Question 1

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
  
-Refer to Exhibit 6.8. What is the standard deviation of this portfolio?

Accepted Answer

A)  4.51% 
B)  5.94% 
C)  6.75% 
D)  7.09% 
E)  8.62% 
A)  4.51% 
B)  5.94% 
C)  6.75% 
D)  7.09% 
E)  8.62%

Question 2

A portfolio is efficient if no other asset or portfolios offer higher expected return with the same (or lower) risk or lower risk with the same (or higher) expected return.

Accepted Answer

A) True 
 B)False

Question 3

The correlation coefficient and the covariance are measures of the extent to which two random variables move together.

Accepted Answer

A) True 
 B)False

Question 4

A good portfolio is a collection of individually good assets.

Accepted Answer

A) True 
 B)False

Question 5

What is the standard deviation of an equally weighted portfolio of two stocks with a covariance of 0.009, if the standard deviation of the first stock is 15% and the standard deviation of the second stock is 20%?

Accepted Answer

A)  2.0% 
B)  2.1% 
C)  7.8% 
D)  14.2% 
E)  14.7% 
A)  2.0% 
B)  2.1% 
C)  7.8% 
D)  14.2% 
E)  14.7%

Question 6

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
  
-Refer to Exhibit 6.6. 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)  10.6% 
B)  10.2% 
C)  13.0% 
D)  11.9% 
E)  14.0% 
A)  10.6% 
B)  10.2% 
C)  13.0% 
D)  11.9% 
E)  14.0%

Question 7

The probability of an adverse outcome is a definition of

Accepted Answer

A)  statistics. 
B)  variance. 
C)  random. 
D)  risk. 
E)  semi-variance above the mean. 
A)  statistics. 
B)  variance. 
C)  random. 
D)  risk. 
E)  semi-variance above the mean.

Question 8

What is the expected return of the three-stock portfolio described below?

Accepted Answer

A)  18.27% 
B)  14.33% 
C)  16.33% 
D)  12.72% 
E)  16.45% 
A)  18.27% 
B)  14.33% 
C)  16.33% 
D)  12.72% 
E)  16.45%

Question 9

The slope of the utility curves for a strongly risk-averse investor, relative to the slope of the utility curves for a less risk-averse investor, will

Accepted Answer

A)  be steeper. 
B)  be flatter. 
C)  be vertical. 
D)  be horizontal. 
E)  not change. 
A)  be steeper. 
B)  be flatter. 
C)  be vertical. 
D)  be horizontal. 
E)  not change.

Question 10

A measure that only considers deviations above the mean is semi-variance.

Accepted Answer

A) True 
 B)False

Question 11

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
   ​
-Refer to Exhibit 6.7. What is the standard deviation of this portfolio?

Accepted Answer

A)  4.87% 
B)  3.62% 
C)  4.13% 
D)  5.76% 
E)  6.02% 
A)  4.87% 
B)  3.62% 
C)  4.13% 
D)  5.76% 
E)  6.02%

Question 12

What is the expected return of the three-stock portfolio described below?

Accepted Answer

A)  18.45% 
B)  12.82% 
C)  13.38% 
D)  15.27% 
E)  16.67% 
A)  18.45% 
B)  12.82% 
C)  13.38% 
D)  15.27% 
E)  16.67%

Question 13

Consider two securities, A and B. Security A and B have a correlation coefficient of 0.65. Security A has standard deviation of 12, and security B has standard deviation of 25. Calculate the covariance between these two securities.

Accepted Answer

A)  300 
B)  461.54 
C)  261.54 
D)  195 
E)  200 
A)  300 
B)  461.54 
C)  261.54 
D)  195 
E)  200

Question 14

Between 1994 and 2004, the standard deviation of the returns for the S&P 500 and the NYSE indexes were 0.27 and 0.14, respectively, and the covariance of these index returns was 0.03. What was the correlation coefficient between the two market indicators?

Accepted Answer

A)  1.26 
B)  0.7937 
C)  0.2142 
D)  0.1111 
E)  0.44 
A)  1.26 
B)  0.7937 
C)  0.2142 
D)  0.1111 
E)  0.44

Question 15

When identifying undervalued and overvalued assets, which of the following statements is FALSE?

Accepted Answer

A)  An asset is properly valued if its estimated rate of return is equal to its required rate of return. 
B)  An asset is considered overvalued if its estimated rate of return is below its required rate of return. 
C)  An asset is considered undervalued if its estimated rate of return is above its required rate of return. 
D)  An asset is considered overvalued if its required rate of return is below its estimated rate of return. 
E)  An asset is considered undervalued if its estimated rate of return is equal to its required rate of return. 
A)  An asset is properly valued if its estimated rate of return is equal to its required rate of return. 
B)  An asset is considered overvalued if its estimated rate of return is below its required rate of return. 
C)  An asset is considered undervalued if its estimated rate of return is above its required rate of return. 
D)  An asset is considered overvalued if its required rate of return is below its estimated rate of return. 
E)  An asset is considered undervalued if its estimated rate of return is equal to its required rate of return.

