Question 1

A portfolio has a standard deviation of 15.8 percent and an average return of 14.2 percent. What loss is associated with a 2.5 percent probability?

Accepted Answer

A)  -12.03 percent 
B)  -14.87 percent 
C)  -16.77 percent 
D)  -17.38 percent 
E)  -19.36 percent 
A)  -12.03 percent 
B)  -14.87 percent 
C)  -16.77 percent 
D)  -17.38 percent 
E)  -19.36 percent

Question 2

Which one of the following assesses the ability of a money manager to balance high returns with an acceptable level of risk?

Accepted Answer

A)  probability analysis 
B)  raw return ratio 
C)  risk assessment 
D)  performance evaluation 
E)  market analysis 
A)  probability analysis 
B)  raw return ratio 
C)  risk assessment 
D)  performance evaluation 
E)  market analysis

Question 3

The U.S. Treasury bill is yielding 2.8 percent and the market has an expected return of 11.6 percent. What is the Treynor ratio of a correctly-valued portfolio that has a beta of .92, and a standard deviation of 12.2 percent?

Accepted Answer

A)  .074 
B)  .088 
C)  .102 
D)  .619 
E)  .628 
A)  .074 
B)  .088 
C)  .102 
D)  .619 
E)  .628

Question 4

Your portfolio has a standard deviation of 11.7 percent. What is the two-year standard deviation?

Accepted Answer

A)  14.87 percent 
B)  15.80 percent 
C)  16.55 percent 
D)  23.40 percent 
E)  24.15 percent 
A)  14.87 percent 
B)  15.80 percent 
C)  16.55 percent 
D)  23.40 percent 
E)  24.15 percent

Question 5

You are comparing three assets which have differing Treynor ratios. Given this, which one of the following must be true?

Accepted Answer

A)  The assets may all be correctly priced if they have differing betas. 
B)  The assets have differing rates of return. 
C)  The assets have differing levels of market risk but equal amounts of total risk. 
D)  The assets are all mispriced according to CAPM. 
E)  The preferred investment is the asset with the highest Treynor ratio. 
A)  The assets may all be correctly priced if they have differing betas. 
B)  The assets have differing rates of return. 
C)  The assets have differing levels of market risk but equal amounts of total risk. 
D)  The assets are all mispriced according to CAPM. 
E)  The preferred investment is the asset with the highest Treynor ratio.

Question 6

What is Jensen's alpha of a portfolio comprised of 30 percent portfolio A and 70 percent of portfolio B?   The risk-free rate is 3.1 percent and the market risk premium is 6.8 percent.

Accepted Answer

A)  -1.25 percent 
B)  0.47 percent 
C)  1.08 percent 
D)  1.46 percent 
E)  1.85 percent 
A)  -1.25 percent 
B)  0.47 percent 
C)  1.08 percent 
D)  1.46 percent 
E)  1.85 percent

Question 7

Lester has a portfolio with an average return of 12.8 percent and a standard deviation of 9.1 percent. He has a one percent probability of losing _____ percent or more in any given year.

Accepted Answer

A)  33.97 
B)  38.87 
C)  20.67 
D)  5.04 
E)  8.37 
A)  33.97 
B)  38.87 
C)  20.67 
D)  5.04 
E)  8.37

Question 8

Which one of the following Value-at-Risk measures would be most appropriate for a portfolio designed for a very risk-adverse investor?

Accepted Answer

A)  Prob (Rp $\le$ - .20) = 100% 
B)  Prob (Rp $\le$ - .15) = 50% 
C)  Prob (Rp $\le$ - .10) = 25% 
D)  Prob (Rp $\le$ - .10) = 10% 
E)  Prob (Rp $\le$ - .05) = 1% 
A)  Prob (Rp $\le$ - .20) = 100% 
B)  Prob (Rp $\le$ - .15) = 50% 
C)  Prob (Rp $\le$ - .10) = 25% 
D)  Prob (Rp $\le$ - .10) = 10% 
E)  Prob (Rp $\le$ - .05) = 1%

Question 9

The U.S. Treasury bill is yielding 1.85 percent and the market has an expected return of 7.48 percent. What is the Treynor ratio of a correctly-valued portfolio that has a beta of 1.33 and a variance of .0045?

Accepted Answer

A)  .056 
B)  .064 
C)  .069 
D)  .082 
E)  .087 
A)  .056 
B)  .064 
C)  .069 
D)  .082 
E)  .087

Question 10

A fund has an alpha of 0.73 percent and a tracking error of 5.4 percent. What is the fund's information ratio?

Accepted Answer

A)  0.112 
B)  0.135 
C)  0.166 
D)  0.208 
E)  0.229 
A)  0.112 
B)  0.135 
C)  0.166 
D)  0.208 
E)  0.229

Question 11

Angie owns a portfolio which has an expected annual return of 14.55 percent. What is the two-year expected return on her portfolio?

