Question 1

An asset with a Treynor ratio greater than the Treynor ratio of the market will have a:

Accepted Answer

A)  positive Jensen's alpha. 
B)  negative Jensen's alpha. 
C)  Sharpe ratio greater than the Sharpe ratio of the market. 
D)  Sharpe ratio les than the Sharpe ratio of the market. 
E)  Insufficient information. 
A)  positive Jensen's alpha. 
B)  negative Jensen's alpha. 
C)  Sharpe ratio greater than the Sharpe ratio of the market. 
D)  Sharpe ratio les than the Sharpe ratio of the market. 
E)  Insufficient information.

Question 2

Suppose you invest equally in Portfolio A and Portfolio C. What is the Treynor ratio for the combined portfolio?

Accepted Answer

A)  0.083 
B)  0.080 
C)  0.086 
D)  0.089 
A)  0.083 
B)  0.080 
C)  0.086 
D)  0.089

Question 3

Suppose you invest equally in Portfolio A and Portfolio C. What is Jensen's alpha for the combined portfolio?

Accepted Answer

A)  0.40% 
B)  0.50% 
C)  0.35% 
D)  0.20% 
A)  0.40% 
B)  0.50% 
C)  0.35% 
D)  0.20%

Question 4

Which one of the following is computed by dividing a portfolio's risk premium by the portfolio beta?

Accepted Answer

A)  The Treynor ratio 
B)  The raw return 
C)  Jensen's alpha 
D)  The Sharpe ratio 
E)  The Jensen-Treynor alpha 
A)  The Treynor ratio 
B)  The raw return 
C)  Jensen's alpha 
D)  The Sharpe ratio 
E)  The Jensen-Treynor alpha

Question 5

High Mountain Homes has an expected annual return of 16.1 percent and a standard deviation of 22.3 percent. What is the smallest expected loss over the next month given a probability of 2.5 percent?

Accepted Answer

A)  -6.64 percent 
B)  -8.67 percent 
C)  -11.28 percent 
D)  -12.12 percent 
E)  -15.13 percent 
A)  -6.64 percent 
B)  -8.67 percent 
C)  -11.28 percent 
D)  -12.12 percent 
E)  -15.13 percent

Question 6

__________ is an attempt by the manager to outperform, on a risk-adjusted basis, a benchmark portfolio.

Accepted Answer

A)  Active portfolio management 
B)  Passive portfolio management 
C)  Hybrid portfolio management 
D)  Structured portfolio management 
E)  Cyclical portfolio management 
A)  Active portfolio management 
B)  Passive portfolio management 
C)  Hybrid portfolio management 
D)  Structured portfolio management 
E)  Cyclical portfolio management

Question 7

A portfolio has an average return of 14 percent, a standard deviation of 27 percent, and a beta of 1.15. The risk-free rate is 4.5 percent, and the expected return of the market is 12 percent. What is the Treynor ratio for the portfolio?

Accepted Answer

A)  0.0741 
B)  0.0943 
C)  0.0782 
D)  0.0918 
E)  0.0826 
A)  0.0741 
B)  0.0943 
C)  0.0782 
D)  0.0918 
E)  0.0826

Question 8

When __________ of an asset is better than the comparable market measure, ___________ is also better than the market.

Accepted Answer

A)  the Sharpe ratio; the Treynor ratio 
B)  Jensen's alpha; the Sharpe ratio 
C)  the raw return; Jensen's alpha 
D)  Jensen's alpha; the Treynor ratio 
E)  the Treynor ratio; the raw return 
A)  the Sharpe ratio; the Treynor ratio 
B)  Jensen's alpha; the Sharpe ratio 
C)  the raw return; Jensen's alpha 
D)  Jensen's alpha; the Treynor ratio 
E)  the Treynor ratio; the raw return

Question 9

Which of the following performance measures is most closely related to the efficient frontier?

Accepted Answer

A)  Treynor ratio. 
B)  Raw return. 
C)  Jensen-Treynor alpha. 
D)  Jensen's alpha. 
E)  Sharpe ratio. 
A)  Treynor ratio. 
B)  Raw return. 
C)  Jensen-Treynor alpha. 
D)  Jensen's alpha. 
E)  Sharpe ratio.

Question 10

In the normal distribution, the z-statistic value for a one tailed probability of 95 percent is __________.

