Question 1

Which one of the following assesses the ability of a money manager to balance high returns with an acceptable level of risk?

Accepted Answer

A) probability analysis 
B) raw return ratio 
C) risk assessment 
D) performance evaluation 
E) market analysis 
A) probability analysis 
B) raw return ratio 
C) risk assessment 
D) performance evaluation 
E) market analysis

Question 2

A portfolio has a beta of 1.26,a standard deviation of 15.9 percent,and an average return of 15.07 percent.The market rate is 12.7 percent and the risk-free rate is 3.6 percent.What is the Sharpe ratio?

Accepted Answer

A) .61 
B) .68 
C) .72 
D) .84 
E) .88 
A) .61 
B) .68 
C) .72 
D) .84 
E) .88

Question 3

High Mountain Homes has an expected annual return of 16.1 percent and a standard deviation of 20.3 percent.What is the smallest expected loss over the next month given a probability of 2.5 percent?

Accepted Answer

A) -6.64 percent 
B) -8.67 percent 
C) -10.14 percent 
D) -12.12 percent 
E) -15.13 percent 
A) -6.64 percent 
B) -8.67 percent 
C) -10.14 percent 
D) -12.12 percent 
E) -15.13 percent

Question 4

A portfolio has a beta of 1.16,a standard deviation of 12.2 percent,and an expected return of 11.55 percent.The market return is 10.4 percent and the risk-free rate is 3.2 percent.What is the portfolio's Sharpe ratio?

Accepted Answer

A) .57 
B) .68 
C) .73 
D) .77 
E) .85 
A) .57 
B) .68 
C) .73 
D) .77 
E) .85

Question 5

A portfolio has a Sharpe ratio of .80,a standard deviation of 17.4 percent,and an expected return of 15.9 percent.What is the risk-free rate?

Accepted Answer

A) 1.98 percent 
B) 2.36 percent 
C) 2.48 percent 
D) 3.09 percent 
E) 3.15 percent 
A) 1.98 percent 
B) 2.36 percent 
C) 2.48 percent 
D) 3.09 percent 
E) 3.15 percent

Question 6

A Sharpe-optimal portfolio provides which one of the following for a given set of securities?

Accepted Answer

A) Jensen's Alpha 
B) highest possible level of risk 
C) highest level of return for a market-equivalent level of risk 
D) highest excess return per unit of systematic risk 
E) highest risk premium per unit of total risk 
A) Jensen's Alpha 
B) highest possible level of risk 
C) highest level of return for a market-equivalent level of risk 
D) highest excess return per unit of systematic risk 
E) highest risk premium per unit of total risk

Question 7

What is the Treynor ratio of a portfolio comprised of 45 percent portfolio A and 55 percent portfolio B?   The risk-free rate is 3.12 percent and the market risk premium is 8.5 percent.

Accepted Answer

A) .041 
B) .058 
C) .069 
D) .114 
E) .136 
A) .041 
B) .058 
C) .069 
D) .114 
E) .136

Question 8

The Miller Fund's correlation with the market is .648.What percentage of the fund's movement can be explained by movements in the overall market?

Accepted Answer

A) 35 percent 
B) 42 percent 
C) 51 percent 
D) 65 percent 
E) 71 percent 
A) 35 percent 
B) 42 percent 
C) 51 percent 
D) 65 percent 
E) 71 percent

Question 9

You have computed the expected return using VaR with a 2.5 percent probability for a one-year period of time.How would this expected return be expressed on a normal distribution curve?

Accepted Answer

A) lower tail starting at the point that is 2.5 standard deviations below the mean 
B) lower tail of a 95 percent probability range 
C) the point that corresponds to 2.5 standard deviations below the mean 
D) the point that represents the lower end of the 90 percent probability range 
E) the negative range that lies within 2.5 standard deviations of the mean 
A) lower tail starting at the point that is 2.5 standard deviations below the mean 
B) lower tail of a 95 percent probability range 
C) the point that corresponds to 2.5 standard deviations below the mean 
D) the point that represents the lower end of the 90 percent probability range 
E) the negative range that lies within 2.5 standard deviations of the mean

Question 10

The risk premium of a portfolio divided by the portfolio's standard deviation defines which one of the following performance measures?

