Risk Management
Textbook Exam Questions
Course Introduction
Risk Management is an essential course that introduces students to the fundamental concepts, methodologies, and tools used to identify, assess, and mitigate risks in various organizational contexts. The course covers a wide range of risk types including financial, operational, strategic, and compliance risks and explores the frameworks used to manage them effectively. Students will learn how to develop risk management plans, perform risk assessments, and implement control strategies to minimize negative impacts on business objectives. By analyzing real-world case studies and applying risk management techniques, students will gain practical skills to support informed decision-making and ensure organizational resilience in an increasingly uncertain environment.
Recommended Textbook
Investments 10th Edition by Zvi Bodie
Available Study Resources on Quizplus 28 Chapters
2186 Verified Questions
2186 Flashcards
Source URL: https://quizplus.com/study-set/2628
Page 2
Chapter 1: The Investment Environment
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/52472
Sample Questions
Q1) Which of the following is true about mortgage-backed securities
I. They aggregate individual home mortgages into homogeneous pools.
II. The purchaser receives monthly interest and principal payments received from payments made on the pool.
III. The banks that originated the mortgages maintain ownership of them.
IV. The banks that originated the mortgages continue to service them.
A)II, III, and IV
B)I, II, and IV
C)II and IV
D)I, III, and IV
E)I, II, III, and IV
Answer: B
Q2) Financial assets permit all of the following except
A)consumption timing.
B)allocation of risk.
C)separation of ownership and control.
D)elimination of risk.
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Asset Classes and Financial Instruments
Available Study Resources on Quizplus for this Chatper
86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/52471
Sample Questions
Q1) Commercial paper is a short-term security issued by ________ to raise funds.
A)the Federal Reserve Bank
B)commercial banks
C)large, well-known companies
D)the New York Stock Exchange
E)state and local governments
Answer: C
Q2) The ____ is an example of a U.S.index of large firms.
A)Wilshire 5000
B)DJIA
C)DAX
D)Russell 2000
E)All of the options
Answer: B
Q3) The ____ index represents the performance of the U.K.stock market.
A)DAX
B)FTSE
C)Nikkei
D)Hang Seng
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: How Securities Are Traded
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/52470
Sample Questions
Q1) When a firm markets new securities, a preliminary registration statement must be filed with
A)the exchange on which the security will be listed.
B)the Securities and Exchange Commission.
C)the Federal Reserve.
D)all other companies in the same line of business.
E)the Federal Deposit Insurance Corporation.
Answer: B
Q2) You want to purchase IBM stock at $80 from your broker using as little of your own money as possible.If initial margin is 50% and you have $2,000 to invest, how many shares can you buy
A)100 shares
B)200 shares
C)50 shares
D)500 shares
E)25 shares
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Mutual Funds and Other Investment Companies
Available Study Resources on Quizplus for this Chatper
72 Verified Questions
72 Flashcards
Source URL: https://quizplus.com/quiz/52469
Sample Questions
Q1) Discuss the taxation of mutual fund income.
Q2) Which of the following is true regarding equity mutual funds
I. They invest primarily in stock.
II. They may hold fixed-income securities as well as stock.
III. Most hold money market securities as well as stock.
IV. Two types of equity funds are income funds and growth funds.
A)I and IV
B)I, III, and IV
C)I, II, and IV
D)I, II, and III
E)I, II, III, and IV
Q3) A mutual fund had NAV per share of $16.75 on January 1, 2012.On December 31 of the same year the fund's rate of return for the year was 26.6%.Income distributions were $1.79 and the fund had capital gain distributions of $2.80.Without considering taxes and transactions costs, what ending NAV would you calculate
A)$17.44
B)$13.28
C)$14.96
D)$17.25
E)$16.62
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Risk, Return, and the Historical Record
Available Study Resources on Quizplus for this Chatper
85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/52468
Sample Questions
Q1) Discuss some reasons why an investor with a longtime horizon might choose to invest in common stocks, even though they have historically been riskier than government bonds or T-bills.
Q2) When comparing investments with different horizons, the ____________ provides the more accurate comparison.
A)arithmetic average
B)effective annual rate
C)average annual return
D)historical annual average
Q3) A year ago, you invested $12,000 in an investment that produced a return of 18%.What is your approximate annual real rate of return if the rate of inflation was 2% over the year
A)18%
B)2%
C)16%
D)15%
Q4) Discuss the relationships between interest rates (both real and nominal), expected inflation rates, and tax rates on investment returns.
