Portfolio Management Test Preparation
Course Introduction
Portfolio Management is a comprehensive course that introduces students to the theories, strategies, and practical techniques involved in constructing and overseeing investment portfolios. The course covers fundamental concepts such as risk and return, asset allocation, diversification, and portfolio optimization. Students will learn to evaluate various asset classes, including equities, bonds, and alternative investments, and understand the principles of modern portfolio theory. Emphasis is placed on performance measurement, the impact of market conditions on portfolio strategy, and the use of analytical tools to manage and rebalance portfolios in response to changing investor goals and market dynamics. The course blends theory with real-world applications, preparing students to make informed portfolio management decisions in professional investment environments.
Recommended Textbook
Modern Portfolio Theory and Investment Analysis 9th Edition by Edwin J. Elton
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5 Chapters
231 Verified Questions
231 Flashcards
Source URL: https://quizplus.com/study-set/3490 Page 2
Chapter 1: Introduction
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12 Verified Questions
12 Flashcards
Source URL: https://quizplus.com/quiz/69294
Sample Questions
Q1) In case of government bonds,non-competitive bidders have price uncertainty and competitive bidders face volume uncertainty.
A)True
B)False
Answer: True
Q2) Dow Jones Industrial Average Index (DJIA)is consisted of a price-weighted average of 30 large "blue chip" stocks.
A)True
B)False
Answer: True
Q3) An order which is activated only when the price of the stock reaches or passes through a predetermined limit is called the:
A) stop order.
B) day order.
C) limit order.
D) market order.
Answer: A
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Page 3
Chapter 2: Portfolio Analysis
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36 Verified Questions
36 Flashcards
Source URL: https://quizplus.com/quiz/69295
Sample Questions
Q1) Two companies Amber and Bolt are manufacturers of glass.The securities of the companies are listed and traded in the New York Stock Exchange.An investor's portfolio consists of these two securities in the proportion of 5/6 and 1/6 respectively.Amber's security has an expected return of 20% and a standard deviation of 8%.Bolt has an expected return of 15% and a standard deviation of 5%.The correlation coefficient between the two securities is 0.6.Calculate the expected return and the standard deviation of the investor's portfolio.
A) \(\bar { R } _ { P } = 19.17 \% ; \sigma _ { P } = 7.20 \%\)
B) \(\bar { R } _ { P } = 20.19 \% ; \sigma _ { P } = 8.20 \%\)
C) \(\bar { R } _ { P } = 17 \% ; \sigma _ { P } = 7.0 \%\)
D) \(\bar { R } _ { P } = 18.19 \% ; \sigma _ { P } = 8.0 \%\)
Answer: A
Q2) The risk on a portfolio of assets:
A) is different from the risk on the market portfolio.
B) is not influenced by the risk of individual assets.
C) is different from the risk of individual assets.
D) is negatively correlated to the risk of individual assets.
Answer: C
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Chapter 3: Models of Equilibrium in the Capital Markets
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46 Verified Questions
46 Flashcards
Source URL: https://quizplus.com/quiz/69296
Sample Questions
Q1) In a CAPM framework,prohibiting short sales:
A) will prohibit investors from holding the market portfolio in equilibrium.
B) will make the security market line steeper.
C) will encourage investors to hold more riskless assets.
D) will not change the equilibrium.
Answer: D
Q2) What is the standard deviation of portfolio A?
A) 12.8%
B) 13.8%
C) 10.7%
D) 28.6%
Answer: A
Q3) If the standard CAPM holds,a security with a high variance of return and a beta of zero should be expected to earn:
A) a zero rate of return.
B) the market rate of return.
C) the risk-free rate of return.
D) higher rate of return
Answer: C
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Chapter 4: Security Analysis and Portfolio Theory
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125 Verified Questions
125 Flashcards
Source URL: https://quizplus.com/quiz/69297
Sample Questions
Q1) Spot interest rates are yields to maturity on loans or bonds that pay only one cash flow to the investor.
A)True
B)False
Q2) Your friend claims that,since the market went up seven days in a row recently,there is no way that the market could follow a random walk.Discuss whether your friend's claim is true or false.
A)True
B)False
Q3) You have just completed a study of small and large stocks and have obtained the following results:
s\(\begin{array} { l c c }
& \text { small stocks } & \text { large stocks } \\
\text { excess returns } & 5 \% & 0 \% \\
\text { transactions cost } & 10 \% & 2 \%
\end{array}\)
Given the difference in transactions costs,how long would your investment horizon have to be for small stocks to be a better investment than large stocks?
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Page 6
Chapter 5: Evaluating the Investment Process
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12 Verified Questions
12 Flashcards
Source URL: https://quizplus.com/quiz/69298
Sample Questions
Q1) Explain how a fund manager may improve the portfolio's performance through market timing.Also discuss the limitation of using such strategies.
Q2) List the methods that are employed to determine the "I's" in the literature of performance measurement,where the "I's" represent influences that systematically affect returns.
Q3) One of the techniques adopted by managers to improve performance through market timing is to:
A) maintain a constant percentage of amount invested in bonds and stock.
B) adjust the expected return on the portfolio in anticipation of changes in market.
C) adjust the unsystematic risk in anticipation of changes in market.
D) adjust the average beta on the portfolio in anticipation of changes in market.
Q4) Mutual funds are subject to a single set of tax rules.To avoid taxes,mutual funds must distribute by December 31<sup>st</sup> 98% of all ordinary income earned during the calendar year and 98% of all realized net capital gains earned during the previous 12 months ending October 31<sup>st</sup>.
A)True
B)False
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