Question 1

In the real world, most of the assets available to investors

Accepted Answer

A) tend to be somewhat positively correlated. 
B) tend to be somewhat negatively correlated. 
C) tend to be uncorrelated. 
D) tend to be either perfectly positively or perfectly negatively correlated. 
A) tend to be somewhat positively correlated. 
B) tend to be somewhat negatively correlated. 
C) tend to be uncorrelated. 
D) tend to be either perfectly positively or perfectly negatively correlated. A

Question 2

A portfolio with a beta of 1.26

Accepted Answer

A) is 126% more risky than the overall market. 
B) has less risk than the lowest risk security held within that portfolio. 
C) is 26% more risky than a risk-free asset. 
D) is considerably more risky than the overall market. 
A) is 126% more risky than the overall market. 
B) has less risk than the lowest risk security held within that portfolio. 
C) is 26% more risky than a risk-free asset. 
D) is considerably more risky than the overall market. D

Question 3

American depositary shares (ADS)are

Accepted Answer

A) shares of foreign companies traded on the U.S.markets. 
B) shares of American companies traded on foreign markets. 
C) foreign currency deposits in American banks. 
D) American currency deposits in foreign banks. 
A) shares of foreign companies traded on the U.S.markets. 
B) shares of American companies traded on foreign markets. 
C) foreign currency deposits in American banks. 
D) American currency deposits in foreign banks. A

Question 4

Which of the following factors comprise the CAPM?
I.dividend yield
II.risk-free rate of return
III.the expected rate of return on the market
IV.risk premium for the firm

Accepted Answer

A) I and III only 
B) II and IV only 
C) III and IV only 
D) II, III and IV only 
A) I and III only 
B) II and IV only 
C) III and IV only 
D) II, III and IV only

Question 5

The market rate of return increased by 8% while the rate of return on XYZ stock increased by 4%.The beta of XYZ stock is

Accepted Answer

A) -2.0. 
B) -0.40. 
C) 0.50. 
D) 2.0. 
A) -2.0. 
B) -0.40. 
C) 0.50. 
D) 2.0.

Question 6

Which one of the following conditions can be effectively eliminated through portfolio diversification?

Accepted Answer

A) a general price increase nationwide 
B) an interest rate reduction by the Federal Reserve 
C) increased government regulation of auto emissions 
D) change in the political party that controls Congress 
A) a general price increase nationwide 
B) an interest rate reduction by the Federal Reserve 
C) increased government regulation of auto emissions 
D) change in the political party that controls Congress

Question 7

The index used to represent market returns is always assigned a beta of 1.0.

Accepted Answer

A) True 
 B)False

Question 8

By design, half of all stocks betas are positive betas and half are negative.

Accepted Answer

A) True 
 B)False

Question 9

Explain what beta measures and how investors can use beta.

Accepted Answer

Students should mention some or all of t

Question 10

Two assets have a coefficient of correlation of -.4.

Accepted Answer

A) Combining these assets will increase risk. 
B) Combining these assets will have no effect on risk. 
C) Combining these assets may either raise or lower risk. 
D) Combining these assets will reduce risk. 
A) Combining these assets will increase risk. 
B) Combining these assets will have no effect on risk. 
C) Combining these assets may either raise or lower risk. 
D) Combining these assets will reduce risk.

Question 11

The risk of a portfolio consisting of two uncorrelated assets will be

Accepted Answer

A) equal to zero. 
B) greater than the risk of the least risky asset but less than the risk level of the more risky asset. 
C) greater than zero but less than the risk of the more risky asset. 
D) equal to the average of the risk level of the two assets. 
A) equal to zero. 
B) greater than the risk of the least risky asset but less than the risk level of the more risky asset. 
C) greater than zero but less than the risk of the more risky asset. 
D) equal to the average of the risk level of the two assets.

Question 12

Beta is more useful in explaining an individual security's return fluctuations than a large portfolio's return fluctuations.

Accepted Answer

A) True 
 B)False

Question 13

Portfolios falling to the left of the efficient frontier

Accepted Answer

A) have too much risk for the expected return. 
B) would be desirable if only they were possible. 
C) do not use all of the assets in the portfolio. 
D) fall within the set of feasible portfolios. 
A) have too much risk for the expected return. 
B) would be desirable if only they were possible. 
C) do not use all of the assets in the portfolio. 
D) fall within the set of feasible portfolios.

Question 14

Diversifiable risk is also called systematic risk.

Accepted Answer

A) True 
 B)False

Question 15

Investing in emerging markets is an effective means of diversifying a U.S.portfolio.

Accepted Answer

A) True 
 B)False

Question 16

Coefficients of correlation range from a maximum of +10 to a minimum of -10.

Accepted Answer

A) True 
 B)False

Question 17

The risk-free rate of return is 2% while the market rate of return is 12%.Parson Company has a historical beta of .85.Today, the beta for Delta Company was adjusted to reflect internal changes in the structure of the company.The new beta is 1.38.What is the amount of the change in the expected rate of return for Delta Company based on this revision to beta?

Accepted Answer

A) 8.5% 
B) 5.3% 
C) 12.2% 
D) 14.0% 
A) 8.5% 
B) 5.3% 
C) 12.2% 
D) 14.0%

Question 18

An efficient portfolio maximizes the rate of return without consideration of risk.

Accepted Answer

A) True 
 B)False

Question 19

Jonathan has the following portfolio of assets.   What is the beta of Jonathan's portfolio?

Accepted Answer

A) 1.04 
B) 1.11 
C) 1.13 
D) 1.00 
A) 1.04 
B) 1.11 
C) 1.13 
D) 1.00

Question 20

Portfolios C and X each have expected rates of return of 12%.C's beta is .9; X's beta is 1.1, therefore C dominates X.

Accepted Answer

A) True 
 B)False

In the real world, most of the assets available to investors

A portfolio with a beta of 1.26

American depositary shares (ADS)are

Which of the following factors comprise the CAPM? I.dividend yield II.risk-free rate of return III.the expected rate of return on the market IV.risk premium for the firm

The market rate of return increased by 8% while the rate of return on XYZ stock increased by 4%.The beta of XYZ stock is

Which one of the following conditions can be effectively eliminated through portfolio diversification?

The index used to represent market returns is always assigned a beta of 1.0.

By design, half of all stocks betas are positive betas and half are negative.

Explain what beta measures and how investors can use beta.

Two assets have a coefficient of correlation of -.4.

The risk of a portfolio consisting of two uncorrelated assets will be

Beta is more useful in explaining an individual security's return fluctuations than a large portfolio's return fluctuations.

Portfolios falling to the left of the efficient frontier

Diversifiable risk is also called systematic risk.

Investing in emerging markets is an effective means of diversifying a U.S.portfolio.

Coefficients of correlation range from a maximum of +10 to a minimum of -10.

An efficient portfolio maximizes the rate of return without consideration of risk.

Jonathan has the following portfolio of assets. What is the beta of Jonathan's portfolio?

Portfolios C and X each have expected rates of return of 12%.C's beta is .9; X's beta is 1.1, therefore C dominates X.

The Investment Environment

Securities Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency and Behavioral Finance

Fixed-Income Securities

Bond Valuation

Mutual Funds and Exchange-Traded Funds

Managing Your Own Portfolio

Options: Puts and Calls

Futures Markets and Securities

Filters

Exam 5: Modern Portfolio Concepts

In the real world, most of the assets available to investors

A portfolio with a beta of 1.26

American depositary shares (ADS)are

Which of the following factors comprise the CAPM? I.dividend yield II.risk-free rate of return III.the expected rate of return on the market IV.risk premium for the firm

The market rate of return increased by 8% while the rate of return on XYZ stock increased by 4%.The beta of XYZ stock is

Which one of the following conditions can be effectively eliminated through portfolio diversification?

The index used to represent market returns is always assigned a beta of 1.0.

By design, half of all stocks betas are positive betas and half are negative.

Explain what beta measures and how investors can use beta.

Two assets have a coefficient of correlation of -.4.

The risk of a portfolio consisting of two uncorrelated assets will be

Beta is more useful in explaining an individual security's return fluctuations than a large portfolio's return fluctuations.

Portfolios falling to the left of the efficient frontier

Diversifiable risk is also called systematic risk.

Investing in emerging markets is an effective means of diversifying a U.S.portfolio.

Coefficients of correlation range from a maximum of +10 to a minimum of -10.

An efficient portfolio maximizes the rate of return without consideration of risk.

Jonathan has the following portfolio of assets. What is the beta of Jonathan's portfolio?

Portfolios C and X each have expected rates of return of 12%.C's beta is .9; X's beta is 1.1, therefore C dominates X.

The Investment Environment

Securities Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency and Behavioral Finance

Fixed-Income Securities

Bond Valuation

Mutual Funds and Exchange-Traded Funds

Managing Your Own Portfolio

Options: Puts and Calls

Futures Markets and Securities

Filters