KIC000066 - Fin 320D Quiz 3 Fall 2010 1. A market anomaly...

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Unformatted text preview: Fin 320D Quiz 3 Fall 2010 1. A market anomaly refers to a. a volatile shock to the market that is sharp but not persistent b. a price or volume event that is inconsistent with historical price or volume trends @ price behavior that differs from the behavior predicted by the efficient market hypothesis d. a trading or pricing event that interferes with the continuous buying and selling of securities 2. When is it appropriate to use a Sharpe ratio for performance evaluation? a. When relevant risk is defmed in terms of market movements. (]) When seeking the best risky investment for a complete portfolio., c. When the investment is one of many to be included in a diversified portfolio. d. When the investor is not exposed to the total risk of the portfolio. 3. a. arbitrage opportunities are difficult to fmd professional investors do not beat the market c. increased risk is on average rewarded with higher returns d. we carmot find obvious instances where prices failed to reflect available information e. trading in domestic markets is less expensive than in international markets In the article "Reflections on the EMH: 30 Years Later", Professor Burton Malkiel [mds which one of the ,J I { following to be the most compelling evidence of market efficiency: v '~ k " , d rN-Iv.. 1 .f;w l:~ W~::~ ~I~:J C~ ~ " " '~ ~J f \.lw '..... Jr..~('l.. Market return 12% Market standard deviation 20% Risk-free return 4% Apex Fund return 17% Apex Fund standard deviation 28% Apex Fund beta 1.35 4. An analyst gathers the following historical data: c. a. Which has more systematic risk - Apex Fund or the market? Support your answer. ~~ 1Vrd.] ~ ~ l'V lo tc nSk. IS M~ur-ed by bhA. 1Vu.. ba 0+ A~ tvlld l\ :?>S) 1<:, o,reat-e.r tn/lfl-tlt.t brA 0+-t:Vu.. \')1.CIX I~ (I).' j b. Compute the Jensen's alpha performance measure for Apex Fund. (R\ - ~ -; = c l.-r\3L C R,,,,- R f J .\1- -()4 = CA..-t- 1.35[ ~ 12-.OYJ \'3 =. ex.-l'1:.E5(.6l:.] 0<..- t ; - 16- . 1m-::: .02 z.. ( 0\"'" .CJ2?.. ) Compute the M' measure of performance for Apex Fund. R p-<- =. ( '.~ ') n-t (I - Ci~ )).~ -:: 'R" 'I-. ~ 1'21 I.\?'-r . 0 \\IA:,:: 132.'6<.0 V--------~ m 2 ::. ~p'"-?-0 '1 7 . . 13.W,ol>/c- rLo/a ::L.OI"2'iS~ 0 ., .1\42\ (,17) 1- (, 2.~':.-1\ J. 01 \'):z.~,,<>l o Some Useful Formulae: R p- Rf _Rc... p _-_R,,--f Sp = Tp = a p fJp i Fin 320A Quiz #1 Fall 2010 Investments NAME: <." ~\V\.. I.D .# :~ 1. You are a banker and manage an investment portfolio of $15 million. Under securities law you would be considered a. c. a qualified institutional buyer an accredited investor an average investor d. a protected investor 2. A Treasury bill has a face value of$IO,OOO and is selling for $9,920. If the Treasury bill matures in 42 days, its bond equivalent yield is a....
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KIC000066 - Fin 320D Quiz 3 Fall 2010 1. A market anomaly...

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