Accepted Answer

A) raw return 
B) Value at Risk 
C) Jensen's alpha 
D) Sharpe ratio 
E) Treynor ratio 
A) raw return 
B) Value at Risk 
C) Jensen's alpha 
D) Sharpe ratio 
E) Treynor ratio

Question 11

A portfolio has an average return of 14.2 percent and a standard deviation of 14.5 percent.Given this,you should expect to lose at least _____ percent on an annual basis once every century.

Accepted Answer

A) -19.53 
B) -17.24 
C) -15.68 
D) -1.710 
E) -1.550 
A) -19.53 
B) -17.24 
C) -15.68 
D) -1.710 
E) -1.550

Which one of the following assesses the ability of a money manager to balance high returns with an acceptable level of risk?

A portfolio has a beta of 1.26,a standard deviation of 15.9 percent,and an average return of 15.07 percent.The market rate is 12.7 percent and the risk-free rate is 3.6 percent.What is the Sharpe ratio?

High Mountain Homes has an expected annual return of 16.1 percent and a standard deviation of 20.3 percent.What is the smallest expected loss over the next month given a probability of 2.5 percent?

A portfolio has a beta of 1.16,a standard deviation of 12.2 percent,and an expected return of 11.55 percent.The market return is 10.4 percent and the risk-free rate is 3.2 percent.What is the portfolio's Sharpe ratio?

A portfolio has a Sharpe ratio of .80,a standard deviation of 17.4 percent,and an expected return of 15.9 percent.What is the risk-free rate?

A Sharpe-optimal portfolio provides which one of the following for a given set of securities?

What is the Treynor ratio of a portfolio comprised of 45 percent portfolio A and 55 percent portfolio B? The risk-free rate is 3.12 percent and the market risk premium is 8.5 percent.

The Miller Fund's correlation with the market is .648.What percentage of the fund's movement can be explained by movements in the overall market?

You have computed the expected return using VaR with a 2.5 percent probability for a one-year period of time.How would this expected return be expressed on a normal distribution curve?

The risk premium of a portfolio divided by the portfolio's standard deviation defines which one of the following performance measures?

A portfolio has an average return of 14.2 percent and a standard deviation of 14.5 percent.Given this,you should expect to lose at least _____ percent on an annual basis once every century.

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Exam 13: Performance Evaluation and Risk Management

Which one of the following assesses the ability of a money manager to balance high returns with an acceptable level of risk?

A portfolio has a beta of 1.26,a standard deviation of 15.9 percent,and an average return of 15.07 percent.The market rate is 12.7 percent and the risk-free rate is 3.6 percent.What is the Sharpe ratio?

High Mountain Homes has an expected annual return of 16.1 percent and a standard deviation of 20.3 percent.What is the smallest expected loss over the next month given a probability of 2.5 percent?

A portfolio has a beta of 1.16,a standard deviation of 12.2 percent,and an expected return of 11.55 percent.The market return is 10.4 percent and the risk-free rate is 3.2 percent.What is the portfolio's Sharpe ratio?

A portfolio has a Sharpe ratio of .80,a standard deviation of 17.4 percent,and an expected return of 15.9 percent.What is the risk-free rate?

A Sharpe-optimal portfolio provides which one of the following for a given set of securities?

What is the Treynor ratio of a portfolio comprised of 45 percent portfolio A and 55 percent portfolio B? The risk-free rate is 3.12 percent and the market risk premium is 8.5 percent.

The Miller Fund's correlation with the market is .648.What percentage of the fund's movement can be explained by movements in the overall market?

You have computed the expected return using VaR with a 2.5 percent probability for a one-year period of time.How would this expected return be expressed on a normal distribution curve?

The risk premium of a portfolio divided by the portfolio's standard deviation defines which one of the following performance measures?

A portfolio has an average return of 14.2 percent and a standard deviation of 14.5 percent.Given this,you should expect to lose at least _____ percent on an annual basis once every century.

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters