Question 1

Treynor's measure of portfolio performance focuses on

Accepted Answer

A) nondiversifiable risk. 
B) diversifiable risk. 
C) total risk. 
D) the standard deviation of the portfolio. 
A) nondiversifiable risk. 
B) diversifiable risk. 
C) total risk. 
D) the standard deviation of the portfolio.

Question 2

If a constant-dollar plan portfolio is profitable over the long run, the ________ in value over time.

Accepted Answer

A) conservative portion will increase 
B) conservative portion will remain constant 
C) aggressive portion will decrease 
D) entire portfolio will remain constant 
A) conservative portion will increase 
B) conservative portion will remain constant 
C) aggressive portion will decrease 
D) entire portfolio will remain constant

Question 3

Asset allocation should focus on

Accepted Answer

A) the investor's financial and family situation. 
B) selection of individual securities within an asset class. 
C) maximization of current income. 
D) maximization of short-term profits. 
A) the investor's financial and family situation. 
B) selection of individual securities within an asset class. 
C) maximization of current income. 
D) maximization of short-term profits.

Question 4

The process of selling certain issues in a portfolio and purchasing new ones to replace them is known as

Accepted Answer

A) portfolio revision. 
B) market timing. 
C) red herring baiting. 
D) dollar cost averaging. 
A) portfolio revision. 
B) market timing. 
C) red herring baiting. 
D) dollar cost averaging.

Question 5

The formula plan that requires maintaining a target dollar investment in the speculative portion of an investor's portfolio is the

Accepted Answer

A) most passive of all the formula plans. 
B) target return plan. 
C) constant ratio plan. 
D) constant dollar plan. 
A) most passive of all the formula plans. 
B) target return plan. 
C) constant ratio plan. 
D) constant dollar plan.

Question 6

Sharpe's measure of portfolio performance compares the risk premium on a portfolio to the portfolio's standard deviation of return.

Accepted Answer

A) True 
 B)False

Question 7

Before analyzing needs and objectives, investors should first construct a portfolio.

Accepted Answer

A) True 
 B)False

Question 8

Which one of the following statements concerning formula plans is correct?

Accepted Answer

A) The use of subjective judgment is important to the routine administration of most formula plans. 
B) Formula plans are based on the adherence to a mechanical set of rules with regard to when to buy and/or sell. 
C) The objective of most formula plans is to maximize profits. 
D) Securities with very stable prices are best suited to nearly all formula plans. 
A) The use of subjective judgment is important to the routine administration of most formula plans. 
B) Formula plans are based on the adherence to a mechanical set of rules with regard to when to buy and/or sell. 
C) The objective of most formula plans is to maximize profits. 
D) Securities with very stable prices are best suited to nearly all formula plans.

Question 9

Explain the type of risk measured by each of the following measures.Also identify the factor in each formula that determines the type of risk that is being measured.
(a)Jensen's measure
(b)Sharpe's measure
(c)Treynor's measure

Accepted Answer

The answer of Explain the type of risk measured by...

Question 10

The primary risk in using a GTC limit sell order rather than a market order is that

Accepted Answer

A) the market price may exceed the limit price when the order is placed. 
B) the limit order may not be executed. 
C) the limit order may be executed at a price above the market price. 
D) the limit order expires at the end of the day and may not be executed. 
A) the market price may exceed the limit price when the order is placed. 
B) the limit order may not be executed. 
C) the limit order may be executed at a price above the market price. 
D) the limit order expires at the end of the day and may not be executed.

Question 11

Capital losses up to $5,000 on stock sales can be used to offset the taxes on ordinary income.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following are reasons why a person may want to warehouse liquidity?
I.protect against total loss
II.ability to exploit future opportunities
III.capitalize on the high rates of return available on cash
IV.protect against the need to disturb the existing portfolio

Accepted Answer

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

Question 13

Holding period return (HPR)captures total return performance by considering current income and capital gains and is most appropriate for holding periods of one year or less.

Accepted Answer

A) True 
 B)False

Question 14

Treynor's measure and Jensen's measure use the standard deviation of portfolio return in the denominator.

Accepted Answer

A) True 
 B)False

Question 15

For a stock investment, the dividend yield is calculated by

Accepted Answer

A) dividing a stock's annual cash dividend by its price. 
B) dividing a stock's price by its annual cash dividend. 
C) multiplying a stock's semi-annual dividend by two. 
D) dividing the annual change in the stock's price plus its annual dividend amount by the beginning of the year price. 
A) dividing a stock's annual cash dividend by its price. 
B) dividing a stock's price by its annual cash dividend. 
C) multiplying a stock's semi-annual dividend by two. 
D) dividing the annual change in the stock's price plus its annual dividend amount by the beginning of the year price.

Question 16

Zachary holds 15 stocks in his portfolio.The portfolio's return last year was 11%, but one stock, RJH, doubled in value.What should Zachary do if he wants to be as diversified as he was at the beginning of the year?

