
[II]Â Â Alan is less risk-averse than Jimmy
[III] Alan must hold a positive position in the risky asset
| | I only |
| | I and II |
| | I and III |
| | II and III |
| | I, II, and III |
The table presents forecasts of the returns of stock market andprobability of each state of the economy for next year. Calculatethe expected return.
State of Economy | Return | Prob. of State |
Recession | -12% | 0.15 |
Normal | 6% | 0.60 |
Expansion | 20% | 0.25 |
| | 4.7% | |
| | 6.8% | |
| | 8.4% | |
| | 10.4% | |
| | None of the above | |
| | | | |
On Jan 1, you sold short 400 shares of AT&T at $35 pershare. You post $7000 to the margin account. On April 1, youreceived a margin call on this trade. Assume the minimum marginrequirement is 40%, what is the price of the stock that triggeredthe margin call?
| | $29.17 |
| | $37.5 |
| | $39.25 |
| | $43.75 |
| | None of the above |
