Question 1

The betas of most stocks are constant over time.

Accepted Answer

A) True 
 B)False

Question 2

Investors are rewarded for assuming

Accepted Answer

A) total risk. 
B) diversifiable risk. 
C) nondiversifiable risk. 
D) any type of risk. 
A) total risk. 
B) diversifiable risk. 
C) nondiversifiable risk. 
D) any type of risk.

Question 3

Beta is the slope of the best fit line for the points with coordinates representing the ________ and the ________ for each one of several years.

Accepted Answer

A) rate of return; level of risk for an individual security 
B) rate of inflation; rate of return for an individual security 
C) risk level of a stock; market rate of return 
D) market rate of return; security's rate of return 
A) rate of return; level of risk for an individual security 
B) rate of inflation; rate of return for an individual security 
C) risk level of a stock; market rate of return 
D) market rate of return; security's rate of return

Question 4

Portfolio objectives should be established independently of tax considerations.

Accepted Answer

A) True 
 B)False

Question 5

Portfolios located on the efficient frontier are preferable to all other portfolios in the feasible set.

Accepted Answer

A) True 
 B)False

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

Which of the following guidelines are appropriate for inclusion in a portfolio management policy?
I.Diversify among different types of securities and across industry and geographic lines.
II.Determine the risk level and financial situation of the individual investor.
III.Utilize beta to help align the portfolio to the risk level of the investor.
IV.Minimize the standard deviation of each security in the portfolio.

Accepted Answer

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

Question 8

When the Capital Asset Pricing Model is depicted graphically, the result is the

Accepted Answer

A) standard deviation line. 
B) coefficient of variation line. 
C) security market line. 
D) alpha-beta line. 
A) standard deviation line. 
B) coefficient of variation line. 
C) security market line. 
D) alpha-beta line.

Question 9

A portfolio that offers the lowest risk for a given level of return is known as an efficient portfolio.

Accepted Answer

A) True 
 B)False

Question 10

The stock of ABC, Inc.has a beta of .80.The market rate of return is expected to increase by by 5%.Beta predicts that ABC stock should

Accepted Answer

A) increase in value by 6.25%. 
B) increase in value by 4.0%. 
C) decrease in value by 1.0%. 
D) increase in value by .8%. 
A) increase in value by 6.25%. 
B) increase in value by 4.0%. 
C) decrease in value by 1.0%. 
D) increase in value by .8%.

Question 11

The Capital Asset Pricing Model (CAPM)is a mathematical model that depicts the

Accepted Answer

A) positive relationship between risk and return. 
B) standard deviation between a risk premium and an investment's expected return. 
C) exact price that an investor should be willing to pay for any given investment. 
D) difference between a risk-free return and the expected rate of inflation. 
A) positive relationship between risk and return. 
B) standard deviation between a risk premium and an investment's expected return. 
C) exact price that an investor should be willing to pay for any given investment. 
D) difference between a risk-free return and the expected rate of inflation.

The betas of most stocks are constant over time.

Investors are rewarded for assuming

Beta is the slope of the best fit line for the points with coordinates representing the and the for each one of several years.

Portfolio objectives should be established independently of tax considerations.

Portfolios located on the efficient frontier are preferable to all other portfolios in the feasible set.

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

When the Capital Asset Pricing Model is depicted graphically, the result is the

A portfolio that offers the lowest risk for a given level of return is known as an efficient portfolio.

The stock of ABC, Inc.has a beta of .80.The market rate of return is expected to increase by by 5%.Beta predicts that ABC stock should

The Capital Asset Pricing Model (CAPM)is a mathematical model that depicts the

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

The betas of most stocks are constant over time.

Investors are rewarded for assuming

Beta is the slope of the best fit line for the points with coordinates representing the ________ and the ________ for each one of several years.

Portfolio objectives should be established independently of tax considerations.

Portfolios located on the efficient frontier are preferable to all other portfolios in the feasible set.

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

When the Capital Asset Pricing Model is depicted graphically, the result is the

A portfolio that offers the lowest risk for a given level of return is known as an efficient portfolio.

The stock of ABC, Inc.has a beta of .80.The market rate of return is expected to increase by by 5%.Beta predicts that ABC stock should

The Capital Asset Pricing Model (CAPM)is a mathematical model that depicts the

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

Beta is the slope of the best fit line for the points with coordinates representing the and the for each one of several years.