Question 1

Raw returns are not particularly useful when making investment decisions because they

Accepted Answer

A)  Are the expected returns only 
B)  Ignore inflation 
C)  Are adjusted for total risk rather than just systematic risk 
D)  Are based on a tentative beta 
E)  Ignore risk 
A)  Are the expected returns only 
B)  Ignore inflation 
C)  Are adjusted for total risk rather than just systematic risk 
D)  Are based on a tentative beta 
E)  Ignore risk

Question 2

With a monthly standard deviation of a portfolio, $\sigma$M., what is the annual standard deviation?

Accepted Answer

A)  $\sigma _ { \mathrm { M } } \times 12$ 
B)  $\sigma _ { M } \times \sqrt { 12 }$ 
C)  $\sqrt { \sigma _ { \mathrm { M } } }\times 12$ 
D)  $\sigma _ { \mathrm { M } } /\sqrt { 12 }$ 
E)  $\sqrt { 12 }   / \sigma _ { \mathrm { M } }$ 
A)  $\sigma _ { \mathrm { M } } \times 12$ 
B)  $\sigma _ { M } \times \sqrt { 12 }$ 
C)  $\sqrt { \sigma _ { \mathrm { M } } }\times 12$ 
D)  $\sigma _ { \mathrm { M } } /\sqrt { 12 }$ 
E)  $\sqrt { 12 }   / \sigma _ { \mathrm { M } }$

Question 3

A passive portfolio management strategy is appropriate when

Accepted Answer

A)  Capital market is inefficient 
B)  Investors have a unique investment philosophy 
C)  Investors have short investment horizons 
D)  Attempting to perform as well as the overall market on a risk-adjusted basis 
E)  All of the above 
A)  Capital market is inefficient 
B)  Investors have a unique investment philosophy 
C)  Investors have short investment horizons 
D)  Attempting to perform as well as the overall market on a risk-adjusted basis 
E)  All of the above

Question 4

A stock has an annual standard deviation of 64 percent. What is the standard deviation over a three-month period?

Accepted Answer

A)  27.35% 
B)  30.19% 
C)  32.00% 
D)  23.63% 
E)  20.18% 
A)  27.35% 
B)  30.19% 
C)  32.00% 
D)  23.63% 
E)  20.18%

Question 5

The assessment of the returns generated by a money manager relative to the level of risk taken is known as:

Accepted Answer

A)  market testing. 
B)  value-at-risk. 
C)  performance evaluation. 
D)  minimum variance evaluation. 
E)  risk management. 
A)  market testing. 
B)  value-at-risk. 
C)  performance evaluation. 
D)  minimum variance evaluation. 
E)  risk management.

Question 6

What is the smallest expected loss with a probability of 2.5 percent over the next two months for a portfolio with an annual expected return of 13 percent and a standard deviation of 28 percent?

Accepted Answer

A)  -24.07% 
B)  -20.24% 
C)  -28.91% 
D)  -26.32% 
E)  -22.86% 
A)  -24.07% 
B)  -20.24% 
C)  -28.91% 
D)  -26.32% 
E)  -22.86%

Question 7

A stock has a return of 16.9 percent, a standard deviation of 11.7 percent, and a beta of 1.57. The risk-free rate is 2.65 percent and the market risk premium is 8.45 percent. What is the Jensen-Treynor alpha of this stock?

Accepted Answer

A)  -1.37 percent 
B)  -1.09 percent 
C)  -0.48 percent 
D)  0.29 percent 
E)  0.63 percent 
A)  -1.37 percent 
B)  -1.09 percent 
C)  -0.48 percent 
D)  0.29 percent 
E)  0.63 percent

Question 8

Which of the following performance measures is zero for the risk-free asset?
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 9

An asset with a positive Treynor ratio will plot __________ the security market line.

Accepted Answer

A)  above 
B)  below 
C)  on 
D)  on or below 
E)  on or above 
A)  above 
B)  below 
C)  on 
D)  on or below 
E)  on or above

Question 10

A stock has a monthly standard deviation of 14.34 percent. What is the annual standard deviation?

Accepted Answer

A)  172.08% 
B)  61.26% 
C)  53.41% 
D)  49.68% 
E)  58.72% 
A)  172.08% 
B)  61.26% 
C)  53.41% 
D)  49.68% 
E)  58.72%

Question 11

An asset with a negative Jensen's alpha will plot __________ the security market line.

Accepted Answer

A)  above 
B)  below 
C)  on 
D)  on or below 
E)  on or above 
A)  above 
B)  below 
C)  on 
D)  on or below 
E)  on or above

Question 12

If you want to search for under-pricing assets, you should look for

Accepted Answer

A)  Low betas 
B)  High betas 
C)  Low alphas 
D)  High alphas 
E)  Low standard deviations 
A)  Low betas 
B)  High betas 
C)  Low alphas 
D)  High alphas 
E)  Low standard deviations

Question 13

Without a risk-free asset in the hypothetical portfolio, the M2 equals to

Accepted Answer

A)  +1. 
B)  -1. 
C)  Positive infinity. 
D)  Negative infinity. 
E)  0. 
A)  +1. 
B)  -1. 
C)  Positive infinity. 
D)  Negative infinity. 
E)  0.