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Capital Allocation to Risky Assets
Available Study Resources on Quizplus for this Chatper
70 Verified Questions
70 Flashcards
Source URL: https://quizplus.com/quiz/52467
Sample Questions
Q1) An investor invests 30% of his wealth in a risky asset with an expected rate of return of 0.11 and a variance of 0.12 and 70% in a T-bill that pays 3%.His portfolio's expected return and standard deviation are __________ and __________, respectively.
A)0.086; 0.242
B)0.054; 0.104
C)0.295; 0.123
D)0.087; 0.182
E)None of the options
Q2) When an investment advisor attempts to determine an investor's risk tolerance, which factor would they be least likely to assess
A)The investor's prior investing experience
B)The investor's degree of financial security
C)The investor's tendency to make risky or conservative choices
D)The level of return the investor prefers
E)The investor's feelings about loss
Q3) Describe how an investor may combine a risk-free asset and one risky asset in order to obtain the optimal portfolio for that investor.
To view all questions and flashcards with answers, click on the resource link above.
8
Chapter 7: Optimal Risky Portfolios
Available Study Resources on Quizplus for this Chatper
80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/52466
Sample Questions
Q1) Discuss how the investor can use the separation theorem and utility theory to produce an efficient portfolio suitable for the investor's level of risk tolerance.
Q2) The risk that can be diversified away is
A)firm specific risk.
B)beta.
C)systematic risk.
D)market risk.
Q3) The risk that cannot be diversified away is
A)firm-specific risk.
B)unique.
C)nonsystematic risk.
D)market risk.
Q4) Which of the following is not a source of systematic risk
A)The business cycle.
B)Interest rates.
C)Personnel changes.
D)The inflation rate.
E)Exchange rates.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Index Models
Available Study Resources on Quizplus for this Chatper
87 Verified Questions
87 Flashcards
Source URL: https://quizplus.com/quiz/52465
Sample Questions
Q1) The index model was first suggested by A)Graham.
B)Markowitz.
C)Miller.
D)Sharpe.
Q2) Assume that stock market returns do follow a single-index structure.An investment fund analyzes 217 stocks in order to construct a mean-variance efficient portfolio constrained by 217 investments.They will need to calculate ________ estimates of expected returns and ________ estimates of sensitivity coefficients to the macroeconomic factor.
A)217; 47,089
B)217; 217
C)47,089; 217
D)47,089; 47,089
E)None of the options
Q3) As diversification increases, the unsystematic risk of a portfolio approaches
A)1.
B)0.
C)infinity.
D)(n - 1) × n.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: The Capital Asset Pricing Model
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/52464
Sample Questions
Q1) Your opinion is that security A has an expected rate of return of 0.145.It has a beta of 1.5.The risk-free rate is 0.04 and the market expected rate of return is 0.11.According to the Capital Asset Pricing Model, this security is A)underpriced.
B)overpriced.
C)fairly priced.
D)Cannot be determined from data provided.
Q2) The capital asset pricing model assumes
A)all investors are price takers.
B)all investors have the same holding period.
C)investors pay taxes on capital gains.
D)all investors are price takers and have the same holding period.
E)all investors are price takers, have the same holding period, and pay taxes on capital gains.
Q3) According to the Capital Asset Pricing Model (CAPM), a security with a
A)positive alpha is considered overpriced.
B)zero alpha is considered to be a good buy.
C)negative alpha is considered to be a good buy.
D)positive alpha is considered to be underpriced.
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Arbitrage Pricing Theory and Multifactor Models
of Risk and Return
Available Study Resources on Quizplus for this Chatper
80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/52463
Sample Questions
Q1) Multifactor models, such as the one constructed by Chen, Roll, and Ross, can better describe assets' returns by
A)expanding beyond one factor to represent sources of systematic risk.
B)using variables that are easier to forecast ex ante.
C)calculating beta coefficients by an alternative method.
D)using only stocks with relatively stable returns.
E)ignoring firm-specific risk.
Q2) Consider the one-factor APT.The standard deviation of returns on a well-diversified portfolio is 19%.The standard deviation on the factor portfolio is 12%.The beta of the well-diversified portfolio is approximately
A)1.58.