Accepted Answer

A)  13.80 percent 
B)  19.52 percent 
C)  23.40 percent 
D)  27.60 percent 
E)  29.10 percent 
A)  13.80 percent 
B)  19.52 percent 
C)  23.40 percent 
D)  27.60 percent 
E)  29.10 percent

Question 12

Which one of the following measures returns in relation to total risk?

Accepted Answer

A)  Treynor ratio 
B)  Sharpe ratio 
C)  Jensen's alpha 
D)  Value at Risk 
E)  beta 
A)  Treynor ratio 
B)  Sharpe ratio 
C)  Jensen's alpha 
D)  Value at Risk 
E)  beta

Question 13

A portfolio consists of the following two funds.   What is the expected return on fund A?

Accepted Answer

A)  12.0 percent 
B)  13.3 percent 
C)  13.7 percent 
D)  14.5 percent 
E)  15.7 percent 
A)  12.0 percent 
B)  13.3 percent 
C)  13.7 percent 
D)  14.5 percent 
E)  15.7 percent

Question 14

What is the Treynor ratio of a portfolio comprised of 50 percent portfolio A and 50 percent portfolio B?   The risk-free rate is 3.12 percent and the market risk premium is 8.5 percent.

Accepted Answer

A)  .041 
B)  .058 
C)  .070 
D)  .114 
E)  .136 
A)  .041 
B)  .058 
C)  .070 
D)  .114 
E)  .136

Question 15

A portfolio has a beta of 1.23 and a standard deviation of 11.6 percent. What is the Sharpe ratio if the market return is 12.4 percent and the market risk premium is 7.9 percent?

Accepted Answer

A)  .07 
B)  .11 
C)  .65 
D)  .84 
E)  .90 
A)  .07 
B)  .11 
C)  .65 
D)  .84 
E)  .90

Question 16

A portfolio has an expected annual return of 15.7 percent and a standard deviation of 19.6 percent. What is the smallest expected loss over the next calendar quarter given a probability of 1 percent?

Accepted Answer

A)  -15.11 percent 
B)  -16.23 percent 
C)  -16.49 percent 
D)  -18.08 percent 
E)  -18.87 percent 
A)  -15.11 percent 
B)  -16.23 percent 
C)  -16.49 percent 
D)  -18.08 percent 
E)  -18.87 percent

Question 17

The Sharpe ratio is best used to evaluate which one of the following?

Accepted Answer

A)  corporate bonds 
B)  government bonds 
C)  Treasury bills 
D)  individual stocks 
E)  diversified portfolios 
A)  corporate bonds 
B)  government bonds 
C)  Treasury bills 
D)  individual stocks 
E)  diversified portfolios

Question 18

Which of the following measures are dependent upon the accuracy of a security's beta?
I. Sharpe ratio
II. Treynor ratio
III. Jensen's alpha

Accepted Answer

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

Question 19

Your portfolio has a beta of 1.24, a standard deviation of 14.3 percent, and an expected return of 12.5 percent. The market return is 11.3 percent and the risk-free rate is 3.1 percent. What is the Treynor ratio?

Accepted Answer

A)  .015 
B)  .076 
C)  .109 
D)  .482 
E)  .510 
A)  .015 
B)  .076 
C)  .109 
D)  .482 
E)  .510

Question 20

A portfolio has an average return of 13.3 percent, a standard deviation of 14.7 percent, and a beta of 1.35. The risk-free rate is 2.8 percent. What is the Sharpe ratio?

Accepted Answer

A)  .49 
B)  .52 
C)  .63 
D)  .71 
E)  .75 
A)  .49 
B)  .52 
C)  .63 
D)  .71 
E)  .75

A portfolio has a standard deviation of 15.8 percent and an average return of 14.2 percent. What loss is associated with a 2.5 percent probability?

Which one of the following assesses the ability of a money manager to balance high returns with an acceptable level of risk?

The U.S. Treasury bill is yielding 2.8 percent and the market has an expected return of 11.6 percent. What is the Treynor ratio of a correctly-valued portfolio that has a beta of .92, and a standard deviation of 12.2 percent?

Your portfolio has a standard deviation of 11.7 percent. What is the two-year standard deviation?

You are comparing three assets which have differing Treynor ratios. Given this, which one of the following must be true?

What is Jensen's alpha of a portfolio comprised of 30 percent portfolio A and 70 percent of portfolio B? The risk-free rate is 3.1 percent and the market risk premium is 6.8 percent.

Lester has a portfolio with an average return of 12.8 percent and a standard deviation of 9.1 percent. He has a one percent probability of losing _____ percent or more in any given year.

