Question 1

Because of increasing correlation between U.S. markets and foreign markets, most professional investors now recommend:

Accepted Answer

A)  zero exposure to foreign markets for the foreseeable future 
B)  replacing foreign stock exposure with U.S. Treasury bonds 
C)  maintaining some reasonable exposure to foreign markets 
D)  replacing foreign stock exposure with sovereign debt from investment grade countries. 
A)  zero exposure to foreign markets for the foreseeable future 
B)  replacing foreign stock exposure with U.S. Treasury bonds 
C)  maintaining some reasonable exposure to foreign markets 
D)  replacing foreign stock exposure with sovereign debt from investment grade countries.

Question 2

Choose the portfolio from the following set that is not on the efficient frontier.

Accepted Answer

A)  A: expected return of 10 percent; standard deviation of 8 percent 
B)  B: expected return of 18 percent; standard deviation of 13 percent 
C)  C: expected return of 38 percent; standard deviation of 38 percent 
D)  D: expected return of 15 percent; standard deviation of 14 percent 
A)  A: expected return of 10 percent; standard deviation of 8 percent 
B)  B: expected return of 18 percent; standard deviation of 13 percent 
C)  C: expected return of 38 percent; standard deviation of 38 percent 
D)  D: expected return of 15 percent; standard deviation of 14 percent

Question 3

Different investors will estimate the inputs to the Markowitz model differently because:

Accepted Answer

A)  every investor has his/her own risk/return preferences 
B)  every investor has access to different information about securities 
C)  there is an inherent uncertainty in security analysis 
D)  there is a random selection process used by individual investors 
A)  every investor has his/her own risk/return preferences 
B)  every investor has access to different information about securities 
C)  there is an inherent uncertainty in security analysis 
D)  there is a random selection process used by individual investors

Question 4

With the Single-index model, the difference between actual return and expected return given a particular market index is referred to as the:

Accepted Answer

A)  parameter 
B)  unique part 
C)  beta 
D)  error term 
A)  parameter 
B)  unique part 
C)  beta 
D)  error term

Question 5

Suppose you interview two different portfolio managers about their efficient sets of portfolios. Is it possible, or even probable, that they would have two different efficient sets? Why?

Accepted Answer

Yes. Two different managers ar

Question 6

Under the Markowitz model, investors:

Accepted Answer

A)  are assumed to be risk-seekers 
B)  are not allowed to use leverage 
C)  are assumed to be institutional investors 
D)  are always better off if they select portfolios consisting of multiple securities 
A)  are assumed to be risk-seekers 
B)  are not allowed to use leverage 
C)  are assumed to be institutional investors 
D)  are always better off if they select portfolios consisting of multiple securities

Question 7

Based on recent research, it seems reasonable that approximately 10-20 securities are needed to ensure adequate diversification.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following would not be considered a source of systematic risk?

Accepted Answer

A)  a hostile takeover 
B)  a rise in inflation 
C)  a fall in GDP 
D)  a panic on Wall Street 
A)  a hostile takeover 
B)  a rise in inflation 
C)  a fall in GDP 
D)  a panic on Wall Street

Question 9

The only asset class to provide systematic protection against inflation is:

Accepted Answer

A)  bonds 
B)  real estate 
C)  foreign stocks 
D)  TIPS 
A)  bonds 
B)  real estate 
C)  foreign stocks 
D)  TIPS

Question 10

The single index model requires (3n+2) total pieces of data to implement.

Accepted Answer

A) True 
 B)False

Question 11

Because of its complexity, the Markowitz model is no longer used by institutional investors.

Accepted Answer

A) True 
 B)False

Question 12

Real estate has never been shown to be positively correlated with the performance of stocks.

Accepted Answer

A) True 
 B)False

Question 13

As a measure of market risk, the beta for the S&P 500 is generally considered to be:

Accepted Answer

A)  -1.0 
B)  1.0 
C)  0 
D)  impossible to determine 
A)  -1.0 
B)  1.0 
C)  0 
D)  impossible to determine

Question 14

The S&P 500 typically is usually correlated at what percent with the MSCI EAFE Index

Accepted Answer

A)  70% 
B)  80% 
C)  90% 
D)  95% 
A)  70% 
B)  80% 
C)  90% 
D)  95%

Because of increasing correlation between U.S. markets and foreign markets, most professional investors now recommend:

Choose the portfolio from the following set that is not on the efficient frontier.