B)1.13.
C)1.25.
D)0.76.
Q3) Discuss the similarities and the differences between the CAPM and the APT with regard to the following factors: capital market equilibrium, assumptions about risk aversion, risk-return dominance, and the number of investors required to restore equilibrium.
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: The Efficient Market Hypothesis
Available Study Resources on Quizplus for this Chatper
71 Verified Questions
71 Flashcards
Source URL: https://quizplus.com/quiz/52462
Sample Questions
Q1) The weather report says that a devastating and unexpected freeze is expected to hit Florida tonight, during the peak of the citrus harvest.In an efficient market one would expect the price of Florida Orange's stock to A)drop immediately.
B)remain unchanged.
C)increase immediately.
D)gradually decline for the next several weeks.
E)gradually increase for the next several weeks.
Q2) Your professor finds a stock-trading rule that generates excess risk-adjusted returns.Instead of publishing the results, she keeps the trading rule to herself.This is most closely associated with A)regret avoidance.
B)selection bias.
C)framing.
D)insider trading.
Q3) What is an event study
It is a test of what form of market efficiency
Discuss the process of conducting an event study, including the best variable(s) to observe as tests of market efficiency.
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Behavioral Finance and Technical Analysis
Available Study Resources on Quizplus for this Chatper
54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/52461
Sample Questions
Q1) Barber and Odean (2001) report that women trade __________ frequently than men.
A)less
B)less in down markets
C)more in up markets
D)more
Q2) Kahneman and Tversky (1973) reported that people give __________ weight to recent experience compared to prior beliefs when making forecasts.This is referred to as
A)too little; hyper rationality
B)too little; conservatism
C)too much; framing
D)too much; memory bias
Q3) Studies of closed-end funds find __________, which __________ the EMH.
A)prices at a premium to NAV; is consistent with B)prices at a premium to NAV; is inconsistent with C)prices at a discount to NAV; is consistent with D)prices at a discount to NAV; is inconsistent with E)prices at premiums and discounts to NAV; is inconsistent with
Q4) Compare and contrast the efficient market hypothesis with the school of thought termed behavioral finance.
Page 14
To view all questions and flashcards with answers, click on the resource link above.
Chapter 13: Empirical Evidence on Security Returns
Available Study Resources on Quizplus for this Chatper
56 Verified Questions
56 Flashcards
Source URL: https://quizplus.com/quiz/52460
Sample Questions
Q1) Consider the regression equation: r<sub>it</sub> - r<sub>ft</sub> = a<sub>i</sub> + b<sub>i</sub>(r<sub>mt</sub> - r<sub>ft</sub>) + e<sub>it</sub>
Where:
R<sub>it</sub> = return on stock i in month t
R<sub>ft</sub> = the monthly risk-free rate of return in month t
R<sub>mt</sub> = the return on the market portfolio proxy in month t
This regression equation is used to estimate
A)the security characteristic line.
B)benchmark error.
C)the capital market line.
D)All of the options
E)None of the options
Q2) Liquidity embodies several characteristics such as
A)trading costs.
B)ease of sale.
C)market depth.
D)necessary price concessions to effect a quick transaction.
E)All of the options
Q3) Describe some of the ways the CAPM is applied in practice.
Q4) Discuss Roll's critique of the CAPM.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Bond Prices and Yields
Available Study Resources on Quizplus for this Chatper
129 Verified Questions
129 Flashcards
Source URL: https://quizplus.com/quiz/52459
Sample Questions
Q1) A convertible bond has a par value of $1,000 and a current market value of $950.The current price of the issuing firm's stock is $22 and the conversion ratio is 40 shares.The bond's conversion premium is
A)$40.
B)$70.
C)$190.
D)$200.
Q2) You purchased an annual interest coupon bond one year ago with six years remaining to maturity at the time of purchase.The coupon interest rate is 10% and par value is $1,000.At the time you purchased the bond, the yield to maturity was 8%.If you sold the bond after receiving the first interest payment and the bond's yield to maturity had changed to 7%, your annual total rate of return on holding the bond for that year would have been
A)7.00%.
B)8.00%.
C)9.95%.
D)11.95%.
E)None of the options
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: The Term Structure of Interest Rates
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/52458
Sample Questions
Q1) If the value of a Treasury bond was lower than the value of the sum of its parts (STRIPPED cash flows) you could
A)profit by buying the stripped cash flows and reconstituting the bond.
B)not profit by buying the stripped cash flows and reconstituting the bond.
C)profit by buying the bond and creating STRIPS.
D)not profit by buying the stripped cash flows and reconstituting the bond and profit by buying the bond and creating STRIPS.
E)None of the options
Q2) Bond stripping and bond reconstitution offer opportunities for ______, which can occur if the _________ is violated.
A)arbitrage; law of one price
B)arbitrage; restrictive covenants
C)huge losses; law of one price
D)huge losses; restrictive covenants
Q3) Explain what the following terms mean: spot rate, short rate, and forward rate.Which of these is(are) observable today
Q4) Term Structure of Interest Rates is the relationship between what variables
What is assumed about other variables
How is term structure of interest rates depicted graphically
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Managing Bond Portfolios
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/52457
Sample Questions
Q1) A 10%, 30-year corporate bond was recently being priced to yield 12%.The Macaulay duration for the bond is 11.3 years.Given this information, the bond's modified duration would be
A)8.05.
B)10.09.
C)9.27.
D)11.22.
Q2) The duration of a par value bond with a coupon rate of 6.5% and a remaining time to maturity of 4 years is
A)3.65 years.
B)3.45 years.
C)3.85 years.
D)4.00 years.
Q3) Holding other factors constant, which one of the following bonds has the smallest price volatility
A)5-year, 0% coupon bond
B)5-year, 12% coupon bond
C)5 year, 14% coupon bond
D)5-year, 10% coupon bond
E)Cannot tell from the information given
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Macroeconomic and Industry Analysis
Available Study Resources on Quizplus for this Chatper
90 Verified Questions
90 Flashcards
Source URL: https://quizplus.com/quiz/52456
Sample Questions
Q1) The stock market exhibiting the highest U.S.dollar return in 2013 was
A)Thailand.
B)Singapore.
C)Greece.
D)South Korea.
E)China.
Q2) An example of a defensive industry is
A)the automobile industry.
B)the tobacco industry.
C)the food industry.
D)the automobile industry and the tobacco industry.
E)the tobacco industry and the food industry.
Q3) Monetary policy is determined by
A)government budget decisions.
B)presidential mandates.
C)the Board of Governors of the Federal Reserve System.
D)congressional actions.
E)None of the options
Q4) List and discuss three of the five determinants of competition suggested in Porter's 1985 study.
Page 19
To view all questions and flashcards with answers, click on the resource link above.
Chapter 18: Equity Valuation Models
Available Study Resources on Quizplus for this Chatper
130 Verified Questions
130 Flashcards
Source URL: https://quizplus.com/quiz/52455
Sample Questions
Q1) Risk Metrics Company is expected to pay a dividend of $3.50 in the coming year.Dividends are expected to grow at a rate of 10% per year.The risk-free rate of return is 5% and the expected return on the market portfolio is 13%.The stock is trading in the market today at a price of $90.00. What is the approximate beta of Risk Metrics's stock
A)0.8
B)1.0
C)1.1
D)1.4
E)None of the options
Q2) Suppose that the average P/E multiple in the oil industry is 22.Exxon is expected to have an EPS of $1.50 in the coming year.The intrinsic value of Exxon stock should be A)$33.00.
B)$35.55.
C)$63.00.
D)$72.00.
E)None of the options
Q3) Describe the free cash flow approach to firm valuation.How does it compare to the dividend discount model (DDM)
To view all questions and flashcards with answers, click on the resource link above.
Page 20
Chapter 19: Financial Statement Analysis
Available Study Resources on Quizplus for this Chatper
91 Verified Questions
91 Flashcards
Source URL: https://quizplus.com/quiz/52454
Sample Questions
Q1) A firm has an ROA of 14%, a debt/equity ratio of 0.8, a tax rate of 35%, and the interest rate on the debt is 10%.The firm's ROE is
A)11.18%.
B)8.97%.
C)11.54%.
D)12.62%.
Q2) If a firm has a positive tax rate, a positive ROA, and the interest rate on debt is the same as ROA, then ROA will be
A)greater than the ROE.
B)equal to the ROE.
C)less than the ROE.