Accepted Answer

A)  1.215 
B)  1.645 
C)  1.960 
D)  2.326 
E)  2.415 
A)  1.215 
B)  1.645 
C)  1.960 
D)  2.326 
E)  2.415

Question 11

What is the Sharpe ratio of Portfolio A?
Refer: To: 13-72

Accepted Answer

A)  0.363 
B)  0.431 
C)  0.409 
D)  0.400 
E)  0.389 
A)  0.363 
B)  0.431 
C)  0.409 
D)  0.400 
E)  0.389

Question 12

Which of the following performance measures is best used to analyze a portfolio for possible inclusion in a master portfolio?
I. Treynor ratio
II. Sharpe ratio
III. Jensen's alpha

Accepted Answer

A)  III only 
B)  I and III only 
C)  II and III only 
D)  I only 
E)  I, II, and III 
A)  III only 
B)  I and III only 
C)  II and III only 
D)  I only 
E)  I, II, and III

Question 13

A stock has an annual standard deviation of 64 percent. What is the standard deviation of the stock for two years?

Accepted Answer

A)  108.63% 
B)  128.00% 
C)  96.01% 
D)  100.34% 
E)  90.51% 
A)  108.63% 
B)  128.00% 
C)  96.01% 
D)  100.34% 
E)  90.51%

Question 14

A portfolio with an expected return of 12 percent has an annual standard deviation of 21 percent. What is the smallest expected loss over the next year with a probability of 1 percent?

Accepted Answer

A)  -39.27% 
B)  -42.86% 
C)  -48.24% 
D)  -36.85% 
E)  -45.16% 
A)  -39.27% 
B)  -42.86% 
C)  -48.24% 
D)  -36.85% 
E)  -45.16%

Question 15

The Sharpe Ratio is considered to be a good measure for well diversified portfolios because:

Accepted Answer

A)  The most of the total risk in the portfolio is systemic risk 
B)  The beta estimate is unambiguous. 
C)  It used by mutual fund managers. 
D)  Unsystemic risk is of little worry in correctly diversified portfolios. 
E)  Well diversified portfolios have a high R-Squared correlation. 
A)  The most of the total risk in the portfolio is systemic risk 
B)  The beta estimate is unambiguous. 
C)  It used by mutual fund managers. 
D)  Unsystemic risk is of little worry in correctly diversified portfolios. 
E)  Well diversified portfolios have a high R-Squared correlation.

Question 16

Which of the following performance measures is zero for the market?
I. Treynor ratio
II. Sharpe ratio
III. Jensen's alpha

Accepted Answer

A)  II only 
B)  I and III only 
C)  I and II only 
D)  III only 
E)  I, II, and III 
A)  II only 
B)  I and III only 
C)  I and II only 
D)  III only 
E)  I, II, and III

Question 17

A __________ portfolio has the highest reward-to-risk ratio over any possible combination of the investment opportunity set.

Accepted Answer

A)  Jensen-optimal 
B)  Sharpe-optimal 
C)  Treynor-optimal 
D)  Credit-optimal 
E)  Default-optimal 
A)  Jensen-optimal 
B)  Sharpe-optimal 
C)  Treynor-optimal 
D)  Credit-optimal 
E)  Default-optimal

Question 18

A portfolio's return above or below the expected return given the asset's systematic risk is:

Accepted Answer

A)  the Treynor ratio. 
B)  the raw return. 
C)  the Jensen-Treynor alpha. 
D)  the Jensen's alpha. 
E)  the Sharpe ratio. 
A)  the Treynor ratio. 
B)  the raw return. 
C)  the Jensen-Treynor alpha. 
D)  the Jensen's alpha. 
E)  the Sharpe ratio.

Question 19

What is Jensen's alpha for Portfolio C?
Refer: To: 13-72

Accepted Answer

A)  0.40% 
B)  0.20% 
C)  0.35% 
D)  0.30% 
E)  0.25% 
A)  0.40% 
B)  0.20% 
C)  0.35% 
D)  0.30% 
E)  0.25%

Question 20

Floyd Corp. stock has an annual standard deviation of 37 percent and an expected return of 12 percent. What is the smallest expected loss over the next month with a probability of 2.5 percent? Note: The corresponding "Z" value is 1, 96.

Accepted Answer

A)  -19.93% 
B)  -21.08% 
C)  -18.35% 
D)  -25.43% 
E)  -23.67% 
A)  -19.93% 
B)  -21.08% 
C)  -18.35% 
D)  -25.43% 
E)  -23.67%

An asset with a Treynor ratio greater than the Treynor ratio of the market will have a:

Suppose you invest equally in Portfolio A and Portfolio C. What is the Treynor ratio for the combined portfolio?

Suppose you invest equally in Portfolio A and Portfolio C. What is Jensen's alpha for the combined portfolio?

Which one of the following is computed by dividing a portfolio's risk premium by the portfolio beta?

High Mountain Homes has an expected annual return of 16.1 percent and a standard deviation of 22.3 percent. What is the smallest expected loss over the next month given a probability of 2.5 percent?

