Exam 13: Performance Evaluation and Risk Management

You are considering the purchase of a mutual fund.You have found three funds that meet your basic criteria.Each fund has a different alpha.Which alpha indicates the preferred investment?

Mike's portfolio has a two-year expected return of 21.70 percent.What is the expected return for one year?

A diversified portfolio has a beta of 1.47 and a raw return of 14.28 percent.The market return is 11.74 percent and the market risk premium is 7.85 percent.What is Jensen's alpha of the portfolio?

Which measure would you use to know whether alpha is truly significant or just the result of random chance?

Which one of the following is computed by dividing a portfolio's risk premium by the portfolio beta?

A portfolio has an expected annual return of 15.7 percent and a standard deviation of 19.6 percent.What is the smallest expected loss over the next calendar quarter given a probability of 1 percent?

Which one of the following assesses risk by stating the probability of a loss a portfolio might incur within a stated time period given a specific probability?

A portfolio has a Treynor ratio of .070,a standard deviation of 16.40 percent,a beta of 1.16,and an expected return of 14.3 percent.What is the risk-free rate?

The Jensen-Treynor alpha is equal to:

You want to create the best portfolio that can be derived from two assets.Which one of the following will help you identify that portfolio?

You have a portfolio which has an average return of 10.3 percent.In any given year,you have a 2.5 percent probability of earning either a zero or a negative annual return.What is the approximate standard deviation of your portfolio?

Which one of the following measures risk premium in relation to systematic risk?

Your portfolio has a standard deviation of 11.7 percent.What is the two-year standard deviation?

Which one of the following statements is true concerning VaR?

A portfolio has a variance of .027556,a beta of 1.54,and an expected return of 11.2 percent.What is the Treynor ratio if the expected risk-free rate is 2.7 percent?

Which one of the following measures a portfolio's raw return against the expected return based on the Capital Asset Pricing Model?

Which one of the following is the best interpretation of this VaR statistiC: Prob (Rp ≤ -.15)= 37%?

The U.S.Treasury bill is yielding 2.25 percent and the market has an expected return of 9.8 percent.What is the Sharpe ratio of a portfolio that has a beta of 1.32 and a variance of .027556?

Which one of the following is the primary purpose of the Value-at-Risk computation?

A portfolio consists of the following two funds. What is the Sharpe ratio of the portfolio?