Question 1

Under the _____ approach,excess returns on a portfolio are compared to the total risk of the portfolio.

Accepted Answer

A) Sharpe 
B) Treynor 
C) Jensen 
D) More than one of the above 
A) Sharpe 
B) Treynor 
C) Jensen 
D) More than one of the above

Question 2

Asset allocation represents an attempt by individuals or portfolio managers to determine what

Accepted Answer

A) Percentage of assets should be distributed to beneficiaries 
B) Mutual funds are appropriate for investment based on risk and return 
C) Percent of funds under management should be invested in stocks,bonds,etc 
D) Brokerage houses best meet their needs 
A) Percentage of assets should be distributed to beneficiaries 
B) Mutual funds are appropriate for investment based on risk and return 
C) Percent of funds under management should be invested in stocks,bonds,etc 
D) Brokerage houses best meet their needs

Question 3

Buying a mutual fund is a good way to diversify.

Accepted Answer

A) True 
 B)False

Question 4

A return of 15 percent might actually be worse than a return of 10 percent.

Accepted Answer

A) In a bull market 
B) In a bear market 
C) On a risk adjusted basis 
D) More than one of the above 
A) In a bull market 
B) In a bear market 
C) On a risk adjusted basis 
D) More than one of the above

Question 5

Michael Jensen uses the security market line to evaluate excess returns on investments.

Accepted Answer

A) True 
 B)False

Question 6

According to numerous studies conducted by various professors,portfolio managers generally

Accepted Answer

A) Outperform the market on a risk adjusted basis 
B) Perform the same as the market 
C) Under-perform the market 
D) Greatly out perform the market on a risk adjusted basis 
A) Outperform the market on a risk adjusted basis 
B) Perform the same as the market 
C) Under-perform the market 
D) Greatly out perform the market on a risk adjusted basis

Question 7

If the portfolio return on a mutual fund is greater than the market return,but the Sharpe and Treynor measures are equal,then the fund manager's performance is

Accepted Answer

A) Superior 
B) Inferior 
C) Neither superior not inferior 
D) There is not enough information to tell 
A) Superior 
B) Inferior 
C) Neither superior not inferior 
D) There is not enough information to tell

Question 8

When the U.S.T-bill rate is 5.75 percent,the excess returns on a portfolio earning 14 percent would be 8.25 percent.

Accepted Answer

A) True 
 B)False

Question 9

The only difference between the Sharpe and Treynor approaches is that the Treynor approach evaluates excess returns based on

Accepted Answer

A) Total risk 
B) Unsystematic risk 
C) Systematic risk 
D) None of the above 
A) Total risk 
B) Unsystematic risk 
C) Systematic risk 
D) None of the above

Question 10

Over 20 year rolling periods,the worst performance by small company stocks was positive according to Ibbotson and Associates.

Accepted Answer

A) True 
 B)False

Question 11

To achieve effective diversification,a fund must have 80 to 100 different securities.

Accepted Answer

A) True 
 B)False

Question 12

Benchmark portfolios are used

Accepted Answer

A) To insure compliance with government regulations 
B) Enhance the return on portfolios 
C) Reduce risk through careful hedging strategies 
D) Measure and compare the performance of portfolio managers 
A) To insure compliance with government regulations 
B) Enhance the return on portfolios 
C) Reduce risk through careful hedging strategies 
D) Measure and compare the performance of portfolio managers

Question 13

Most funds' performance in terms of R2is poor.

Accepted Answer

A) True 
 B)False

Question 14

In general,the best portfolio managers are those who earn the highest returns.

