Question 1

Given the following weights and expected security returns, calculate the expected return for the portfolio.

Accepted Answer

A)  0.085 
B)  0.090 
C)  0.092 
D)  0.097 
E)  0.099 
A)  0.085 
B)  0.090 
C)  0.092 
D)  0.097 
E)  0.099

Question 2

For a two stock portfolio containing Stocks i and j, the correlation coefficient of returns (rij) is equal to the square root of the covariance (covij).

Accepted Answer

A) True 
 B)False

Question 3

Calculate the expected return for a three-asset portfolio with the following

Accepted Answer

A)  11.71 percent 
B)  11.12 percent 
C)  15.70 percent 
D)  14.25 percent 
E)  6.75 percent 
A)  11.71 percent 
B)  11.12 percent 
C)  15.70 percent 
D)  14.25 percent 
E)  6.75 percent

Question 4

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
  
-Refer to Exhibit 6.4. What is the expected return of a portfolio of two risky assets if the expected return E(Ri), standard deviation ( $\sigma$i), covariance (COVi,j), and asset weight (Wi) are as shown above?

Accepted Answer

A)  8.6% 
B)  8.1% 
C)  9.3% 
D)  10.2% 
E)  11.6% 
A)  8.6% 
B)  8.1% 
C)  9.3% 
D)  10.2% 
E)  11.6%

Question 5

When individuals evaluate their portfolios, they should evaluate

Accepted Answer

A)  all the U.S. and non-U.S. stocks. 
B)  all marketable securities. 
C)  all marketable securities and other liquid assets. 
D)  all assets. 
E)  all assets and liabilities. 
A)  all the U.S. and non-U.S. stocks. 
B)  all marketable securities. 
C)  all marketable securities and other liquid assets. 
D)  all assets. 
E)  all assets and liabilities.

Question 6

Given a portfolio of stocks, the envelope curve containing the set of best possible combinations is known as the

Accepted Answer

A)  efficient portfolio. 
B)  utility curve. 
C)  efficient frontier. 
D)  last frontier. 
E)  capital asset pricing model. 
A)  efficient portfolio. 
B)  utility curve. 
C)  efficient frontier. 
D)  last frontier. 
E)  capital asset pricing model.

Question 7

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
   ​
-Refer to Exhibit 6.7. What is the expected return of a portfolio of two risky assets if the expected return E(Ri), standard deviation ( $\sigma$i), covariance (COVi,j), and asset weight (Wi) are as shown above?

Accepted Answer

A)  5.8% 
B)  6.1% 
C)  6.9% 
D)  7.8% 
E)  8.9% 
A)  5.8% 
B)  6.1% 
C)  6.9% 
D)  7.8% 
E)  8.9%

Question 8

The expected return and standard deviation of a portfolio of risky assets is equal to the weighted average of the individual asset's expected returns and standard deviation.

Accepted Answer

A) True 
 B)False

Question 9

As the number of securities in a portfolio increases, the amount of systematic risk

Accepted Answer

A)  remains constant. 
B)  decreases. 
C)  increases. 
D)  changes. 
E)  resets to zero. 
A)  remains constant. 
B)  decreases. 
C)  increases. 
D)  changes. 
E)  resets to zero.

Question 10

Between 1980 and 1990, the standard deviation of the returns for the NIKKEI and the DJIA indexes were 0.19 and 0.06, respectively, and the covariance of these index returns was 0.0014. What was the correlation coefficient between the two market indicators?

Accepted Answer

A)  8.1428 
B)  0.0233 
C)  0.0073 
D)  0.2514 
E)  0.1228 
A)  8.1428 
B)  0.0233 
C)  0.0073 
D)  0.2514 
E)  0.1228

Question 11

The introduction of lending and borrowing severely limits the available risk/return opportunities.

Accepted Answer

A) True 
 B)False

Question 12

Between 1986 and 1996, the standard deviation of the returns for the NYSE and the DJIA indexes were 0.10 and 0.09, respectively, and the covariance of these index returns was 0.0009. What was the correlation coefficient between the two market indicators?

