Exam 13: Managing Your Own Portfolios

Allison's portfolio has an expected return of 14% and a beta of 1.37.Brianna's portfolio has an expected rate of return of 11% and a beta of 1.The risk-free rate is 3%.According to the Treynor measure,

Late in the calendar year, Jessica must choose between selling stock that was purchased 2 years ago for $10,000 and has fallen to $7,000 or a different stock that was purchased 1 year ago for $5,000 and has risen to $7,000.If the investor has no other capital gains, which stock should she sell?

An investor in the 25% marginal tax bracket purchased a bond for $983, received $85 in interest, and then sold the bond for $955 after holding it for six months.The tax rate for capital gains with holding periods in excess of one year is 15%.What are the pre-tax and post-tax holding period returns?

The general theory of dollar cost averaging is

Asset allocation should focus on

A stock has a total return of 16.4%, a standard deviation of 14.5% and a beta of 1.63.The market rate of return is 12.4%, while the market's Treynor measure is 6.3.What is the value of the Treynor measure of this portfolio?

When using a constant dollar plan?

The Dow Jones Industrial Average (DJIA)includes 500 of the largest companies traded on U.S.exchanges.

Phil has a portfolio with a 13.2% total return.The beta of the portfolio is 1.48 and the standard deviation is 13%.Currently, the risk-free rate of return is 4% and the overall market has a total return of 11%.What is the value of Treynor's measure for Phil's portfolio?

An moderate asset allocation alternative might include I.bonds. II.common stocks. III.foreign securities. IV.options and commodities futures.

The primary risk in using a GTC limit sell order rather than a market order is that

The formula plan that requires maintaining a target dollar investment in the speculative portion of an investor's portfolio is the

Which of the following are reasons why a person may want to warehouse liquidity? I.protect against total loss II.ability to exploit future opportunities III.capitalize on the high rates of return available on cash IV.protect against the need to disturb the existing portfolio

The formula plan which requires the greatest management attention and is also the most aggressive is called the ________ plan.

Sharpe measures total risk while Treynor and Jensen measure only systematic risk.

Which of the following statements about Jensen's measure are correct? I.Through its use of the capital asset pricing model, Jensen's measure automatically adjusts for market return. II.In general, the higher the Jensen's measure, the better a portfolio has performed. III.Jensen's measure is referred to as alpha. IV.A positive Jensen's measure indicates an investment has underperformed the market on a risk-adjusted basis.

To form an assessment of the future performance of investments, investors should monitor

If a constant-dollar plan portfolio is profitable over the long run, the ________ in value over time.

Explain the use of limit orders and stop-loss orders in rebalancing an investor's stock portfolio.What are the principal risks in using these orders?

A stop loss order may not protect an investor's profits if