__________ is an attempt by the manager to outperform, on a risk-adjusted basis, a benchmark portfolio.

A portfolio has an average return of 14 percent, a standard deviation of 27 percent, and a beta of 1.15. The risk-free rate is 4.5 percent, and the expected return of the market is 12 percent. What is the Treynor ratio for the portfolio?

When of an asset is better than the comparable market measure, _ is also better than the market.

Which of the following performance measures is most closely related to the efficient frontier?

In the normal distribution, the z-statistic value for a one tailed probability of 95 percent is __________.

What is the Sharpe ratio of Portfolio A? Refer: To: 13-72

Which of the following performance measures is best used to analyze a portfolio for possible inclusion in a master portfolio? I. Treynor ratio II. Sharpe ratio III. Jensen's alpha

A stock has an annual standard deviation of 64 percent. What is the standard deviation of the stock for two years?

A portfolio with an expected return of 12 percent has an annual standard deviation of 21 percent. What is the smallest expected loss over the next year with a probability of 1 percent?

The Sharpe Ratio is considered to be a good measure for well diversified portfolios because:

Which of the following performance measures is zero for the market? I. Treynor ratio II. Sharpe ratio III. Jensen's alpha

A __________ portfolio has the highest reward-to-risk ratio over any possible combination of the investment opportunity set.

A portfolio's return above or below the expected return given the asset's systematic risk is:

What is Jensen's alpha for Portfolio C? Refer: To: 13-72

Floyd Corp. stock has an annual standard deviation of 37 percent and an expected return of 12 percent. What is the smallest expected loss over the next month with a probability of 2.5 percent? Note: The corresponding "Z" value is 1, 96.

A Brief History of Risk and Return

Diversification and Risky Asset Allocation

The Investment Process

Overview of Security Types

Mutual Funds

The Stock Market

Common Stock Valuation

Stock Price Behaviour and Market Efficiency

Behavioural Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Return, Risk and Security Management

Options

Option Valuation

Futures Contracts

Projecting Cash Flow and Earnings

Corporate Bonds

Government Bonds and Mortgaged-Backed Securities

International Portfolio Investment

Filters

Exam 13: Performance Evaluation and Risk Management

An asset with a Treynor ratio greater than the Treynor ratio of the market will have a:

Suppose you invest equally in Portfolio A and Portfolio C. What is the Treynor ratio for the combined portfolio?

Suppose you invest equally in Portfolio A and Portfolio C. What is Jensen's alpha for the combined portfolio?

Which one of the following is computed by dividing a portfolio's risk premium by the portfolio beta?

High Mountain Homes has an expected annual return of 16.1 percent and a standard deviation of 22.3 percent. What is the smallest expected loss over the next month given a probability of 2.5 percent?

__________ is an attempt by the manager to outperform, on a risk-adjusted basis, a benchmark portfolio.

A portfolio has an average return of 14 percent, a standard deviation of 27 percent, and a beta of 1.15. The risk-free rate is 4.5 percent, and the expected return of the market is 12 percent. What is the Treynor ratio for the portfolio?

When __________ of an asset is better than the comparable market measure, ___________ is also better than the market.

Which of the following performance measures is most closely related to the efficient frontier?

In the normal distribution, the z-statistic value for a one tailed probability of 95 percent is __________.

What is the Sharpe ratio of Portfolio A? Refer: To: 13-72

Which of the following performance measures is best used to analyze a portfolio for possible inclusion in a master portfolio? I. Treynor ratio II. Sharpe ratio III. Jensen's alpha

A stock has an annual standard deviation of 64 percent. What is the standard deviation of the stock for two years?

A portfolio with an expected return of 12 percent has an annual standard deviation of 21 percent. What is the smallest expected loss over the next year with a probability of 1 percent?

The Sharpe Ratio is considered to be a good measure for well diversified portfolios because:

Which of the following performance measures is zero for the market? I. Treynor ratio II. Sharpe ratio III. Jensen's alpha

A __________ portfolio has the highest reward-to-risk ratio over any possible combination of the investment opportunity set.

A portfolio's return above or below the expected return given the asset's systematic risk is:

What is Jensen's alpha for Portfolio C? Refer: To: 13-72

Floyd Corp. stock has an annual standard deviation of 37 percent and an expected return of 12 percent. What is the smallest expected loss over the next month with a probability of 2.5 percent? Note: The corresponding "Z" value is 1, 96.

A Brief History of Risk and Return

Diversification and Risky Asset Allocation

The Investment Process

Overview of Security Types

Mutual Funds

The Stock Market

Common Stock Valuation

Stock Price Behaviour and Market Efficiency

Behavioural Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Return, Risk and Security Management

Options

Option Valuation

Futures Contracts

Projecting Cash Flow and Earnings

Corporate Bonds

Government Bonds and Mortgaged-Backed Securities

International Portfolio Investment

Filters

When of an asset is better than the comparable market measure, _ is also better than the market.