Accepted Answer

A) Sell some of the RJH because it now constitutes a higher percentage of his holdings. 
B) Sell the worst performing stock and use the proceeds to buy more RJH. 
C) Wait for the price for RJH and the remaining stocks to rise so the proportions are reestablished. 
D) Sell the RJH and buy a cheaper stock in the same industry. 
A) Sell some of the RJH because it now constitutes a higher percentage of his holdings. 
B) Sell the worst performing stock and use the proceeds to buy more RJH. 
C) Wait for the price for RJH and the remaining stocks to rise so the proportions are reestablished. 
D) Sell the RJH and buy a cheaper stock in the same industry.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

The investor's overall economic security should an important consideration when allocating assets within a portfolio.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following are required to measure the performance of a diversified stock portfolio?
I.Price changes
II.Dividend payments
III.An appropriate index to use as a benchmark
IV.The risk-free interest rate

Accepted Answer

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

Question 20

Jensen's measure of portfolio performance compares the return a portfolio to the beta adjusted market return.

Accepted Answer

A) True 
 B)False

Treynor's measure of portfolio performance focuses on

If a constant-dollar plan portfolio is profitable over the long run, the ________ in value over time.

Asset allocation should focus on

The process of selling certain issues in a portfolio and purchasing new ones to replace them is known as

The formula plan that requires maintaining a target dollar investment in the speculative portion of an investor's portfolio is the

Sharpe's measure of portfolio performance compares the risk premium on a portfolio to the portfolio's standard deviation of return.

Before analyzing needs and objectives, investors should first construct a portfolio.

Which one of the following statements concerning formula plans is correct?

Explain the type of risk measured by each of the following measures.Also identify the factor in each formula that determines the type of risk that is being measured. (a)Jensen's measure (b)Sharpe's measure (c)Treynor's measure

The primary risk in using a GTC limit sell order rather than a market order is that

Capital losses up to $5,000 on stock sales can be used to offset the taxes on ordinary income.

Which of the following are reasons why a person may want to warehouse liquidity? I.protect against total loss II.ability to exploit future opportunities III.capitalize on the high rates of return available on cash IV.protect against the need to disturb the existing portfolio

Holding period return (HPR)captures total return performance by considering current income and capital gains and is most appropriate for holding periods of one year or less.

Treynor's measure and Jensen's measure use the standard deviation of portfolio return in the denominator.

For a stock investment, the dividend yield is calculated by

Zachary holds 15 stocks in his portfolio.The portfolio's return last year was 11%, but one stock, RJH, doubled in value.What should Zachary do if he wants to be as diversified as he was at the beginning of the year?

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

The investor's overall economic security should an important consideration when allocating assets within a portfolio.

Which of the following are required to measure the performance of a diversified stock portfolio? I.Price changes II.Dividend payments III.An appropriate index to use as a benchmark IV.The risk-free interest rate

Jensen's measure of portfolio performance compares the return a portfolio to the beta adjusted market return.

The Investment Environment

Securities Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency and Behavioral Finance

Fixed-Income Securities

Bond Valuation

Mutual Funds and Exchange-Traded Funds

Options: Puts and Calls

Futures Markets and Securities

Filters

Exam 13: Managing Your Own Portfolio

Treynor's measure of portfolio performance focuses on

If a constant-dollar plan portfolio is profitable over the long run, the ________ in value over time.

Asset allocation should focus on

The process of selling certain issues in a portfolio and purchasing new ones to replace them is known as

The formula plan that requires maintaining a target dollar investment in the speculative portion of an investor's portfolio is the

Sharpe's measure of portfolio performance compares the risk premium on a portfolio to the portfolio's standard deviation of return.

Before analyzing needs and objectives, investors should first construct a portfolio.

Which one of the following statements concerning formula plans is correct?

Explain the type of risk measured by each of the following measures.Also identify the factor in each formula that determines the type of risk that is being measured. (a)Jensen's measure (b)Sharpe's measure (c)Treynor's measure

The primary risk in using a GTC limit sell order rather than a market order is that

Capital losses up to $5,000 on stock sales can be used to offset the taxes on ordinary income.

Which of the following are reasons why a person may want to warehouse liquidity? I.protect against total loss II.ability to exploit future opportunities III.capitalize on the high rates of return available on cash IV.protect against the need to disturb the existing portfolio

Holding period return (HPR)captures total return performance by considering current income and capital gains and is most appropriate for holding periods of one year or less.

Treynor's measure and Jensen's measure use the standard deviation of portfolio return in the denominator.

For a stock investment, the dividend yield is calculated by

Zachary holds 15 stocks in his portfolio.The portfolio's return last year was 11%, but one stock, RJH, doubled in value.What should Zachary do if he wants to be as diversified as he was at the beginning of the year?

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

The investor's overall economic security should an important consideration when allocating assets within a portfolio.

Which of the following are required to measure the performance of a diversified stock portfolio? I.Price changes II.Dividend payments III.An appropriate index to use as a benchmark IV.The risk-free interest rate

Jensen's measure of portfolio performance compares the return a portfolio to the beta adjusted market return.

The Investment Environment

Securities Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency and Behavioral Finance

Fixed-Income Securities

Bond Valuation

Mutual Funds and Exchange-Traded Funds

Options: Puts and Calls

Futures Markets and Securities

Filters