Accepted Answer

A)  .1000 
B)  .1100 
C)  .1258 
D)  .1322 
E)  .1164 
A)  .1000 
B)  .1100 
C)  .1258 
D)  .1322 
E)  .1164

Question 13

Semivariance, when applied to portfolio theory, is concerned with

Accepted Answer

A)  the square root of deviations from the mean. 
B)  all deviations below the mean. 
C)  all deviations above the mean. 
D)  all deviations. 
E)  the summation of the squared deviations from the mean. 
A)  the square root of deviations from the mean. 
B)  all deviations below the mean. 
C)  all deviations above the mean. 
D)  all deviations. 
E)  the summation of the squared deviations from the mean.

Question 14

Risk is defined as the uncertainty of future outcomes.

Accepted Answer

A) True 
 B)False

Question 15

The most important criteria when adding new investments to a portfolio is the

Accepted Answer

A)  expected return of the new investment. 
B)  standard deviation of the new investment. 
C)  correlation of the new investment with the portfolio. 
D)  selection of the risk-free asset. 
E)  variance of the risk-free asset. 
A)  expected return of the new investment. 
B)  standard deviation of the new investment. 
C)  correlation of the new investment with the portfolio. 
D)  selection of the risk-free asset. 
E)  variance of the risk-free asset.

Question 16

Investors choose a portfolio on the efficient frontier based on their utility functions that reflect their attitudes towards risk.

Accepted Answer

A) True 
 B)False

Question 17

If equal risk is added moving along the envelope curve containing the best possible combinations the return will

Accepted Answer

A)  decrease at an increasing rate. 
B)  decrease at a decreasing rate. 
C)  increase at an increasing rate. 
D)  increase at a decreasing rate. 
E)  remain constant. 
A)  decrease at an increasing rate. 
B)  decrease at a decreasing rate. 
C)  increase at an increasing rate. 
D)  increase at a decreasing rate. 
E)  remain constant.

Question 18

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks A and B have a correlation coefficient of -0.8. The stocks' expected returns and standard deviations are in the table below. A portfolio consisting of 40% of stock A and 60% of stock B is constructed.
  
-Refer to Exhibit 6.14. What is the expected return of the stock A and B portfolio?

Accepted Answer

A)  17.0% 
B)  17.5% 
C)  18.0% 
D)  18.5% 
E)  19.0% 
A)  17.0% 
B)  17.5% 
C)  18.0% 
D)  18.5% 
E)  19.0%

Question 19

Markowitz believes that any asset or portfolio of assets can be described by ____ parameter(s).

Accepted Answer

A)  one 
B)  two 
C)  three 
D)  four 
E)  five 
A)  one 
B)  two 
C)  three 
D)  four 
E)  five

Question 20

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
  
-Refer to Exhibit 6.11. Calculate the expected standard deviation of the two-stock portfolio.

Accepted Answer

A)  0.1367 
B)  0.1872 
C)  0.1169 
D)  0.20 
E)  0.3950 
A)  0.1367 
B)  0.1872 
C)  0.1169 
D)  0.20 
E)  0.3950

Given the following weights and expected security returns, calculate the expected return for the portfolio.

For a two stock portfolio containing Stocks i and j, the correlation coefficient of returns (r_ij) is equal to the square root of the covariance (cov_ij).

Calculate the expected return for a three-asset portfolio with the following

When individuals evaluate their portfolios, they should evaluate

Given a portfolio of stocks, the envelope curve containing the set of best possible combinations is known as the

The expected return and standard deviation of a portfolio of risky assets is equal to the weighted average of the individual asset's expected returns and standard deviation.

As the number of securities in a portfolio increases, the amount of systematic risk

Between 1980 and 1990, the standard deviation of the returns for the NIKKEI and the DJIA indexes were 0.19 and 0.06, respectively, and the covariance of these index returns was 0.0014. What was the correlation coefficient between the two market indicators?

The introduction of lending and borrowing severely limits the available risk/return opportunities.

Between 1986 and 1996, the standard deviation of the returns for the NYSE and the DJIA indexes were 0.10 and 0.09, respectively, and the covariance of these index returns was 0.0009. What was the correlation coefficient between the two market indicators?