D)greater than zero, but it is impossible to determine how ROA will compare to ROE. E)negative in all cases.
Q3) A firm has a P/E ratio of 12 and a ROE of 13% and a market-to-book value of
A)0.64.
B)0.92.
C)1.08.
D)1.56.
To view all questions and flashcards with answers, click on the resource link above.
21
Chapter 20: Options Markets: Introduction
Available Study Resources on Quizplus for this Chatper
108 Verified Questions
108 Flashcards
Source URL: https://quizplus.com/quiz/52453
Sample Questions
Q1) Lookback options have payoffs that
A)depend in part on the minimum or maximum price of the underlying asset during the life of the option.
B)only depend on the minimum price of the underlying asset during the life of the option.
C)only depend on the maximum price of the underlying asset during the life of the option.
D)are known in advance.
Q2) List three types of exotic options and describe their characteristics.
Q3) A call option on a stock is said to be at the money if
A)the exercise price is higher than the stock price.
B)the exercise price is less than the stock price.
C)the exercise price is equal to the stock price.
D)the price of the put is higher than the price of the call.
E)the price of the call is higher than the price of the put.
Q4) Draw a graph that shows the payoff and profit to the holder of a call option at expiration.Draw another graph that shows the payoff to the holder of a put option at expiration.Draw a third graph that shows the payoff of a long straddle at expiration.Be sure to label the axes and all other relevant features of the graphs.
To view all questions and flashcards with answers, click on the resource link above.
Page 22
Chapter 21: Option Valuation
Available Study Resources on Quizplus for this Chatper
90 Verified Questions
90 Flashcards
Source URL: https://quizplus.com/quiz/52452
Sample Questions
Q1) Portfolio A consists of 500 shares of stock and 500 calls on that stock.Portfolio B consists of 800 shares of stock.The call delta is 0.6.Which portfolio has a higher dollar exposure to a change in stock price
A)Portfolio B
B)Portfolio A
C)The two portfolios have the same exposure.
D)Portfolio A if the stock price increases, and portfolio B if it decreases
E)Portfolio B if the stock price increases, and portfolio A if it decreases
Q2) Volatility risk is
A)the volatility level for the stock that the option price implies.
B)the risk incurred from unpredictable changes in volatility.
C)the percentage change in the stock call option price divided by the percentage change in the stock price.
D)the sensitivity of the delta to the stock price.
Q3) Which of the variables affecting option pricing is not directly observable
If this variable is estimated to be higher or lower than the variable actually is, how is the option valuation affected
To view all questions and flashcards with answers, click on the resource link above. Page 23
Chapter 22: Futures Markets
Available Study Resources on Quizplus for this Chatper
91 Verified Questions
91 Flashcards
Source URL: https://quizplus.com/quiz/52451
Sample Questions
Q1) Which one of the following statements regarding "basis" is not true
A)The basis is the difference between the futures price and the spot price.
B)The basis risk is borne by the hedger.
C)A short hedger suffers losses when the basis decreases.
D)The basis increases when the futures price increases by more than the spot price.
Q2) On April 1, you bought one S&P 500 Index futures contract at a futures price of 1,550.If on June 15 the futures price were 1,612, what would be your profit (loss) if you closed your position (without considering transactions costs)
A)$1,550 loss
B)$15,550 loss
C)$15,550 profit
D)$1,550 profit
Q3) An increase in the basis will __________ a long hedger and __________ a short hedger.
A)hurt; benefit
B)hurt; hurt
C)benefit; hurt
D)benefit; benefit
E)benefit; have no effect upon
To view all questions and flashcards with answers, click on the resource link above.
Page 24
Chapter 23: Futures, Swaps, and Risk Management
Available Study Resources on Quizplus for this Chatper
56 Verified Questions
56 Flashcards
Source URL: https://quizplus.com/quiz/52450
Sample Questions
Q1) E-Minis typically have a value of ____________ percent of the standard contract and exist for ____________.
A)50; individual stocks and commodities
B)50; stock indexes and foreign currencies
C)40; stock indexes and commodities
D)20; individual stocks and commodities
E)20; stock indexes and foreign currencies
Q2) Suppose that the risk-free rates in the United States and in the United Kingdom are 4% and 6%, respectively.The spot exchange rate between the dollar and the pound is $1.60/BP.What should the futures price of the pound for a one-year contract be to prevent arbitrage opportunities, ignoring transactions costs
A)$1.60/BP
B)$1.70/BP
C)$1.66/BP
D)$1.63/BP
E)$1.57/BP
Q3) Why are commodity futures prices different from other futures prices
Explain the difference and give an example of a commodity and the factors involved.
