corporate finance - berk demarzo- test bank chapter 11

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1、CorporateFinance,3e(Berk/DeMarzo)Chapter11OptimalPortfolioChoiceandtheCapitalAssetPricingModel11.1TheExpectedReturnofaPortfolio1)WhichofthefollowingstatementsisFALSE?A)Withouttrading,theportfolioweightswilldecreaseforthestocksintheportfoliowhosereturnsareabovethe

2、overallportfolioreturn.B)Theexpectedreturnofaportfolioissimplytheweightedaverageoftheexpectedreturnsoftheinvestmentswithintheportfolio.C)Portfolioweightsaddupto1sothattheyrepresentthewaywehavedividedourmoneybetweenthedifferentindividualinvestmentsintheportfolio.D

3、)Aportfolioweightisthefractionofthetotalinvestmentintheportfolioheldinanindividualinvestmentintheportfolio.Answer:AExplanation:A)Withouttrading,theportfolioweightswillincreaseforthestocksintheportfoliowhosereturnsareabovetheoverallportfolioreturn.Diff:1Section:11

4、.1TheExpectedReturnofaPortfolioSkill:Conceptual2)WhichofthefollowingequationsisINCORRECT?A)xi=B)Rp=ΣixiRiC)Rp=x1R1+x2R2+...+xnRnD)E[Rp]=E[ΣixiRi]Answer:AExplanation:A)xi=Diff:2Section:11.1TheExpectedReturnofaPortfolioSkill:Conceptual65Copyright©2014PearsonEducati

5、on,Inc.Usetheinformationforthequestion(s)below.Supposeyouinvest$20,000bypurchasing200sharesofAbbottLabs(ABT)at$50pershare,200sharesofLowes(LOW)at$30pershare,and100sharesofBallCorporation(BLL)at$40pershare.3)TheweightonAbbottLabsinyourportfoliois:A)50%B)40%C)30%D)

6、20%Answer:AExplanation:A)Valueofportfolio=200×$50+200×$30+100×$40=$20,000xi=valueofsecurity/valueofportfolio=(200×$50)/$20000=.50or50%Diff:1Section:11.1TheExpectedReturnofaPortfolioSkill:Analytical4)TheweightonLowesinyourportfoliois:A)40%B)20%C)50%D)30%Answer:DEx

7、planation:D)Valueofportfolio=200×$50+200×$30+100×$40=$20,000xi=valueofsecurity/valueofportfolio=(200×$30)/$20000=.30or30%Diff:1Section:11.1TheExpectedReturnofaPortfolioSkill:Analytical5)TheweightonBallCorporationinyourportfoliois:A)50%B)40%C)20%D)30%Answer:CExpla

8、nation:C)Valueofportfolio=200×$50+200×$30+100×$40=$20,000xi=valueofsecurity/valueofportfolio=(100×$40)/$20000=.20or20%Diff:1Section:11.1TheExpectedReturnofaPor