Question 1

A portfolio has a total return of 14.4%, a standard deviation of 18.5% and a beta of 1.43.The risk free rate is 2.5%, the market rate of return is 11.4%, and the market's Treynor measure is 6.3.What is the value of the Treynor measure of this portfolio?

Accepted Answer

A) -1.9% 
B) .63 % 
C) 8.32% 
D) 27.4%

Question 2

Juan's investment portfolio was valued at $125,640 at the beginning of the year.During the year, Juan received $603 in interest income and $298 in dividend income.Juan also sold shares of stock and realized $1,459 in capital gains.Juan's portfolio is valued at $142,608 at the end of the year.All income and realized gains were reinvested.No funds were contributed or withdrawn during the year.What is the amount of income Juan must declare this year for income tax purposes?

Accepted Answer

A) $0 
B) $901 
C) $2,360 
D) $19,328

Question 3

Tatiana is following a fixed weighting approach to managing her portfolio, which on January 1 consisted of 45% common stock, 40% bonds, and 15% short-term securities.Because stocks had a good year, at the end of the year, it consisted of 55% common stock, 35% bonds and 10% short-term securities.As a result,

Accepted Answer

A) Tatiana should leave her portfolio as it is to take advantage of momentum in stocks. 
B) she should sell stock and buy bonds and short-term securities to restore the original weightings. 
C) she should sell stock index futures to protect herself from falling prices. 
D) she should sell stock and increase the proportions of bonds and short-term securities because she is now one year older.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) 10.0%. 
B) 12%. 
C) 21%. 
D) 31%.

Question 7

The calculation of returns on options and futures must consider income as well as capital gains.

Accepted Answer

A) True 
 B)False

Question 8

On January 1, Stacy's portfolio was valued at $96,534.During the year Stacy received $3,285 in interest and $4,100 in dividends.She also sold one stock at a gain of $850.The value of the portfolio on December 31 of the same year was $113,201.At the end of June, Stacy withdrew $5,000 from the portfolio.What is the holding period return for the year?

Accepted Answer

A) 25.1% 
B) 25.8% 
C) 26.5% 
D) 27.2%

Question 9

Explain the use of limit orders and stop-loss orders in rebalancing an investor's stock portfolio.What are the principal risks in using these orders?

Accepted Answer

The answer of Explain the use of limit orders and...

Question 10

A Jensen measure of 2.5% means that a security earned 2.5% more than the overall market.

Accepted Answer

A) True 
 B)False

Question 11

Formula plans are high-risk investment strategies that attempt to benefit from cyclical price movements.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) between 46 and 46.13, whereas a market order to sell could have been executed anywhere between 45.50 and 46.13. 
B) anywhere between 45.50 and 46.13, whereas a market order to sell would have been executed only at 46. 
C) only at 46, whereas a market order to sell would have been executed at 46.13. 
D) only at 46.13, and a market order to sell would have been executed between 46 and 46.13.

Question 13

Jordan invests 10% of his money in each of the 10 mutual funds available in his 401-K plan.This tendency is known as the 1/N heuristic.

Accepted Answer

A) True 
 B)False

Question 14

The holding period return measures only the capital appreciation of an investment.

Accepted Answer

A) True 
 B)False

Question 15

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?

Accepted Answer

The answer of One year ago, Matt bought 100 shares...

Question 16

Marti is 31 years old and is saving for retirement.Which one of the following portfolio allocations might best suit her situation if she is willing to accept a fair amount of risk in exchange for long-term capital appreciation?

Accepted Answer

A) 60% bonds, 15% money funds and 25% real estate 
B) 5% money funds, 10% bonds and 85% growth stocks 
C) 25% bank CDs, 40% corporate bonds, 15% money market, 20% value stocks 
D) 50% mortgage bonds, 5% money market, 45% municipal bonds

Question 17

Which of the following is ideally suited to automatic investing through a payroll deduction plan?

Accepted Answer

A) a dollar cost averaging plan 
B) a constant dollar plan 
C) a constant ratio plan 
D) a variable ratio plan

Question 18

Allison's portfolio has an expected return of 14% and a standard deviation 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,

Accepted Answer

A) Allison has the better portfolio. 
B) Brianna has the better portfolio. 
C) the portfolio's are equally desirable. 
D) the answer depends on Allison and Brianna's risk tolerance.

Question 19

The general theory of dollar cost averaging is

Accepted Answer

A) to time the market to take advantage of low stock prices. 
B) to buy more stock when prices are low and less when prices are high. 
C) to equal the performance of market averages at the lowest dollar cost. 
D) to sell as markets decline and buy as they begin to rise.

Question 20

Investors need to monitor economic and market activity to assess the potential impact these factors can have on their investment portfolios.

Accepted Answer

A) True 
 B)False

Exam 13: Managing Your Own Portfolio

A portfolio has a total return of 14.4%, a standard deviation of 18.5% and a beta of 1.43.The risk free rate is 2.5%, the market rate of return is 11.4%, and the market's Treynor measure is 6.3.What is the value of the Treynor measure of this portfolio?

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

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.

The calculation of returns on options and futures must consider income as well as capital gains.

Explain the use of limit orders and stop-loss orders in rebalancing an investor's stock portfolio.What are the principal risks in using these orders?

A Jensen measure of 2.5% means that a security earned 2.5% more than the overall market.

Formula plans are high-risk investment strategies that attempt to benefit from cyclical price movements.

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

Jordan invests 10% of his money in each of the 10 mutual funds available in his 401-K plan.This tendency is known as the 1/N heuristic.

The holding period return measures only the capital appreciation of an investment.

Marti is 31 years old and is saving for retirement.Which one of the following portfolio allocations might best suit her situation if she is willing to accept a fair amount of risk in exchange for long-term capital appreciation?

Which of the following is ideally suited to automatic investing through a payroll deduction plan?

Allison's portfolio has an expected return of 14% and a standard deviation 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,

The general theory of dollar cost averaging is

Investors need to monitor economic and market activity to assess the potential impact these factors can have on their investment portfolios.