Question 14

Jensen's alpha measures a security's raw return against the

Accepted Answer

A)  Sharpe-adjusted return 
B)  Market return 
C)  CAPM return 
D)  Real return 
E)  Treynor-adjusted return 
A)  Sharpe-adjusted return 
B)  Market return 
C)  CAPM return 
D)  Real return 
E)  Treynor-adjusted return

Question 15

What is the Sharpe ratio of Portfolio B?
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 16

Which portfolio(s) should you add to a master portfolio using the Treynor ratio?
Refer: To: 13-72

Accepted Answer

A)  A only 
B)  D only 
C)  A and B 
D)  A and C 
E)  B and D 
A)  A only 
B)  D only 
C)  A and B 
D)  A and C 
E)  B and D

Question 17

VaR is based on the.

Accepted Answer

A)  Beta 
B)  Normal distribution 
C)  Efficient frontier 
D)  Security market line 
E)  Treynor ratio 
A)  Beta 
B)  Normal distribution 
C)  Efficient frontier 
D)  Security market line 
E)  Treynor ratio

Question 18

Which portfolio(s) plot above the security market line?
Refer: To: 13-72

Accepted Answer

A)  A only 
B)  B only 
C)  C only 
D)  A and C only 
E)  B and D only 
A)  A only 
B)  B only 
C)  C only 
D)  A and C only 
E)  B and D only

Question 19

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

Accepted Answer

A)  0.431 
B)  0.363 
C)  0.420 
D)  0.389 
A)  0.431 
B)  0.363 
C)  0.420 
D)  0.389

Question 20

A stock has an annual standard deviation of 57 percent. What is the monthly standard deviation?

Accepted Answer

A)  16.45% 
B)  18.63% 
C)  12.18% 
D)  11.26% 
E)  10.19% 
A)  16.45% 
B)  18.63% 
C)  12.18% 
D)  11.26% 
E)  10.19%

Raw returns are not particularly useful when making investment decisions because they

With a monthly standard deviation of a portfolio, $\sigma$ _M., what is the annual standard deviation?

A passive portfolio management strategy is appropriate when

A stock has an annual standard deviation of 64 percent. What is the standard deviation over a three-month period?

The assessment of the returns generated by a money manager relative to the level of risk taken is known as:

What is the smallest expected loss with a probability of 2.5 percent over the next two months for a portfolio with an annual expected return of 13 percent and a standard deviation of 28 percent?

A stock has a return of 16.9 percent, a standard deviation of 11.7 percent, and a beta of 1.57. The risk-free rate is 2.65 percent and the market risk premium is 8.45 percent. What is the Jensen-Treynor alpha of this stock?

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

An asset with a positive Treynor ratio will plot __________ the security market line.

A stock has a monthly standard deviation of 14.34 percent. What is the annual standard deviation?

An asset with a negative Jensen's alpha will plot __________ the security market line.

If you want to search for under-pricing assets, you should look for

Without a risk-free asset in the hypothetical portfolio, the M² equals to

Jensen's alpha measures a security's raw return against the

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

Which portfolio(s) should you add to a master portfolio using the Treynor ratio? Refer: To: 13-72

VaR is based on the.

Which portfolio(s) plot above the security market line? Refer: To: 13-72

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

A stock has an annual standard deviation of 57 percent. What is the monthly standard deviation?

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

Raw returns are not particularly useful when making investment decisions because they

With a monthly standard deviation of a portfolio, σ\sigmaσ M., what is the annual standard deviation?

A passive portfolio management strategy is appropriate when

A stock has an annual standard deviation of 64 percent. What is the standard deviation over a three-month period?

The assessment of the returns generated by a money manager relative to the level of risk taken is known as:

What is the smallest expected loss with a probability of 2.5 percent over the next two months for a portfolio with an annual expected return of 13 percent and a standard deviation of 28 percent?

A stock has a return of 16.9 percent, a standard deviation of 11.7 percent, and a beta of 1.57. The risk-free rate is 2.65 percent and the market risk premium is 8.45 percent. What is the Jensen-Treynor alpha of this stock?

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

An asset with a positive Treynor ratio will plot __________ the security market line.

A stock has a monthly standard deviation of 14.34 percent. What is the annual standard deviation?

An asset with a negative Jensen's alpha will plot __________ the security market line.

If you want to search for under-pricing assets, you should look for

Without a risk-free asset in the hypothetical portfolio, the M2 equals to

Jensen's alpha measures a security's raw return against the

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

Which portfolio(s) should you add to a master portfolio using the Treynor ratio? Refer: To: 13-72

VaR is based on the.

Which portfolio(s) plot above the security market line? Refer: To: 13-72

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

A stock has an annual standard deviation of 57 percent. What is the monthly standard deviation?

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

With a monthly standard deviation of a portfolio, $\sigma$ _M., what is the annual standard deviation?

Without a risk-free asset in the hypothetical portfolio, the M² equals to