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Unformatted text preview: Some questions from old exams. Exam II Multiple-choice questions. 1. The Capital Allocation Line can be described as the A) investment opportunity set formed with a risky asset and a risk-free asset. B) investment opportunity set formed with two risky assets. C) line on which lie all portfolios that offer the same utility to a particular investor. D) line on which lie all portfolios with the same expected rate of return and different standard deviations. E) none of the above. Ans: A 2. A reward-to-volatility ratio is useful in: A) measuring the standard deviation of returns. B) understanding how returns increase relative to risk increases. C) analyzing returns on variable rate bonds. D) assessing the effects of inflation. E) none of the above. Ans: B 3. Market risk is also referred to as A) systematic risk, diversifiable risk. B) systematic risk, nondiversifiable risk. C) unique risk, nondiversifiable risk. D) unique risk, diversifiable risk. E) none of the above. Ans: B 4. The risk that can be diversified away is A) firm specific risk. B) beta. C) systematic risk. D) market risk. E) none of the above. Ans: A 5. The variance of a portfolio of risky securities A) is a weighted sum of the securities' variances. B) is the sum of the securities' variances. C) is the weighted sum of the securities' variances and covariances. D) is the sum of the securities' covariances. E) none of the above. Ans: C 6. Which one of the following portfolios cannot lie on the efficient frontier as described by Markowitz?...
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This note was uploaded on 11/02/2011 for the course FIN 310 taught by Professor Ardaugh during the Fall '09 term at Ill. Chicago.
- Fall '09