Question 1

The efficient frontier

Accepted Answer

A)  represents the best attainable tradeoff between risk and return. 
B)  provides the highest level of risk for the lowest level of return. 
C)  includes all feasible sets of portfolios based on risk and return characteristics. 
D)  is represented by the rightmost boundary of the feasible set of portfolios. 
A)  represents the best attainable tradeoff between risk and return. 
B)  provides the highest level of risk for the lowest level of return. 
C)  includes all feasible sets of portfolios based on risk and return characteristics. 
D)  is represented by the rightmost boundary of the feasible set of portfolios.

Question 2

An efficient portfolio maximises the rate of return without consideration of risk.

Accepted Answer

A) True 
 B)False

Question 3

Investors are rewarded for assuming

Accepted Answer

A)  any type of risk. 
B)  total risk. 
C)  diversifiable risk. 
D)  non-diversifiable risk. 
A)  any type of risk. 
B)  total risk. 
C)  diversifiable risk. 
D)  non-diversifiable risk.

Question 4

Over the long term, a portfolio consisting of an ASX200 index and an EAFE index will generally produce returns ____________and have ____________risk than a portfolio comprised solely of the ASX200 index.

Accepted Answer

A)  higher; less 
B)  lower; less 
C)  lower; more 
D)  higher; more 
A)  higher; less 
B)  lower; less 
C)  lower; more 
D)  higher; more

Question 5

Both the efficient frontier and beta are important aspects of MPT.

Accepted Answer

A) True 
 B)False

Question 6

The CAPM estimates the required rate of return on a stock held as part of a well diversified portfolio.

Accepted Answer

A) True 
 B)False

Question 7

The transaction costs of investing directly in foreign- currency- denominated assets are relatively low.

Accepted Answer

A) True 
 B)False

Question 8

Portfolios located on the efficient frontier may not be part of the feasible set.

Accepted Answer

A) True 
 B)False

Question 9

The stock of ABC, Inc. has a beta of 1.10. The market rate of return is expected to increase in value by 5%. ABC stock should

Accepted Answer

A)  increase in value by 0.5%. 
B)  decrease in value by 0.5%. 
C)  decrease in value by 5.5%. 
D)  increase in value by 5.5%. 
A)  increase in value by 0.5%. 
B)  decrease in value by 0.5%. 
C)  decrease in value by 5.5%. 
D)  increase in value by 5.5%.

Question 10

An investment portfolio should be built around the needs of the individual investor.

Accepted Answer

A) True 
 B)False

Question 11

Adding shares with higher standard deviations to a portfolio will necessarily increase the portfolio's risk.

Accepted Answer

A) True 
 B)False

Question 12

Explain the efficient frontier as it relates to the utility function of an individual investor.

Accepted Answer

The answer of Explain the efficient frontier as it relates...

The efficient frontier

An efficient portfolio maximises the rate of return without consideration of risk.

Investors are rewarded for assuming

Over the long term, a portfolio consisting of an ASX200 index and an EAFE index will generally produce returns and have risk than a portfolio comprised solely of the ASX200 index.

Both the efficient frontier and beta are important aspects of MPT.

The CAPM estimates the required rate of return on a stock held as part of a well diversified portfolio.

The transaction costs of investing directly in foreign- currency- denominated assets are relatively low.

Portfolios located on the efficient frontier may not be part of the feasible set.

The stock of ABC, Inc. has a beta of 1.10. The market rate of return is expected to increase in value by 5%. ABC stock should

An investment portfolio should be built around the needs of the individual investor.

Adding shares with higher standard deviations to a portfolio will necessarily increase the portfolio's risk.

Explain the efficient frontier as it relates to the utility function of an individual investor.

The Investment Environment

Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Shares

Analysing Shares

Share Valuation

Technical Analysis, Market Efficiency and Behavioural Finance

Fixed-Income Securities

Bond Valuation

Managed Funds: Professionally Managed Portfolios

Managing Your Own Portfolio

Options: Puts and Calls

Commodities and Financial Futures

Filters

Exam 5: Modern Portfolio Concepts

The efficient frontier

An efficient portfolio maximises the rate of return without consideration of risk.

Investors are rewarded for assuming

Over the long term, a portfolio consisting of an ASX200 index and an EAFE index will generally produce returns ____________and have ____________risk than a portfolio comprised solely of the ASX200 index.

Both the efficient frontier and beta are important aspects of MPT.

The CAPM estimates the required rate of return on a stock held as part of a well diversified portfolio.

The transaction costs of investing directly in foreign- currency- denominated assets are relatively low.

Portfolios located on the efficient frontier may not be part of the feasible set.

The stock of ABC, Inc. has a beta of 1.10. The market rate of return is expected to increase in value by 5%. ABC stock should

An investment portfolio should be built around the needs of the individual investor.

Adding shares with higher standard deviations to a portfolio will necessarily increase the portfolio's risk.

Explain the efficient frontier as it relates to the utility function of an individual investor.

The Investment Environment

Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Shares

Analysing Shares

Share Valuation

Technical Analysis, Market Efficiency and Behavioural Finance

Fixed-Income Securities

Bond Valuation

Managed Funds: Professionally Managed Portfolios

Managing Your Own Portfolio

Options: Puts and Calls

Commodities and Financial Futures

Filters

Over the long term, a portfolio consisting of an ASX200 index and an EAFE index will generally produce returns and have risk than a portfolio comprised solely of the ASX200 index.