Question 1

To form an assessment of the future performance of investments, investors should monitor

Accepted Answer

A)  the Value Line Index. 
B)  the ASX 100 Index. 
C)  the All Ordinaries Average. 
D)  economic and market activity. 
A)  the Value Line Index. 
B)  the ASX 100 Index. 
C)  the All Ordinaries Average. 
D)  economic and market activity.

Question 2

Fixed weightings, flexible weightings, and tactical asset allocation are three approaches to asset allocation. Compare and contrast these three different approaches.

Accepted Answer

The fixed weightings approach assigns a

Question 3

Only capital gains that have been realised should be included in the measurement of a portfolio's return over a given period of time.

Accepted Answer

A) True 
 B)False

Question 4

Over a period of time if an investment has not met its return objective, it should be sold.

Accepted Answer

A) True 
 B)False

Question 5

Holding period return (HPR) captures total return performance by considering current income and capital gains and is most appropriate for holding periods of one year or less.

Accepted Answer

A) True 
 B)False

Question 6

An investor who wants to take advantage of a temporary decline in the price of a share should use a limit order.

Accepted Answer

A) True 
 B)False

Question 7

The process of selling certain issues in a portfolio and purchasing new ones to replace them is known as

Accepted Answer

A)  dollar-cost averaging. 
B)  portfolio revision. 
C)  market timing. 
D)  red herring baiting. 
A)  dollar-cost averaging. 
B)  portfolio revision. 
C)  market timing. 
D)  red herring baiting.

Question 8

Dollar-cost averaging is a formula plan which automatically causes investors to purchase more shares when the price is low and purchase fewer shares when the price is high.

Accepted Answer

A) True 
 B)False

Question 9

Allison's portfolio has an expected return of 14% and a standard deviation of of 20%. Brianna's portfolio has an expected rate of return of 11% and a standard deviation of 12%. The risk- free rate is 3%. According to the Sharpe measure,

Accepted Answer

A)  Brianna has the better portfolio. 
B)  The answer depends on Allison and Brianna's risk tolerance. 
C)  Allison has the better portfolio. 
D)  The portfolio's are equally desirable. 
A)  Brianna has the better portfolio. 
B)  The answer depends on Allison and Brianna's risk tolerance. 
C)  Allison has the better portfolio. 
D)  The portfolio's are equally desirable.

Question 10

Sharpe's measure of portfolio performance compares the risk premium on a portfolio to the portfolio's standard deviation of return.

Accepted Answer

A) True 
 B)False

Question 11

The Sharpe's measure for Jane Smith's investment portfolio is 0.40, while the Sharpe's measure for the market is 0.30. This information suggests that Smith's portfolio

Accepted Answer

A)  is overly diversified, and some securities should be sold to bring the portfolio in line with the market. 
B)  exhibits superior performance because its risk premium per unit of risk is above that of the market. 
C)  is inadequately diversified, and more securities should be added to the portfolio in order to bring it in line with the market. 
D)  exhibits poor performance because its risk premium per unit of risk is below that of the market. 
A)  is overly diversified, and some securities should be sold to bring the portfolio in line with the market. 
B)  exhibits superior performance because its risk premium per unit of risk is above that of the market. 
C)  is inadequately diversified, and more securities should be added to the portfolio in order to bring it in line with the market. 
D)  exhibits poor performance because its risk premium per unit of risk is below that of the market.

Question 12

A constant- dollar plan allows for speculative gains while limiting potential losses.

Accepted Answer

A) True 
 B)False

Question 13

The formula plan which requires the greatest management attention and is also the most aggressive is called the_________ plan.

Accepted Answer

A)  constant- dollar 
B)  variable- ratio 
C)  dollar- cost averaging 
D)  constant- ratio 
A)  constant- dollar 
B)  variable- ratio 
C)  dollar- cost averaging 
D)  constant- ratio

Question 14

If the holding period return (HPR) of an investment is 20 percent before taxes for a nine month period, an investor in the 30 percent tax bracket would have an after- tax HPR of 14 percent.

