Question 1

Dollar-cost averaging is a formula plan to purchase the same number of shares at regular intervals of time.

Accepted Answer

A) True 
 B)False

Question 2

A portfolio has a total return of 10.5%, a beta of 0.72 and a standard deviation of 6.3%. The risk-free rate is 3.8%, the market return is 12.4%. Jensen's measure of this portfolio's performance is

Accepted Answer

A)  4.3%. 
B)  9.3%. 
C)  0.5%. 
D)  7.9%. 
A)  4.3%. 
B)  9.3%. 
C)  0.5%. 
D)  7.9%.

Question 3

Sharpe's measure of portfolio performance compares the risk premium on a portfolio to

Accepted Answer

A)  a broad- based market index such as the ASX 300 index. 
B)  the portfolio's beta. 
C)  the prevailing risk- free rate of return. 
D)  the portfolio's standard deviation of return. 
A)  a broad- based market index such as the ASX 300 index. 
B)  the portfolio's beta. 
C)  the prevailing risk- free rate of return. 
D)  the portfolio's standard deviation of return.

Question 4

For a share investment, the dividend yield is calculated by

Accepted Answer

A)  multiplying a share's semi- annual dividend by two. 
B)  dividing a share's price by its annual cash dividend. 
C)  dividing the annual change in the share's price plus its annual dividend amount by the beginning of the year price. 
D)  dividing a share's annual cash dividend by its price. 
A)  multiplying a share's semi- annual dividend by two. 
B)  dividing a share's price by its annual cash dividend. 
C)  dividing the annual change in the share's price plus its annual dividend amount by the beginning of the year price. 
D)  dividing a share's annual cash dividend by its price.

Question 5

Maria purchased $5,000 of no- fee managed fund units just over a year ago. She received $136 in dividend income and $201 in long- term capital gains distributions. Today she sold her shares for $5,062. Maria is in the 25% marginal tax bracket. Capital gains with holding periods in excess of one year and dividend income are taxed at 15%. What is Maria's after- tax holding period return?

Accepted Answer

A)  6.8%. 
B)  8.0%. 
C)  6.0%. 
D)  6.6%. 
A)  6.8%. 
B)  8.0%. 
C)  6.0%. 
D)  6.6%.

Question 6

The theory behind the variable-ratio plan is to

Accepted Answer

A)  keep the unit cost of the portfolio at a constant level. 
B)  passively buy and hold a wide variety of securities. 
C)  avoid selling any security for a capital gain, and thus indefinitely avoiding the capital gains tax. 
D)  time the cyclical movements of the share market and thereby "buy low and sell high." 
A)  keep the unit cost of the portfolio at a constant level. 
B)  passively buy and hold a wide variety of securities. 
C)  avoid selling any security for a capital gain, and thus indefinitely avoiding the capital gains tax. 
D)  time the cyclical movements of the share market and thereby "buy low and sell high."

Question 7

Treynor's measure of portfolio performance focuses on

Accepted Answer

A)  diversifiable risk. 
B)  total risk. 
C)  the standard deviation of the portfolio. 
D)  non-diversifiable risk. 
A)  diversifiable risk. 
B)  total risk. 
C)  the standard deviation of the portfolio. 
D)  non-diversifiable risk.

Question 8

A portfolio has a total return of 14.5%, a beta of 1.54, and a standard deviation of 17.6%. If the risk-free rate is 4.5% and the market return is 10.2%, then Treynor's measure of this portfolio's performance is

Accepted Answer

A)  2.8%. 
B)  6.5%. 
C)  9.4%. 
D)  3.7%. 
A)  2.8%. 
B)  6.5%. 
C)  9.4%. 
D)  3.7%.

Question 9

Jensen's measure of portfolio performance compares the risk premium on a portfolio to the portfolio's beta.

Accepted Answer

A) True 
 B)False

Question 10

On February 19, 2010, Angela purchased 100 shares of ABC at a total cost of $1,712.50. She received a total of $125.00 in dividends and sold the shares today, February 22, 2011. Her net proceeds from the sale are $1,892.40. Angela has a marginal tax rate of 32%. Her tax rate on both her capital gains in excess of one year and her dividend income is 18%. What is Angela's after- tax holding period return on her investment in ABC stock?

Accepted Answer

A)  11.0%. 
B)  14.6%. 
C)  13.2%. 
D)  12.1%. 
A)  11.0%. 
B)  14.6%. 
C)  13.2%. 
D)  12.1%.

Question 11

Under the variable- ratio plan, additional speculative investments are made when the ratio

Accepted Answer

A)  of conservative investments to speculative investments increases by 10%. 
B)  of the realised rate of return falls below the desired rate of return by 1% or more. 
C)  of the value of the speculative investments to the total portfolio value drops below a predetermined level. 
D)  of the rate of return on the speculative investments exceeds the overall market return by 1% or more. 
A)  of conservative investments to speculative investments increases by 10%. 
B)  of the realised rate of return falls below the desired rate of return by 1% or more. 
C)  of the value of the speculative investments to the total portfolio value drops below a predetermined level. 
D)  of the rate of return on the speculative investments exceeds the overall market return by 1% or more.

Question 12

A conservative asset allocation would rely heavily on bonds and short- term securities.

Accepted Answer

A) True 
 B)False

Question 13

Asset allocation focuses on selecting specific securities within an asset class.

