1. Systematic risk is a measure of return volatility in an individual stock that is specific to __________.

a. the market

b. the weather

c. the individual firm

d. inflation

2. Consider the following information:

                               Your Portfolio     The Market Index Portfolio

mean return                  12%                    10%

standard deviation         14%                    12%

beta                             1.2                      1.0

risk-free rate = 4%

Calculate the Sharpe Measure of Performance for both Your Portfolio and The Market Index Portfolio.

D. .671; .450

A. .450; .400

C. .571; .500

B. .500; .450

The beta for firm XYZ was reported as Beta = 1.62 on S&P Market Insight. If the market return is expected to be 12% and the risk-free rate is 4.5%, calculate the expected rate of return for XYZ under assumption that the CAPM is the appropriate return generating model.

D. 17.00%

C. 16.65%

A. 15.75%

B. 15.00%