Semivariance, when applied to portfolio theory, is concerned with

Risk is defined as the uncertainty of future outcomes.

The most important criteria when adding new investments to a portfolio is the

Investors choose a portfolio on the efficient frontier based on their utility functions that reflect their attitudes towards risk.

If equal risk is added moving along the envelope curve containing the best possible combinations the return will

Markowitz believes that any asset or portfolio of assets can be described by ____ parameter(s).

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 6.11. Calculate the expected standard deviation of the two-stock portfolio.

The Investment Setting

The Investment Setting: Part A

Asset Allocation and Security Selection

Asset Allocation and Security Selection: Part A

Organization and Functioning of Securities Markets

Security Market Indexes and Index Funds

Efficient Capital Markets, Behavioral Finance, and Technical Analysis

An Introduction to Portfolio Management: Part A

An Introduction to Portfolio Management: Part B

Asset Pricing Models

Equity Valuation

The Top-Down Approach to Market, Industry, and Company Analysis

The Practice of Fundamental Investing

Equity Portfolio Management Strategies

Bond Fundamentals and Valuation

Bond Analysis and Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward, Futures, and Swap Contracts

Option Contracts

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Filters

Exam 6: An Introduction to Portfolio Management

Given the following weights and expected security returns, calculate the expected return for the portfolio.

For a two stock portfolio containing Stocks i and j, the correlation coefficient of returns (rij) is equal to the square root of the covariance (covij).

Calculate the expected return for a three-asset portfolio with the following

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 6.4. What is the expected return of a portfolio of two risky assets if the expected return E(Ri), standard deviation ( σ\sigmaσ i), covariance (COVi,j), and asset weight (Wi) are as shown above?

When individuals evaluate their portfolios, they should evaluate

Given a portfolio of stocks, the envelope curve containing the set of best possible combinations is known as the

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) ​ -Refer to Exhibit 6.7. What is the expected return of a portfolio of two risky assets if the expected return E(Ri), standard deviation ( σ\sigmaσ i), covariance (COVi,j), and asset weight (Wi) are as shown above?

The expected return and standard deviation of a portfolio of risky assets is equal to the weighted average of the individual asset's expected returns and standard deviation.

As the number of securities in a portfolio increases, the amount of systematic risk

Between 1980 and 1990, the standard deviation of the returns for the NIKKEI and the DJIA indexes were 0.19 and 0.06, respectively, and the covariance of these index returns was 0.0014. What was the correlation coefficient between the two market indicators?

The introduction of lending and borrowing severely limits the available risk/return opportunities.

Between 1986 and 1996, the standard deviation of the returns for the NYSE and the DJIA indexes were 0.10 and 0.09, respectively, and the covariance of these index returns was 0.0009. What was the correlation coefficient between the two market indicators?

Semivariance, when applied to portfolio theory, is concerned with

Risk is defined as the uncertainty of future outcomes.

The most important criteria when adding new investments to a portfolio is the

Investors choose a portfolio on the efficient frontier based on their utility functions that reflect their attitudes towards risk.

If equal risk is added moving along the envelope curve containing the best possible combinations the return will

Markowitz believes that any asset or portfolio of assets can be described by ____ parameter(s).

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 6.11. Calculate the expected standard deviation of the two-stock portfolio.

The Investment Setting

The Investment Setting: Part A

Asset Allocation and Security Selection

Asset Allocation and Security Selection: Part A

Organization and Functioning of Securities Markets

Security Market Indexes and Index Funds

Efficient Capital Markets, Behavioral Finance, and Technical Analysis

An Introduction to Portfolio Management: Part A

An Introduction to Portfolio Management: Part B

Asset Pricing Models

Equity Valuation

The Top-Down Approach to Market, Industry, and Company Analysis

The Practice of Fundamental Investing

Equity Portfolio Management Strategies

Bond Fundamentals and Valuation

Bond Analysis and Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward, Futures, and Swap Contracts

Option Contracts

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Filters

For a two stock portfolio containing Stocks i and j, the correlation coefficient of returns (r_ij) is equal to the square root of the covariance (cov_ij).