Accepted Answer

A) True 
 B)False

Question 14

A rational investor will require the same return from a corporate security as from a government security.

Accepted Answer

A) True 
 B)False

Question 15

Dollar- cost averaging plans and constant- dollar plans are both formula approaches to portfolio management. Briefly explain the two plans.

Accepted Answer

Dollar- cost averaging involves investin

Question 16

The holding period return for managed funds should be based on

Accepted Answer

A)  capital gains distributions and dividends. 
B)  net asset value exclusively. 
C)  capital gains distributions exclusively. 
D)  dividend income exclusively. 
A)  capital gains distributions and dividends. 
B)  net asset value exclusively. 
C)  capital gains distributions exclusively. 
D)  dividend income exclusively.

Question 17

Explain the use of limit orders and stop- loss orders in rebalancing an investor's share portfolio. What are the principal risks in using these orders?

Accepted Answer

Limit orders can be used to buy or sell

Question 18

A Jensen measure of 2.5% means that a security earned 2.5% more than the overall market.

Accepted Answer

A) True 
 B)False

Question 19

Six months ago, Suzanne purchased a share for $28 a share. Today she sold the share at a price of $32 a share. During the time she owned the share, she received a total of $1.30 in dividends per share. What is her holding period return?

Accepted Answer

A)  18.9%. 
B)  37.8%. 
C)  33.2%. 
D)  16.6%. 
A)  18.9%. 
B)  37.8%. 
C)  33.2%. 
D)  16.6%.

Question 20

A stop-loss order may not protect an investor's profits if

Accepted Answer

A)  the stop-loss price is never reached. 
B)  an unexpected event cause the price to drop steeply when the markets are closed. 
C)  the price enters a prolonged period of gradual decline. 
D)  the price drops even slightly below the stop price before the order can be executed. 
A)  the stop-loss price is never reached. 
B)  an unexpected event cause the price to drop steeply when the markets are closed. 
C)  the price enters a prolonged period of gradual decline. 
D)  the price drops even slightly below the stop price before the order can be executed.

Dollar-cost averaging is a formula plan to purchase the same number of shares at regular intervals of time.

A portfolio has a total return of 10.5%, a beta of 0.72 and a standard deviation of 6.3%. The risk-free rate is 3.8%, the market return is 12.4%. Jensen's measure of this portfolio's performance is

Sharpe's measure of portfolio performance compares the risk premium on a portfolio to

For a share investment, the dividend yield is calculated by

The theory behind the variable-ratio plan is to

Treynor's measure of portfolio performance focuses on

A portfolio has a total return of 14.5%, a beta of 1.54, and a standard deviation of 17.6%. If the risk-free rate is 4.5% and the market return is 10.2%, then Treynor's measure of this portfolio's performance is

Jensen's measure of portfolio performance compares the risk premium on a portfolio to the portfolio's beta.

Under the variable- ratio plan, additional speculative investments are made when the ratio

A conservative asset allocation would rely heavily on bonds and short- term securities.

Asset allocation focuses on selecting specific securities within an asset class.

A rational investor will require the same return from a corporate security as from a government security.

Dollar- cost averaging plans and constant- dollar plans are both formula approaches to portfolio management. Briefly explain the two plans.

The holding period return for managed funds should be based on

Explain the use of limit orders and stop- loss orders in rebalancing an investor's share portfolio. What are the principal risks in using these orders?

A Jensen measure of 2.5% means that a security earned 2.5% more than the overall market.

Six months ago, Suzanne purchased a share for $28 a share. Today she sold the share at a price of $32 a share. During the time she owned the share, she received a total of $1.30 in dividends per share. What is her holding period return?

A stop-loss order may not protect an investor's profits if

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

Dollar-cost averaging is a formula plan to purchase the same number of shares at regular intervals of time.

A portfolio has a total return of 10.5%, a beta of 0.72 and a standard deviation of 6.3%. The risk-free rate is 3.8%, the market return is 12.4%. Jensen's measure of this portfolio's performance is

Sharpe's measure of portfolio performance compares the risk premium on a portfolio to

For a share investment, the dividend yield is calculated by

The theory behind the variable-ratio plan is to

Treynor's measure of portfolio performance focuses on

A portfolio has a total return of 14.5%, a beta of 1.54, and a standard deviation of 17.6%. If the risk-free rate is 4.5% and the market return is 10.2%, then Treynor's measure of this portfolio's performance is

Jensen's measure of portfolio performance compares the risk premium on a portfolio to the portfolio's beta.

Under the variable- ratio plan, additional speculative investments are made when the ratio

A conservative asset allocation would rely heavily on bonds and short- term securities.

Asset allocation focuses on selecting specific securities within an asset class.

A rational investor will require the same return from a corporate security as from a government security.

Dollar- cost averaging plans and constant- dollar plans are both formula approaches to portfolio management. Briefly explain the two plans.

The holding period return for managed funds should be based on

Explain the use of limit orders and stop- loss orders in rebalancing an investor's share portfolio. What are the principal risks in using these orders?

A Jensen measure of 2.5% means that a security earned 2.5% more than the overall market.

Six months ago, Suzanne purchased a share for $28 a share. Today she sold the share at a price of $32 a share. During the time she owned the share, she received a total of $1.30 in dividends per share. What is her holding period return?

A stop-loss order may not protect an investor's profits if

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