Question 1

When the stock market has bottomed out and is beginning to recover, the best portfolio to own is the one with a beta of

Accepted Answer

A)  0.0. 
B)  +0.5. 
C)  +1.5. 
D)  +2.0. 
A)  0.0. 
B)  +0.5. 
C)  +1.5. 
D)  +2.0.

Question 2

A portfolio with a beta of 1.26

Accepted Answer

A)  is 126% more risky than the overall market. 
B)  has less risk than the lowest risk security held within that portfolio. 
C)  is 26% more risky than a risk-free asset. 
D)  is considerably more risky than the overall market. 
A)  is 126% more risky than the overall market. 
B)  has less risk than the lowest risk security held within that portfolio. 
C)  is 26% more risky than a risk-free asset. 
D)  is considerably more risky than the overall market.

Question 3

U. S. based companies such as Coca Cola and Caterpillar have no exchange rate risk.

Accepted Answer

A) True 
 B)False

Question 4

Traditional portfolio management

Accepted Answer

A)  concentrates on only the most recent "hot" sectors of the market. 
B)  typically centers on interindustry diversification. 
C)  uses portfolio betas and standard deviations to minimize risk. 
D)  is based on statistical measures to develop the portfolio plan. 
A)  concentrates on only the most recent "hot" sectors of the market. 
B)  typically centers on interindustry diversification. 
C)  uses portfolio betas and standard deviations to minimize risk. 
D)  is based on statistical measures to develop the portfolio plan.

Question 5

The tendency of professional fund managers to invest heavily in the same stocks is known as the traditional approach.

Accepted Answer

A) True 
 B)False

Question 6

Lauren has the following portfolio of assets. $$\begin{array}{l}
\text { Proportion of }\
\begin{array} { l c c } 
\text { Asset } & \text { Portfolio } & \text { Beta } \
\hline \text { A } & 20 \% & 1.60 \
\text { B } & 35 \% & 1.05 \
\text { C } & 45 \% & 0.85
\end{array}
\end{array}$$ What is the beta of Lauren's portfolio?

Accepted Answer

A)  1.07 
B)  1.16 
C)  1.05 
D)  1.00 
A)  1.07 
B)  1.16 
C)  1.05 
D)  1.00

Question 7

Beta is the slope of the best fit line for the points with coordinates representing the______ and the_____ for each one of several years.

Accepted Answer

A)  rate of return; level of risk for an individual security 
B)  rate of inflation; rate of return for an individual security 
C)  risk level of a stock; market rate of return 
D)  market rate of return; security's rate of return 
A)  rate of return; level of risk for an individual security 
B)  rate of inflation; rate of return for an individual security 
C)  risk level of a stock; market rate of return 
D)  market rate of return; security's rate of return

Question 8

Dr. Zweibel's portfolio consists of four stocks: AZMN, 35%, beta 2.4; MKR, 20%, beta 1.6; ABDE, 25%, beta 1.8; and SBUK, 20%, beta 2.1. Compute Dr. Z's portfolio beta. Does he seem to be a conservative or aggressive investor?

Accepted Answer

Portfolio beta = (.35 × 2.4) + (.20 × 1.

Question 9

The best stock to own when the stock market is at a peak and is expected to decline in value is one with a beta of

Accepted Answer

A)  +1.5. 
B)  +1.0. 
C)  -1.0. 
D)  -0.5. 
A)  +1.5. 
B)  +1.0. 
C)  -1.0. 
D)  -0.5.

Question 10

The efficient frontier

Accepted Answer

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

Question 11

A measure of systematic risk is

Accepted Answer

A)  standard deviation. 
B)  correlation coefficient. 
C)  beta. 
D)  variance. 
A)  standard deviation. 
B)  correlation coefficient. 
C)  beta. 
D)  variance.

Question 12

How can individuals who manage their own portfolios reconcile some of the most useful aspects of traditional portfolio management and modern portfolio theory?

Accepted Answer

Students should include these key points

When the stock market has bottomed out and is beginning to recover, the best portfolio to own is the one with a beta of

A portfolio with a beta of 1.26

U. S. based companies such as Coca Cola and Caterpillar have no exchange rate risk.

Traditional portfolio management

The tendency of professional fund managers to invest heavily in the same stocks is known as the traditional approach.

Lauren has the following portfolio of assets. Proportion of Asset Portfolio Beta A 20\% 1.60 B 35\% 1.05 C 45\% 0.85 What is the beta of Lauren's portfolio?

Beta is the slope of the best fit line for the points with coordinates representing the__ and the_ for each one of several years.

Dr. Zweibel's portfolio consists of four stocks: AZMN, 35%, beta 2.4; MKR, 20%, beta 1.6; ABDE, 25%, beta 1.8; and SBUK, 20%, beta 2.1. Compute Dr. Z's portfolio beta. Does he seem to be a conservative or aggressive investor?

The best stock to own when the stock market is at a peak and is expected to decline in value is one with a beta of

The efficient frontier

A measure of systematic risk is

How can individuals who manage their own portfolios reconcile some of the most useful aspects of traditional portfolio management and modern portfolio theory?

The Investment Environment

Securities Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency and Behavioral Finance

Fixed-Income Securities

Bond Valuation

Mutual Funds and Exchange-Traded Funds

Managing Your Own Portfolio

Options: Puts and Calls

Futures Markets and Securities

Filters

Exam 5: Modern Portfolio Concepts

When the stock market has bottomed out and is beginning to recover, the best portfolio to own is the one with a beta of

A portfolio with a beta of 1.26

U. S. based companies such as Coca Cola and Caterpillar have no exchange rate risk.

Traditional portfolio management

The tendency of professional fund managers to invest heavily in the same stocks is known as the traditional approach.

Lauren has the following portfolio of assets. Proportion of Asset Portfolio Beta A 20\% 1.60 B 35\% 1.05 C 45\% 0.85 What is the beta of Lauren's portfolio?

Beta is the slope of the best fit line for the points with coordinates representing the______ and the_____ for each one of several years.

Dr. Zweibel's portfolio consists of four stocks: AZMN, 35%, beta 2.4; MKR, 20%, beta 1.6; ABDE, 25%, beta 1.8; and SBUK, 20%, beta 2.1. Compute Dr. Z's portfolio beta. Does he seem to be a conservative or aggressive investor?

The best stock to own when the stock market is at a peak and is expected to decline in value is one with a beta of

The efficient frontier

A measure of systematic risk is

How can individuals who manage their own portfolios reconcile some of the most useful aspects of traditional portfolio management and modern portfolio theory?

The Investment Environment

Securities Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency and Behavioral Finance

Fixed-Income Securities

Bond Valuation

Mutual Funds and Exchange-Traded Funds

Managing Your Own Portfolio

Options: Puts and Calls

Futures Markets and Securities

Filters

Beta is the slope of the best fit line for the points with coordinates representing the__ and the_ for each one of several years.