Question 1

The measure of performance that divides the portfolio's risk premium by the portfolio's beta is the

Accepted Answer

A)  Sharpe measure. 
B)  Jensen measure. 
C)  Fama measure. 
D)  Alternative components model (MCV). 
E)  Treynor measure. 
A)  Sharpe measure. 
B)  Jensen measure. 
C)  Fama measure. 
D)  Alternative components model (MCV). 
E)  Treynor measure.

Question 2

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The last year's performance for four mutual funds is presented below. The market return was 10.70 percent, the standard deviation was 13.1 percent last year, and the risk-free rate of return was 5%.
  
-Refer to Exhibit 18.7. Compute the Sharpe Measure for the A fund.

Accepted Answer

A)  0.012 
B)  0.040 
C)  0.069 
D)  0.396 
E)  1.142 
A)  0.012 
B)  0.040 
C)  0.069 
D)  0.396 
E)  1.142

Question 3

Treynor developed the first composite measure of portfolio performance by introducing the capital market line, which defines the relationship between the return of a portfolio over time and the return for the market portfolio.

Accepted Answer

A) True 
 B)False

Question 4

The most common manner of evaluating portfolio managers is a peer group comparison.

Accepted Answer

A) True 
 B)False

Question 5

The Sharpe measure of portfolio performance divides the portfolio's risk premium by the portfolio's beta.

Accepted Answer

A) True 
 B)False

Question 6

Sharpe's performance assumes that all portfolios are completely diversified.

Accepted Answer

A) True 
 B)False

Question 7

In the evaluation of bond portfolio performance, the interest rate anticipation effect refers to

Accepted Answer

A)  the difference in portfolio duration and index duration. 
B)  the extra return attributable to acquiring bonds that are temporarily mispriced relative to risk. 
C)  short-run changes in the portfolio during a specific period. 
D)  the differential return from changing duration of the portfolio during a specific period. 
E)  None of these are correct. 
A)  the difference in portfolio duration and index duration. 
B)  the extra return attributable to acquiring bonds that are temporarily mispriced relative to risk. 
C)  short-run changes in the portfolio during a specific period. 
D)  the differential return from changing duration of the portfolio during a specific period. 
E)  None of these are correct.

Question 8

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The last year's performance for four mutual funds is presented below. The market return was 10.70 percent, the standard deviation was 13.1 percent last year, and the risk-free rate of return was 5%.
  
-Refer to Exhibit 18.7. Compute the Treynor Measure for the C fund.

Accepted Answer

A)  0.012 
B)  0.040 
C)  0.069 
D)  0.396 
E)  1.142 
A)  0.012 
B)  0.040 
C)  0.069 
D)  0.396 
E)  1.142

Question 9

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information for a portfolio manager:
  
-Refer to Exhibit 18.12. Calculate the percentage return that can be attributed to the asset allocation decision.

Accepted Answer

A)  0.105 percent 
B)  0.925 percent 
C)  0.20 percent 
D)  0.96 percent 
E)  0.94 percent 
A)  0.105 percent 
B)  0.925 percent 
C)  0.20 percent 
D)  0.96 percent 
E)  0.94 percent

Question 10

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The data presented below has been collected at this point in time.
  
-Refer to Exhibit 18.4. Compute the Treynor Measure for the CCC fund.

Accepted Answer

A)  5.43 
B)  2.74 
C)  2.19 
D)  2.00 
E)  1.65 
A)  5.43 
B)  2.74 
C)  2.19 
D)  2.00 
E)  1.65

Question 11

What is the Sharpe measure for the S&P 500 over the last ten years if the standard deviation was 8 percent and the return was 14 percent?

Accepted Answer

A)  1.55 
B)  1.69 
C)  1.75 
D)  1.99 
E)  2.09 
A)  1.55 
B)  1.69 
C)  1.75 
D)  1.99 
E)  2.09

Question 12

The Jensen measure requires that each period's rates of return and risk-free rate be measured, rather than using the long-term averages as in the Treynor and Sharpe measures.

