Exam 13: Managing Your Own Portfolio

Which one of the following statements is correct if a portfolio has a Jensen measure of return of zero?

A portfolio has a total return of 14.5%, a beta of 1.54, and a standard deviation of 17.6%. If the risk free rate is 4.5% and the market return is 10.2%, then Treynor's measure of this portfolio's performance is

One year ago, Matt bought 100 shares of ACE Corp. stock for $5,619 including commission. He is about to sell the ACE stock for $6,528 net of commissions. When he made the purchase the S&P 500 index was at 907; now it is 1070. The beta of ACE stock is 0.98, and the market's risk-free rate is 4.0%. No dividends were paid. Based on Jensen's measure, did Matt make a good purchase?

Investors who use formula plans believe that they have above average ability to time the market and pick successful investments.

A rational investor will require the same return from a corporate security as from a government security.

An investor adopts a policy of investing in both an aggressive mutual fund and a short-term bond fund. When the value of the aggressive fund exceeds 65% of the portfolio value, shares of that fund are sold such that the aggressive fund represents only 45% of the portfolio. This is an example of a ________ plan.

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

Only capital gains that have been realized should be included in the measurement of a portfolio's return over a given period of time.

Suppose the shares of the Chickadee Corporation traded seven times in the following sequence one day last week: 46, 45.88, 45.75, 45.50, 45.63, 46, 46.13. In this case, a limit order to sell at 46 would have been executed

Asset allocation focuses on selecting specific securities within an asset class.

A constant ratio plan allows for speculative gains while limiting potential losses.

A stop loss order may not be advisable

Treynor's measure of portfolio performance focuses on

A portfolio has a total return of 10.5%, a beta of 0.72 and a standard deviation of 6.3%. The risk free rate is 3.8%, the market return is 12.4%. Jensen's measure of this portfolio's performance is

If an investor's portfolio is comprised of a broad range of common stocks, the best measure to use as a basis of comparison of performance is the

Ten years ago, Taylor purchased 444.44 shares in a mutual fund for $22.50 per share. He has never made an additional investment in this fund, but because of reinvested dividends and capital gains, he now owns 1,200 shares with a net asset value of $25.88 per share. Ignoring taxes, his compound average annual rate of return (IRR) is

Fred and Martha are in their seventies and retired. Which one of the following sets of portfolio statistics might best suit their situation if their primary investment goal is current income with limited risk?

Allison's portfolio has an expected return of 14% and a standard deviation of of 20%. Brianna's portfolio has an expected rate of return of 11% and a standard deviation of 12%. The risk-free rate is 3%. According to the Sharpe measure,

Which of the following are reasons to consider selling an investment that is currently in a portfolio? I. The investment has met the original objective. II. Better investment opportunities currently exist. III. The outlook for the investment has improved. IV. The investment has not met expectations and no change is expected.

Portfolio revision is the ongoing process of systematically studying the issues in the portfolio and selling certain issues and purchasing others as the means of maintaining a portfolio that best meets the investor's objectives.