This preview shows pages 1–2. Sign up to view the full content.
21. On a standard expected return vs standard deviation graph investors will prefer portfolios that lie to the
A.
Northeast 22. The variance of a portfolio of risky securities is
C.
The weighted sum of the securities' covariances 23. The measure of risk used in the Capital Asset Pricing Model is
D.
Beta 24. According to Markowitz and other
proponents of modern portfolio theory which of the following activities would not be expected to produce any benefits?
D.
Engaging in active portfolio management to
enhance returns
25. Rewardtovariability ratios are ________ on the capital market line than (as) on the efficient frontier.
A.
Lower 26. The optimal risky portfolio can be
identified by finding III. the tangency point of the capital market line and the efficient frontier IV. the line with the steepest slope that connects the risk free rate to the
efficient frontier
C.
III and IV only
2729:
27. What is the beta of this
stock.
C
. 1.32
28. State the characteristic line for this stock
Rstock = ___ + ___ Rmarket.
B
. 4.05,1.32
29. What percent of the variance is explained by this
regression
A
. 12
30. As you lengthen the time horizon of your investment period and decide to invest for multiple years you will find that
I. the average risk per year
may be smaller over longer investment horizons II. the variance of the total rate of return on your investment will be larger
B.
IandIIonly
31. The ________ is equal to the
square root of the systematic variance divided by the total variance.
B.
Correlation coefficient 32. Which of the following statements is true regarding time diversification? I.
The standard deviation of the average annual rate of return over several years will be smaller than the oneyear standard deviation. II. For a longer time horizon, uncertainty
compounds over a greater numberof years. III. Time diversification does not reduce risk.
D.
I, II and III
33. If an investor does not diversify their portfolio and instead puts
all of their money in one stock, the appropriate measure of security risk for that investor is the
A.
Stock's standard deviation 34.
Semitool Corp has an expected excess return
of 5% for next year. However for every unexpected 1% change in the market, Semitool's return responds by a factor of 1.3. Suppose it turns out the economy and the stock
market do better than expected by 1.5% and Semitool's products experience more rapid growth than anticipated, pushing up the stock price by another 1%. Based on this
information what was Semitool's actual excess return?
D
. 7.95%
35. The expected return of portfolio is 8.9% and the risk free rate is 3.5%. If the portfolio standard
deviation is 12.0%, what is the reward to variability ratio of the portfolio?
B.
0.45 36. A project has a 60% chance of doubling your investment in one year and a 40%
chance of losing half your money. What is the standard deviation of this investment?
B.
73%
37. A security's beta coefficient will be negative if
A.
Its returns are
negatively correlated with market index returns 38. Standard deviation is a measure of
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview. Sign up
to
access the rest of the document.
 Spring '11
 Wang

Click to edit the document details