Which one of the following Value-at-Risk measures would be most appropriate for a portfolio designed for a very risk-adverse investor?

The U.S. Treasury bill is yielding 1.85 percent and the market has an expected return of 7.48 percent. What is the Treynor ratio of a correctly-valued portfolio that has a beta of 1.33 and a variance of .0045?

A fund has an alpha of 0.73 percent and a tracking error of 5.4 percent. What is the fund's information ratio?

Angie owns a portfolio which has an expected annual return of 14.55 percent. What is the two-year expected return on her portfolio?

Which one of the following measures returns in relation to total risk?

A portfolio consists of the following two funds. What is the expected return on fund A?

What is the Treynor ratio of a portfolio comprised of 50 percent portfolio A and 50 percent portfolio B? The risk-free rate is 3.12 percent and the market risk premium is 8.5 percent.

A portfolio has a beta of 1.23 and a standard deviation of 11.6 percent. What is the Sharpe ratio if the market return is 12.4 percent and the market risk premium is 7.9 percent?

A portfolio has an expected annual return of 15.7 percent and a standard deviation of 19.6 percent. What is the smallest expected loss over the next calendar quarter given a probability of 1 percent?

The Sharpe ratio is best used to evaluate which one of the following?

Which of the following measures are dependent upon the accuracy of a security's beta? I. Sharpe ratio II. Treynor ratio III. Jensen's alpha

Your portfolio has a beta of 1.24, a standard deviation of 14.3 percent, and an expected return of 12.5 percent. The market return is 11.3 percent and the risk-free rate is 3.1 percent. What is the Treynor ratio?

A portfolio has an average return of 13.3 percent, a standard deviation of 14.7 percent, and a beta of 1.35. The risk-free rate is 2.8 percent. What is the Sharpe ratio?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate Bonds

Government Bonds

Mortgage-Backed Securities

Filters

Exam 13: Performance Evaluation and Risk Management

A portfolio has a standard deviation of 15.8 percent and an average return of 14.2 percent. What loss is associated with a 2.5 percent probability?

Which one of the following assesses the ability of a money manager to balance high returns with an acceptable level of risk?

The U.S. Treasury bill is yielding 2.8 percent and the market has an expected return of 11.6 percent. What is the Treynor ratio of a correctly-valued portfolio that has a beta of .92, and a standard deviation of 12.2 percent?

Your portfolio has a standard deviation of 11.7 percent. What is the two-year standard deviation?

You are comparing three assets which have differing Treynor ratios. Given this, which one of the following must be true?

What is Jensen's alpha of a portfolio comprised of 30 percent portfolio A and 70 percent of portfolio B? The risk-free rate is 3.1 percent and the market risk premium is 6.8 percent.

Lester has a portfolio with an average return of 12.8 percent and a standard deviation of 9.1 percent. He has a one percent probability of losing _____ percent or more in any given year.

Which one of the following Value-at-Risk measures would be most appropriate for a portfolio designed for a very risk-adverse investor?

The U.S. Treasury bill is yielding 1.85 percent and the market has an expected return of 7.48 percent. What is the Treynor ratio of a correctly-valued portfolio that has a beta of 1.33 and a variance of .0045?

A fund has an alpha of 0.73 percent and a tracking error of 5.4 percent. What is the fund's information ratio?

Angie owns a portfolio which has an expected annual return of 14.55 percent. What is the two-year expected return on her portfolio?

Which one of the following measures returns in relation to total risk?

A portfolio consists of the following two funds. What is the expected return on fund A?

What is the Treynor ratio of a portfolio comprised of 50 percent portfolio A and 50 percent portfolio B? The risk-free rate is 3.12 percent and the market risk premium is 8.5 percent.

A portfolio has a beta of 1.23 and a standard deviation of 11.6 percent. What is the Sharpe ratio if the market return is 12.4 percent and the market risk premium is 7.9 percent?

A portfolio has an expected annual return of 15.7 percent and a standard deviation of 19.6 percent. What is the smallest expected loss over the next calendar quarter given a probability of 1 percent?

The Sharpe ratio is best used to evaluate which one of the following?

Which of the following measures are dependent upon the accuracy of a security's beta? I. Sharpe ratio II. Treynor ratio III. Jensen's alpha

Your portfolio has a beta of 1.24, a standard deviation of 14.3 percent, and an expected return of 12.5 percent. The market return is 11.3 percent and the risk-free rate is 3.1 percent. What is the Treynor ratio?

A portfolio has an average return of 13.3 percent, a standard deviation of 14.7 percent, and a beta of 1.35. The risk-free rate is 2.8 percent. What is the Sharpe ratio?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate Bonds

Government Bonds

Mortgage-Backed Securities

Filters