Accepted Answer

A) True 
 B)False

Question 13

One of the goals of the Global Investment Performance Standards (GIPS) is to obtain worldwide acceptance of a single standard for the calculation and presentation of investment performance based on the principles of fair representation and full disclosure.

Accepted Answer

A) True 
 B)False

Question 14

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Given the following information, evaluate the performance of Tyler Incorporated (TI).
  
-Refer to Exhibit 18.10. Calculate TI's risk.

Accepted Answer

A)  0.0113 
B)  0.1200 
C)  0.0670 
D)  0.0530 
E)  0.0696 
A)  0.0113 
B)  0.1200 
C)  0.0670 
D)  0.0530 
E)  0.0696

Question 15

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
An analyst is considering investing in funds A, B, C, and D. The market portfolio, M, is expected to be 11 percent next period, and the risk-free rate of return is 3 percent. The market portfolio had a standard deviation over the past ten years of 0.20. The analyst gathered the following information on the four funds.
  
-Refer to Exhibit 18.8. Compute the Jensen Measure for the C fund.

Accepted Answer

A)  0.16 percent 
B)  1.80 percent 
C)  7.20 percent 
D)  9.00 percent 
E)  9.13 percent 
A)  0.16 percent 
B)  1.80 percent 
C)  7.20 percent 
D)  9.00 percent 
E)  9.13 percent

Question 16

If the return increases as more global investments with low correlation are added to the market portfolio, the efficient frontier moves

Accepted Answer

A)  up and right. 
B)  up and left. 
C)  down and right. 
D)  down and left. 
E)  up only. 
A)  up and right. 
B)  up and left. 
C)  down and right. 
D)  down and left. 
E)  up only.

Question 17

A more recent adjustment to the Sharpe measurement for portfolio evaluation is

Accepted Answer

A)  to divide the portfolio risk premium by total risk rather than the portfolio's beta. 
B)  to divide the portfolio risk premium by standard deviation rather than the portfolio's beta. 
C)  to divide the portfolio risk premium by the excess portfolio return rather than total risk. 
D)  to divide the excess portfolio return by the portfolio's standard deviation. 
E)  to divide the excess portfolio return by the portfolio's beta. 
A)  to divide the portfolio risk premium by total risk rather than the portfolio's beta. 
B)  to divide the portfolio risk premium by standard deviation rather than the portfolio's beta. 
C)  to divide the portfolio risk premium by the excess portfolio return rather than total risk. 
D)  to divide the excess portfolio return by the portfolio's standard deviation. 
E)  to divide the excess portfolio return by the portfolio's beta.

Question 18

Normal portfolios, which are customized benchmarks that reflect the specific styles of alternative managers.

Accepted Answer

A) True 
 B)False

Question 19

The typical proxy for the market portfolio is the S&P 500 Index because it is diversified and price weighted.

Accepted Answer

A) True 
 B)False

Question 20

The policy effect is a difference in bond portfolio performance from that of a benchmark index due to a difference in duration.

Accepted Answer

A) True 
 B)False

The measure of performance that divides the portfolio's risk premium by the portfolio's beta is the

Treynor developed the first composite measure of portfolio performance by introducing the capital market line, which defines the relationship between the return of a portfolio over time and the return for the market portfolio.

The most common manner of evaluating portfolio managers is a peer group comparison.

The Sharpe measure of portfolio performance divides the portfolio's risk premium by the portfolio's beta.

Sharpe's performance assumes that all portfolios are completely diversified.

In the evaluation of bond portfolio performance, the interest rate anticipation effect refers to

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Consider the following information for a portfolio manager: -Refer to Exhibit 18.12. Calculate the percentage return that can be attributed to the asset allocation decision.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The data presented below has been collected at this point in time. -Refer to Exhibit 18.4. Compute the Treynor Measure for the CCC fund.

What is the Sharpe measure for the S&P 500 over the last ten years if the standard deviation was 8 percent and the return was 14 percent?

The Jensen measure requires that each period's rates of return and risk-free rate be measured, rather than using the long-term averages as in the Treynor and Sharpe measures.