Accepted Answer

A) True 
 B)False

Question 15

Under the Jensen approach,if the market rate of excess returns is 5.75 percent,a portfolio with beta of .9 should provide excess returns of

Accepted Answer

A) 5.175 percent 
B) 4.5 percent 
C) 5 percent 
D) There is not enough information to tell 
A) 5.175 percent 
B) 4.5 percent 
C) 5 percent 
D) There is not enough information to tell

Question 16

The best way to measure adherence to the objectives of money managers and the financial needs of investors is:

Accepted Answer

A) To calculate the total returns on the portfolios that they manage 
B) To evaluate the risk exposure that the fund manager has accepted 
C) To calculate the dividend income that the portfolio has achieved 
D) To calculate the capital gains that the portfolio has achieved 
A) To calculate the total returns on the portfolios that they manage 
B) To evaluate the risk exposure that the fund manager has accepted 
C) To calculate the dividend income that the portfolio has achieved 
D) To calculate the capital gains that the portfolio has achieved

Question 17

Using the Jensen approach,the adequacy of a portfolio manager's performance cannot be judged against the market line.

Accepted Answer

A) True 
 B)False

Question 18

Asset allocation is generally ________________ important then stock selection.

Accepted Answer

A) Less 
B) More 
C) Of equal 
D) None of the above are true 
A) Less 
B) More 
C) Of equal 
D) None of the above are true

Question 19

Using the Jensen approach to portfolio valuation rank the three portfolios.The market rate of return (Km)is 12 percent.

Accepted Answer

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Question 20

A positive alpha is an indication of:

Accepted Answer

A) Low risk 
B) High risk 
C) Superior performance 
D) Low diversification 
A) Low risk 
B) High risk 
C) Superior performance 
D) Low diversification

Exam 22: Measuring Risks and Returns of Portfolio Managers

Under the _____ approach,excess returns on a portfolio are compared to the total risk of the portfolio.

Asset allocation represents an attempt by individuals or portfolio managers to determine what

Buying a mutual fund is a good way to diversify.

A return of 15 percent might actually be worse than a return of 10 percent.

Michael Jensen uses the security market line to evaluate excess returns on investments.

According to numerous studies conducted by various professors,portfolio managers generally

If the portfolio return on a mutual fund is greater than the market return,but the Sharpe and Treynor measures are equal,then the fund manager's performance is

When the U.S.T-bill rate is 5.75 percent,the excess returns on a portfolio earning 14 percent would be 8.25 percent.

The only difference between the Sharpe and Treynor approaches is that the Treynor approach evaluates excess returns based on

Over 20 year rolling periods,the worst performance by small company stocks was positive according to Ibbotson and Associates.

To achieve effective diversification,a fund must have 80 to 100 different securities.

Benchmark portfolios are used

Most funds' performance in terms of R2is poor.

In general,the best portfolio managers are those who earn the highest returns.

Under the Jensen approach,if the market rate of excess returns is 5.75 percent,a portfolio with beta of .9 should provide excess returns of

The best way to measure adherence to the objectives of money managers and the financial needs of investors is:

Using the Jensen approach,the adequacy of a portfolio manager's performance cannot be judged against the market line.

Asset allocation is generally ________________ important then stock selection.

Using the Jensen approach to portfolio valuation rank the three portfolios.The market rate of return (Km)is 12 percent.

A positive alpha is an indication of:

The Investment Setting

Security Markets: Present and Future

Participating in the Market

Sources of Investment Information

Economic and Industry Analysis

Industry Analysis

Valuation of the Individual Firm

Financial Statement Analysis

A Basic View of Technical Analysis and Market Efficiency

Investment in Special Situations and Anomalies

Bond and Fixed Income Fundamentals

Principles of Bond Valuation and Investment

Duration and Reinvestment Concepts

Convertible Securities and Warrants

Put and Call Options

Commodities and Financial Futures

Stock Index Futures and Options

Mutual Funds

International Securities Markets

Investment in Real Assets

A Basic Look at Portfolio Management and Capital Market Theory

Sustainable Growth Model

a Black Scholes Option Pricing Model

A Comprehensive Analysis for Real Estate Investment Decisions

Unit Investment Trusts Uits

The Makeup of Institutional Investors

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