Accepted Answer

A) True 
 B)False

Question 15

The ASX 300 Index can be used to represent the share market as a whole.

Accepted Answer

A) True 
 B)False

Question 16

Ella owns a share with a beta of 1.34 and a standard deviation of 16.4%. The share has a total return of 14.8%. The market risk premium is 8.5%, while the return on the market portfolio was 12.0%. What is the value of Sharpe's measure for Ella's portfolio?

Accepted Answer

A)  0.21 
B)  0.69 
C)  0.38 
D)  0.90 
A)  0.21 
B)  0.69 
C)  0.38 
D)  0.90

Question 17

Tim purchased a share ten months ago for $14 a share, received a $1 dividend per share last month, and sold the share today for $16 per share. Tim has a marginal tax rate of 30%. Both capital gains for securities held more than one year and dividend income is taxed at 15%. What is Tim's after- tax holding period return? Hint: The tax rate for capital gains with the holding period less than one year is the same as the marginal tax rate.

Accepted Answer

A)  16.1%. 
B)  14.1%. 
C)  18.2%. 
D)  15.9%. 
A)  16.1%. 
B)  14.1%. 
C)  18.2%. 
D)  15.9%.

Question 18

Ten months ago, Junior purchased a share for $14 a share. The share pays a quarterly dividend of $0.50 per share. Today, Junior sold the share for $15 a share. What is his holding period return?

Accepted Answer

A)  16.7%. 
B)  17.9%. 
C)  10.0%. 
D)  10.7%. 
A)  16.7%. 
B)  17.9%. 
C)  10.0%. 
D)  10.7%.

Question 19

Which one of the following statements is correct if a portfolio has a Jensen measure of return of zero?

Accepted Answer

A)  The market provides a better return on a risk- adjusted basis. 
B)  The portfolio outperformed the market on a risk- adjusted basis. 
C)  The portfolio earned exactly its expected return on a risk- adjusted basis. 
D)  The portfolio has a total return of zero percent. 
A)  The market provides a better return on a risk- adjusted basis. 
B)  The portfolio outperformed the market on a risk- adjusted basis. 
C)  The portfolio earned exactly its expected return on a risk- adjusted basis. 
D)  The portfolio has a total return of zero percent.

Question 20

If a constant- dollar plan portfolio is profitable over the long run, the in value over time.

Accepted Answer

A)  aggressive portion will decrease 
B)  conservative portion will remain constant 
C)  entire portfolio will remain constant 
D)  conservative portion will increase 
A)  aggressive portion will decrease 
B)  conservative portion will remain constant 
C)  entire portfolio will remain constant 
D)  conservative portion will increase

To form an assessment of the future performance of investments, investors should monitor

Fixed weightings, flexible weightings, and tactical asset allocation are three approaches to asset allocation. Compare and contrast these three different approaches.

Only capital gains that have been realised should be included in the measurement of a portfolio's return over a given period of time.

Over a period of time if an investment has not met its return objective, it should be sold.

Holding period return (HPR) captures total return performance by considering current income and capital gains and is most appropriate for holding periods of one year or less.

An investor who wants to take advantage of a temporary decline in the price of a share should use a limit order.

The process of selling certain issues in a portfolio and purchasing new ones to replace them is known as

Dollar-cost averaging is a formula plan which automatically causes investors to purchase more shares when the price is low and purchase fewer shares when the price is high.

Allison's portfolio has an expected return of 14% and a standard deviation of of 20%. Brianna's portfolio has an expected rate of return of 11% and a standard deviation of 12%. The risk- free rate is 3%. According to the Sharpe measure,

Sharpe's measure of portfolio performance compares the risk premium on a portfolio to the portfolio's standard deviation of return.