Question 16

All of the following are assumptions of the Markowitz model EXCEPT

Accepted Answer

A)  risk is measured based on the variability of returns. 
B)  investors maximize one-period expected utility. 
C)  investors' utility curves demonstrate properties of diminishing marginal utility of wealth. 
D)  investors base decisions solely on expected return and time. 
E)  there are no tax costs involved. 
A)  risk is measured based on the variability of returns. 
B)  investors maximize one-period expected utility. 
C)  investors' utility curves demonstrate properties of diminishing marginal utility of wealth. 
D)  investors base decisions solely on expected return and time. 
E)  there are no tax costs involved.

Question 17

As the correlation coefficient between two assets decreases, the shape of the efficient frontier

Accepted Answer

A)  approaches a horizontal straight line. 
B)  bends out. 
C)  bends in. 
D)  approaches a vertical straight line. 
E)  shifts to the right. 
A)  approaches a horizontal straight line. 
B)  bends out. 
C)  bends in. 
D)  approaches a vertical straight line. 
E)  shifts to the right.

Question 18

Which of the following is NOT a relaxation of the assumptions for the CAPM?

Accepted Answer

A)  differential lending and borrowing rates 
B)  a zero-beta model 
C)  transaction costs 
D)  taxes 
E)  homogeneous expectations and fixed planning periods 
A)  differential lending and borrowing rates 
B)  a zero-beta model 
C)  transaction costs 
D)  taxes 
E)  homogeneous expectations and fixed planning periods

Question 19

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
  
-Refer to Exhibit 6.2. 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)  18.64% 
B)  20.0% 
C)  22.5% 
D)  13.65% 
E)  11% 
A)  18.64% 
B)  20.0% 
C)  22.5% 
D)  13.65% 
E)  11%

Question 20

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
  
-Refer to Exhibit 6.5. What is the standard deviation of this portfolio?

Accepted Answer

A)  3.89% 
B)  4.61% 
C)  5.02% 
D)  6.83% 
E)  6.09% 
A)  3.89% 
B)  4.61% 
C)  5.02% 
D)  6.83% 
E)  6.09%

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 6.8. What is the standard deviation of this portfolio?

A portfolio is efficient if no other asset or portfolios offer higher expected return with the same (or lower) risk or lower risk with the same (or higher) expected return.

The correlation coefficient and the covariance are measures of the extent to which two random variables move together.

A good portfolio is a collection of individually good assets.

What is the standard deviation of an equally weighted portfolio of two stocks with a covariance of 0.009, if the standard deviation of the first stock is 15% and the standard deviation of the second stock is 20%?

The probability of an adverse outcome is a definition of

What is the expected return of the three-stock portfolio described below?

The slope of the utility curves for a strongly risk-averse investor, relative to the slope of the utility curves for a less risk-averse investor, will

A measure that only considers deviations above the mean is semi-variance.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 6.7. What is the standard deviation of this portfolio?

What is the expected return of the three-stock portfolio described below?

Consider two securities, A and B. Security A and B have a correlation coefficient of 0.65. Security A has standard deviation of 12, and security B has standard deviation of 25. Calculate the covariance between these two securities.

Between 1994 and 2004, the standard deviation of the returns for the S&P 500 and the NYSE indexes were 0.27 and 0.14, respectively, and the covariance of these index returns was 0.03. What was the correlation coefficient between the two market indicators?

When identifying undervalued and overvalued assets, which of the following statements is FALSE?

All of the following are assumptions of the Markowitz model EXCEPT

As the correlation coefficient between two assets decreases, the shape of the efficient frontier

Which of the following is NOT a relaxation of the assumptions for the CAPM?

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 6.5. What is the standard deviation of this 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

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 6.8. What is the standard deviation of this portfolio?

A portfolio is efficient if no other asset or portfolios offer higher expected return with the same (or lower) risk or lower risk with the same (or higher) expected return.

The correlation coefficient and the covariance are measures of the extent to which two random variables move together.

A good portfolio is a collection of individually good assets.

What is the standard deviation of an equally weighted portfolio of two stocks with a covariance of 0.009, if the standard deviation of the first stock is 15% and the standard deviation of the second stock is 20%?

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 6.6. 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 probability of an adverse outcome is a definition of

What is the expected return of the three-stock portfolio described below?

The slope of the utility curves for a strongly risk-averse investor, relative to the slope of the utility curves for a less risk-averse investor, will

A measure that only considers deviations above the mean is semi-variance.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) ​ -Refer to Exhibit 6.7. What is the standard deviation of this portfolio?

What is the expected return of the three-stock portfolio described below?

Consider two securities, A and B. Security A and B have a correlation coefficient of 0.65. Security A has standard deviation of 12, and security B has standard deviation of 25. Calculate the covariance between these two securities.

Between 1994 and 2004, the standard deviation of the returns for the S&P 500 and the NYSE indexes were 0.27 and 0.14, respectively, and the covariance of these index returns was 0.03. What was the correlation coefficient between the two market indicators?

When identifying undervalued and overvalued assets, which of the following statements is FALSE?

All of the following are assumptions of the Markowitz model EXCEPT

As the correlation coefficient between two assets decreases, the shape of the efficient frontier

Which of the following is NOT a relaxation of the assumptions for the CAPM?

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 6.2. 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?

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 6.5. What is the standard deviation of this 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

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 6.7. What is the standard deviation of this portfolio?