1. A portfolio beta is computed as which one of the following? (Points : 1)
2. You own a stock which is expected to return 14 percent in a booming economy and 9 percent in a normal economy. If the probability of a booming economy decreases, your expected return will: (Points : 1)
either remain constant or decrease.
either remain constant or increase.
3. What is the beta of a risk-free security? (Points : 1)
4. Which one of the following concerns a money manager’s control over investment risks, particularly potential short-run losses? (Points : 1)
Normal distribution management
Investment risk management
Raw return distributions
Volatility performance measures
5. Tony brags that his portfolio’s rate of return is “beating the market”. Which one of the following would best substantiate his claim? (Points : 1)
positive Sharpe ratio
negative Treynor ratio
positive Jensen’s alpha
zero Value at Risk
beta greater than 1.0
6. You own three stocks which have betas of 1.16, 1.34, and 1.02. You would like to add a fourth security such that your portfolio beta will match that of the market. Given this situation, the new security: (Points : 1)
must have a beta of 1.0.
must have a beta of zero.
could be a U.S. Treasury bill.
could have any beta greater than 1.0.
must have a portfolio weight of 50 percent or more.
7. Which one of the following is the type of risk that affects a large number of assets? (Points : 1)
8. What is the beta of a portfolio which consists of the following?
(Points : 1)
9. The slope of the security market line is equal to the: (Points : 1)
market risk premium.
risk-free rate of return.
market rate of return.
market rate of return multiplied by any security’s beta, given an inefficient market.
market rate of return multiplied by the risk-free rate.
10. Which one of the following is computed by dividing a portfolio’s risk premium by the portfolio beta? (Points : 1)
Value at Risk