One of the goals of the Global Investment Performance Standards (GIPS) is to obtain worldwide acceptance of a single standard for the calculation and presentation of investment performance based on the principles of fair representation and full disclosure.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Given the following information, evaluate the performance of Tyler Incorporated (TI). -Refer to Exhibit 18.10. Calculate TI's risk.

If the return increases as more global investments with low correlation are added to the market portfolio, the efficient frontier moves

A more recent adjustment to the Sharpe measurement for portfolio evaluation is

Normal portfolios, which are customized benchmarks that reflect the specific styles of alternative managers.

The typical proxy for the market portfolio is the S&P 500 Index because it is diversified and price weighted.

The policy effect is a difference in bond portfolio performance from that of a benchmark index due to a difference in duration.

The Investment Setting

The Investment Setting: Part A

Asset Allocation and Security Selection

Asset Allocation and Security Selection: Part A

Organization and Functioning of Securities Markets

Security Market Indexes and Index Funds

Efficient Capital Markets, Behavioral Finance, and Technical Analysis

An Introduction to Portfolio Management

An Introduction to Portfolio Management: Part A

An Introduction to Portfolio Management: Part B

Asset Pricing Models

Equity Valuation

The Top-Down Approach to Market, Industry, and Company Analysis

The Practice of Fundamental Investing

Equity Portfolio Management Strategies

Bond Fundamentals and Valuation

Bond Analysis and Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward, Futures, and Swap Contracts

Option Contracts

Professional Money Management, Alternative Assets, and Industry Ethics

Filters

Exam 18: Evaluation of Portfolio Performance

The measure of performance that divides the portfolio's risk premium by the portfolio's beta is the

Treynor developed the first composite measure of portfolio performance by introducing the capital market line, which defines the relationship between the return of a portfolio over time and the return for the market portfolio.

The most common manner of evaluating portfolio managers is a peer group comparison.

The Sharpe measure of portfolio performance divides the portfolio's risk premium by the portfolio's beta.

Sharpe's performance assumes that all portfolios are completely diversified.

In the evaluation of bond portfolio performance, the interest rate anticipation effect refers to

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Consider the following information for a portfolio manager: -Refer to Exhibit 18.12. Calculate the percentage return that can be attributed to the asset allocation decision.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The data presented below has been collected at this point in time. -Refer to Exhibit 18.4. Compute the Treynor Measure for the CCC fund.

What is the Sharpe measure for the S&P 500 over the last ten years if the standard deviation was 8 percent and the return was 14 percent?

The Jensen measure requires that each period's rates of return and risk-free rate be measured, rather than using the long-term averages as in the Treynor and Sharpe measures.

One of the goals of the Global Investment Performance Standards (GIPS) is to obtain worldwide acceptance of a single standard for the calculation and presentation of investment performance based on the principles of fair representation and full disclosure.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Given the following information, evaluate the performance of Tyler Incorporated (TI). -Refer to Exhibit 18.10. Calculate TI's risk.

If the return increases as more global investments with low correlation are added to the market portfolio, the efficient frontier moves

A more recent adjustment to the Sharpe measurement for portfolio evaluation is

Normal portfolios, which are customized benchmarks that reflect the specific styles of alternative managers.

The typical proxy for the market portfolio is the S&P 500 Index because it is diversified and price weighted.

The policy effect is a difference in bond portfolio performance from that of a benchmark index due to a difference in duration.

The Investment Setting

The Investment Setting: Part A

Asset Allocation and Security Selection

Asset Allocation and Security Selection: Part A

Organization and Functioning of Securities Markets

Security Market Indexes and Index Funds

Efficient Capital Markets, Behavioral Finance, and Technical Analysis

An Introduction to Portfolio Management

An Introduction to Portfolio Management: Part A

An Introduction to Portfolio Management: Part B

Asset Pricing Models

Equity Valuation

The Top-Down Approach to Market, Industry, and Company Analysis

The Practice of Fundamental Investing

Equity Portfolio Management Strategies

Bond Fundamentals and Valuation

Bond Analysis and Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward, Futures, and Swap Contracts

Option Contracts

Professional Money Management, Alternative Assets, and Industry Ethics

Filters