Different investors will estimate the inputs to the Markowitz model differently because:

With the Single-index model, the difference between actual return and expected return given a particular market index is referred to as the:

Suppose you interview two different portfolio managers about their efficient sets of portfolios. Is it possible, or even probable, that they would have two different efficient sets? Why?

Under the Markowitz model, investors:

Based on recent research, it seems reasonable that approximately 10-20 securities are needed to ensure adequate diversification.

Which of the following would not be considered a source of systematic risk?

The only asset class to provide systematic protection against inflation is:

The single index model requires (3n+2) total pieces of data to implement.

Because of its complexity, the Markowitz model is no longer used by institutional investors.

Real estate has never been shown to be positively correlated with the performance of stocks.

As a measure of market risk, the beta for the S&P 500 is generally considered to be:

The S&P 500 typically is usually correlated at what percent with the MSCI EAFE Index

Investing Is an Important Activity Worldwide

Investment Alternatives: Generic Principles All Investors Must Know

Indirect Investing: a Global Activity

Securities Markets Matter to All Investors

All Financial Markets Have Regulations and Trading Practices

Return and Risk: the Foundation of Investing Worldwide

Portfolio Theory Is Universal

Asset Pricing Principles

Common Stock Valuation Lessons for All Investors

Managing a Stock Portfolio: a Worldwide Issue

What Happens If Markets Are Efficient or Not?

Economy/ market Analysis Must Be Considered by All Investor

Sector/ industry Analysis

Company Analysis

Technical Analysis

Fixed Income Securities Are Available Worldwide

Managing Bond Portfolios: Some Issues Affect All Investors

Understanding Derivative Securities: Options

Understanding Derivative Securities: Futures

All Investors Must Consider Portfolio Management

Evaluation of Investment Performance: a Global Concept

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Exam 8: Portfolio Selection for All Investors

Because of increasing correlation between U.S. markets and foreign markets, most professional investors now recommend:

Choose the portfolio from the following set that is not on the efficient frontier.

Different investors will estimate the inputs to the Markowitz model differently because:

With the Single-index model, the difference between actual return and expected return given a particular market index is referred to as the:

Suppose you interview two different portfolio managers about their efficient sets of portfolios. Is it possible, or even probable, that they would have two different efficient sets? Why?

Under the Markowitz model, investors:

Based on recent research, it seems reasonable that approximately 10-20 securities are needed to ensure adequate diversification.

Which of the following would not be considered a source of systematic risk?

The only asset class to provide systematic protection against inflation is:

The single index model requires (3n+2) total pieces of data to implement.

Because of its complexity, the Markowitz model is no longer used by institutional investors.

Real estate has never been shown to be positively correlated with the performance of stocks.

As a measure of market risk, the beta for the S&P 500 is generally considered to be:

The S&P 500 typically is usually correlated at what percent with the MSCI EAFE Index

Investing Is an Important Activity Worldwide

Investment Alternatives: Generic Principles All Investors Must Know

Indirect Investing: a Global Activity

Securities Markets Matter to All Investors

All Financial Markets Have Regulations and Trading Practices

Return and Risk: the Foundation of Investing Worldwide

Portfolio Theory Is Universal

Asset Pricing Principles

Common Stock Valuation Lessons for All Investors

Managing a Stock Portfolio: a Worldwide Issue

What Happens If Markets Are Efficient or Not?

Economy/ market Analysis Must Be Considered by All Investor

Sector/ industry Analysis

Company Analysis

Technical Analysis

Fixed Income Securities Are Available Worldwide

Managing Bond Portfolios: Some Issues Affect All Investors

Understanding Derivative Securities: Options

Understanding Derivative Securities: Futures

All Investors Must Consider Portfolio Management

Evaluation of Investment Performance: a Global Concept

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