Exam2Sp09x

# Exam2Sp09x - Fin331,Exam2,Spring2009 Name 1.Rank the...

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Fin 331, Exam 2, Spring 2009 Name___________________________________ 1.  Rank the following from highest average historical return to lowest average historical return from 1926-2006. I. Small stocks II. Long term bonds III. Large stocks IV. T-bills a. I, II, III, IV b. III, IV, II, I c. I, III, II, IV d. III, I, II, IV 2. Rank the following from highest average historical standard deviation to lowest average historical standard deviation from 1926-2006. I. Small stocks II. Long term bonds III. Large stocks IV. T-bills a. I, II, III, IV b. III, IV, II, I c. I, III, II, IV d. III, I, II, IV 3. You have calculated the historical dollar weighted return, annual geometric average return and annual arithmetic average return. If you desire to forecast performance for next year, the best forecast will be given by the a. dollar weighted return b. geometric average return c. arithmetic average return d. index return 4. According to CAPM, an investor's degree of risk aversion will determine his _______.  A) optimal risky portfolio  B) risk-free rate  C) mix of risk-free asset and optimal risky asset  D) choice of risk free asset

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5. Asset A has an expected return of 12% and a standard deviation of 20%.  The risk free rate is  4%.  What is the reward-to-variability ratio?  A) .20  B) .40  C) .60  D) It cannot be determined from the information provided.  6. Diversification is most effective when security returns are __________.  A) high  B) negatively correlated  C) positively correlated  D) uncorrelated  7. Beta is a measure of __________.  A) firm specific risk  B) diversifiable risk  C) market risk  D) unique risk  8. The risk that can be diversified away is ___________.  A) beta  B) firm specific risk  C) market risk  D) systematic risk  9. The term efficient frontier refers to the set of portfolios that _________________.
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Exam2Sp09x - Fin331,Exam2,Spring2009 Name 1.Rank the...

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