Question 1

Markowitz diversification,also called _____________ diversification,removes _________________ risk from the portfolio.

Accepted Answer

efficient,idiosyncra

Question 2

An efficiently diversified portfolio still has _____________________ risk.

Accepted Answer

market (also known a

Question 3

A portfolio consisting of two securities with perfect negative correlation in the proper proportions can be shown to have a standard deviation of zero.What makes this riskless portfolio impossible to achieve in the real world?

Accepted Answer

Perfect negative correlation is not achi

Question 4

Each individual asset's weight in the portfolio is found by:

Accepted Answer

A) dividing the asset's standard deviation by its expected value. 
B) calculating the percentage of the asset's value to the total portfolio value. 
C) calculating the return of the asset as a percent of total portfolio return. 
D) dividing the asset's expected value by its standard deviation. 
A) dividing the asset's standard deviation by its expected value. 
B) calculating the percentage of the asset's value to the total portfolio value. 
C) calculating the return of the asset as a percent of total portfolio return. 
D) dividing the asset's expected value by its standard deviation.

Question 5

The major problem with the Markowitz model is that it requires a full set of ___________ between the asset returns in order to calculate portfolio variance.

Accepted Answer

covariance

Question 6

When the covariance is positive,the correlation will be:

Accepted Answer

A) positive. 
B) negative. 
C) zero. 
D) impossible to determine. 
A) positive. 
B) negative. 
C) zero. 
D) impossible to determine.

Question 7

Investments in commodities such as precious metals may provide additional
diversification opportunities for portfolios consisting primarily of stocks and bonds.

Accepted Answer

A) True 
 B)False

Question 8

In a portfolio consisting of two perfectly negatively correlated securities,the highest attainable expected return will consist of a portfolio containing 100% of the asset with the highest expected return.

Accepted Answer

A) True 
 B)False

Question 9

The major difference between the correlation coefficient and the covariance is that the correlation coefficient:

Accepted Answer

A) can be positive,negative,or zero,whereas the covariance is always positive. 
B) measures the relationship between securities,whereas the covariance measures the relationship between a security and the market. 
C) is a relative measure showing association between security returns,whereas the covariance is an absolute measure showing association between security returns. 
D) is a geometric measure,and the covariance is a statistical measure. 
A) can be positive,negative,or zero,whereas the covariance is always positive. 
B) measures the relationship between securities,whereas the covariance measures the relationship between a security and the market. 
C) is a relative measure showing association between security returns,whereas the covariance is an absolute measure showing association between security returns. 
D) is a geometric measure,and the covariance is a statistical measure.

Question 10

Which of the following statements regarding expected return of a portfolio is true? It can:

Accepted Answer

A) be higher than the weighted average expected return of the individual assets. 
B) be lower than the weighted average return of the individual assets. 
C) never differ from the weighted average expected return of the individual assets. 
D) not be calculated. 
A) be higher than the weighted average expected return of the individual assets. 
B) be lower than the weighted average return of the individual assets. 
C) never differ from the weighted average expected return of the individual assets. 
D) not be calculated.

Question 11

Probability distributions:

Accepted Answer

A) are always discrete. 
B) are always continuous. 
C) can be either discrete or continuous. 
D) are always symmetric. 
A) are always discrete. 
B) are always continuous. 
C) can be either discrete or continuous. 
D) are always symmetric.

Question 12

With a continuous probability distribution:

Accepted Answer

A) a probability is assigned to each possible outcome. 
B) possible outcomes are constantly changing. 
C) an infinite number of possible outcomes exist. 
D) there is no variance. 
A) a probability is assigned to each possible outcome. 
B) possible outcomes are constantly changing. 
C) an infinite number of possible outcomes exist. 
D) there is no variance.

Question 13

The bell-shaped curve,or normal distribution,is considered:

Accepted Answer

A) discrete. 
B) downward sloping. 
C) linear. 
D) continuous. 
A) discrete. 
B) downward sloping. 
C) linear. 
D) continuous.

Markowitz diversification,also called _ diversification,removes _____ risk from the portfolio.

An efficiently diversified portfolio still has _____________________ risk.

A portfolio consisting of two securities with perfect negative correlation in the proper proportions can be shown to have a standard deviation of zero.What makes this riskless portfolio impossible to achieve in the real world?

Each individual asset's weight in the portfolio is found by:

The major problem with the Markowitz model is that it requires a full set of ___________ between the asset returns in order to calculate portfolio variance.

When the covariance is positive,the correlation will be:

Investments in commodities such as precious metals may provide additional diversification opportunities for portfolios consisting primarily of stocks and bonds.

In a portfolio consisting of two perfectly negatively correlated securities,the highest attainable expected return will consist of a portfolio containing 100% of the asset with the highest expected return.

The major difference between the correlation coefficient and the covariance is that the correlation coefficient:

Which of the following statements regarding expected return of a portfolio is true? It can:

Probability distributions:

With a continuous probability distribution:

The bell-shaped curve,or normal distribution,is considered:

Understanding Investments

Investment Alternatives

Indirect Investing

Securities Markets and Market Indexes

How Securities Are Traded

The Risks and Returns From Investing

Portfolio Selection

Asset Pricing Models

Common Stock Valuation

Common Stocks: Analysis and Strategy

Market Efficiency

Economy Market Analysis

Industry Analysis

Company Analysis

Technical Analysis

Bond Yields

Bonds: Analysis and Strategy

Options

Futures

Portfolio Management

Evaluation of Investment Performance

Filters

Exam 7: Portfolio Theory

Markowitz diversification,also called _____________ diversification,removes _________________ risk from the portfolio.

An efficiently diversified portfolio still has _____________________ risk.

A portfolio consisting of two securities with perfect negative correlation in the proper proportions can be shown to have a standard deviation of zero.What makes this riskless portfolio impossible to achieve in the real world?

Each individual asset's weight in the portfolio is found by:

The major problem with the Markowitz model is that it requires a full set of ___________ between the asset returns in order to calculate portfolio variance.

When the covariance is positive,the correlation will be:

Investments in commodities such as precious metals may provide additional diversification opportunities for portfolios consisting primarily of stocks and bonds.

In a portfolio consisting of two perfectly negatively correlated securities,the highest attainable expected return will consist of a portfolio containing 100% of the asset with the highest expected return.

The major difference between the correlation coefficient and the covariance is that the correlation coefficient:

Which of the following statements regarding expected return of a portfolio is true? It can:

Probability distributions:

With a continuous probability distribution:

The bell-shaped curve,or normal distribution,is considered:

Understanding Investments

Investment Alternatives

Indirect Investing

Securities Markets and Market Indexes

How Securities Are Traded

The Risks and Returns From Investing

Portfolio Selection

Asset Pricing Models

Common Stock Valuation

Common Stocks: Analysis and Strategy

Market Efficiency

Economy Market Analysis

Industry Analysis

Company Analysis

Technical Analysis

Bond Yields

Bonds: Analysis and Strategy

Options

Futures

Portfolio Management

Evaluation of Investment Performance

Filters

Markowitz diversification,also called _ diversification,removes _____ risk from the portfolio.