Chapter 05 - Risk and Return: Past and Prologue
CHAPTER 05
RISK AND RETURN: PAST AND PROLOGUE
1. The 1% VaR will be less than -30%. As percentile or probability of a return declines so
does the magnitude of that return. Thus, a 1 percentile probability wi
Chapter 06 - Efficient Diversification
CHAPTER 06
EFFICIENT DIVERSIFICATION
1. So long as the correlation coefficient is neither zero nor 1.0, the portfolio will contain
diversification benefits. Any other combination will cause a diversification benefit
Chapter 07 - Capital Asset Pricing and Arbitrage Pricing Theory
CHAPTER 07
CAPITAL ASSET PRICING AND ARBITRAGE PRICING
THEORY
1. The required rate of return on a stock is related to the required rate of return on the
stock market via beta. Assuming the be
Chapter 08 - The Efficient Market Hypothesis
CHAPTER 08
THE EFFICIENT MARKET HYPOTHESIS
1. The correlation coefficient should be zero. If it were not zero, then one could use
returns from one period to predict returns in later periods and therefore earn a
Chapter 04 - Mutual Funds and Other Investment Companies
CHAPTER 04
MUTUAL FUNDS AND OTHER INVESTMENT COMPANIES
1. Mutual funds offer many benefits. Some of those benefits include the ability to invest
with small amounts of money, diversification, profess
Chapter 07 - Capital Asset Pricing and Arbitrage Pricing Theory
CHAPTER 07 CAPITAL ASSET PRICING AND ARBITRAGE PRICING THEORY
1. The required rate of return on a stock is related to the required rate of return on the stock market via beta. Assuming the be
Chapter 10 - Bond Prices and Yields
CHAPTER 10
BOND PRICES AND YIELDS
1.
a. Catastrophe bond. Typically issued by an insurance company. They are
similar to an insurance policy in that the investor receives coupons and par
value, but takes a loss in part o