The Sharpe's measure for Jane Smith's investment portfolio is 0.40, while the Sharpe's measure for the market is 0.30. This information suggests that Smith's portfolio

A constant- dollar plan allows for speculative gains while limiting potential losses.

The formula plan which requires the greatest management attention and is also the most aggressive is called the_________ plan.

If the holding period return (HPR) of an investment is 20 percent before taxes for a nine month period, an investor in the 30 percent tax bracket would have an after- tax HPR of 14 percent.

The ASX 300 Index can be used to represent the share market as a whole.

Ella owns a share with a beta of 1.34 and a standard deviation of 16.4%. The share has a total return of 14.8%. The market risk premium is 8.5%, while the return on the market portfolio was 12.0%. What is the value of Sharpe's measure for Ella's portfolio?

Ten months ago, Junior purchased a share for $14 a share. The share pays a quarterly dividend of $0.50 per share. Today, Junior sold the share for $15 a share. What is his holding period return?

Which one of the following statements is correct if a portfolio has a Jensen measure of return of zero?

If a constant- dollar plan portfolio is profitable over the long run, the in value over time.

The Investment Environment

Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Shares

Analysing Shares

Share Valuation

Technical Analysis, Market Efficiency and Behavioural Finance

Fixed-Income Securities

Bond Valuation

Managed Funds: Professionally Managed Portfolios

Options: Puts and Calls

Commodities and Financial Futures

Filters

Exam 13: Managing Your Own Portfolio

To form an assessment of the future performance of investments, investors should monitor

Fixed weightings, flexible weightings, and tactical asset allocation are three approaches to asset allocation. Compare and contrast these three different approaches.

Only capital gains that have been realised should be included in the measurement of a portfolio's return over a given period of time.

Over a period of time if an investment has not met its return objective, it should be sold.

Holding period return (HPR) captures total return performance by considering current income and capital gains and is most appropriate for holding periods of one year or less.

An investor who wants to take advantage of a temporary decline in the price of a share should use a limit order.

The process of selling certain issues in a portfolio and purchasing new ones to replace them is known as

Dollar-cost averaging is a formula plan which automatically causes investors to purchase more shares when the price is low and purchase fewer shares when the price is high.

Allison's portfolio has an expected return of 14% and a standard deviation of of 20%. Brianna's portfolio has an expected rate of return of 11% and a standard deviation of 12%. The risk- free rate is 3%. According to the Sharpe measure,

Sharpe's measure of portfolio performance compares the risk premium on a portfolio to the portfolio's standard deviation of return.

The Sharpe's measure for Jane Smith's investment portfolio is 0.40, while the Sharpe's measure for the market is 0.30. This information suggests that Smith's portfolio

A constant- dollar plan allows for speculative gains while limiting potential losses.

The formula plan which requires the greatest management attention and is also the most aggressive is called the_________ plan.

If the holding period return (HPR) of an investment is 20 percent before taxes for a nine month period, an investor in the 30 percent tax bracket would have an after- tax HPR of 14 percent.

The ASX 300 Index can be used to represent the share market as a whole.

Ella owns a share with a beta of 1.34 and a standard deviation of 16.4%. The share has a total return of 14.8%. The market risk premium is 8.5%, while the return on the market portfolio was 12.0%. What is the value of Sharpe's measure for Ella's portfolio?

Ten months ago, Junior purchased a share for $14 a share. The share pays a quarterly dividend of $0.50 per share. Today, Junior sold the share for $15 a share. What is his holding period return?

Which one of the following statements is correct if a portfolio has a Jensen measure of return of zero?

If a constant- dollar plan portfolio is profitable over the long run, the in value over time.

The Investment Environment

Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Shares

Analysing Shares

Share Valuation

Technical Analysis, Market Efficiency and Behavioural Finance

Fixed-Income Securities

Bond Valuation

Managed Funds: Professionally Managed Portfolios

Options: Puts and Calls

Commodities and Financial Futures

Filters