To view all questions and flashcards with answers, click on the resource link above. Page 25
Chapter 24: Portfolio Performance Evaluation
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/52449
Sample Questions
Q1) Suppose two portfolios have the same average return, the same standard deviation of returns, but Buckeye Fund has a higher beta than Gator Fund.According to the Sharpe measure, the performance of Buckeye Fund
A)is better than the performance of Gator Fund.
B)is the same as the performance of Gator Fund.
C)is poorer than the performance of Gator Fund.
D)cannot be measured as there are no data on the alpha of the portfolio.
Q2) Suppose you purchase one share of the stock of Volatile Engineering Corporation at the beginning of year 1 for $36.At the end of year 1, you receive a $2 dividend and buy one more share for $30.At the end of year 2, you receive total dividends of $4 (i.e., $2 for each share) and sell the shares for $36.45 each.The time-weighted return on your investment is
A)-1.75%.
B)4.08%.
C)6.74%.
D)11.46%.
E)12.35%.
Q3) What is the problem with using the Sharpe measure for evaluation of an active portfolio management strategy
To view all questions and flashcards with answers, click on the resource link above.
Page 26
Chapter 25: International Diversification
Available Study Resources on Quizplus for this Chatper
52 Verified Questions
52 Flashcards
Source URL: https://quizplus.com/quiz/52448
Sample Questions
Q1) The __________ equity market had the lowest average U.S.dollar standard deviation of excess returns between 2002-2011.
A)Turkish
B)U.S.
C)Indonesian
D)U.K.
Q2) Assume there is a fixed exchange rate between the Canadian and U.S.dollar.The expected return and standard deviation of return on the U.S.stock market are 18% and 15%, respectively.The expected return and standard deviation on the Canadian stock market are 13% and 20%, respectively.The covariance of returns between the U.S.and Canadian stock markets is 1.5%. If you invested 50% of your money in the Canadian stock market and 50% in the U.S.stock market, the expected return on your portfolio would be
A)12.0%.
B)12.5%.
C)13.0%.
D)15.5%.
Q3) Discuss some of the factors that might be included in a multifactor model of security returns in an international application of arbitrage pricing theory (APT).
To view all questions and flashcards with answers, click on the resource link above.
Chapter 26: Hedge Funds
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/52447
Sample Questions
Q1) Statistical arbitrage is a version of a ______ strategy.
A)market neutral
B)directional
C)relative value
D)divergence
E)convergence
Q2) Hedge fund performance may reflect significant compensation for ________ risk.
A)liquidity
B)systematic
C)unsystematic
D)default
E)unsystematic and default
Q3) Shares in hedge funds are priced
A)at NAV.
B)a significant premium to NAV.
C)a significant discount from NAV.
D)a significant premium to NAV or a significant discount from NAV.
E)None of the options
Q4) Explain the five major differences between hedge funds and mutual funds.
To view all questions and flashcards with answers, click on the resource link above. Page 28
Chapter 27: The Theory of Active Portfolio Management
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/52446
Sample Questions
Q1) Kane, Marcus, and Trippi (1999) show that the annualized fee that investors should be willing to pay for active management, over and above the fee charged by a passive index fund, depends on I) the investor's coefficient of risk aversion.
II. the value of at-the-money call option on the market portfolio.
III. the value of out-of-the-money call option on the market portfolio.
IV. the precision of the security analyst.
V. the distribution of the squared information ratio of in the universe of securities.
A)I, II, and IV
B)I, III, and V
C)II, IV, and V
D)I, IV, and V
E)II, III, and V
Q2) Active portfolio managers try to construct a risky portfolio with
A)a higher Sharpe measure than a passive strategy.
B)a lower Sharpe measure than a passive strategy.
C)the same Sharpe measure as a passive strategy.
D)very few securities.
Q3) Discuss the Treynor-Black model.
To view all questions and flashcards with answers, click on the resource link above. Page 29
Chapter 28: Investment Policy and the Framework of the
Cfa Institute
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/52445
Sample Questions
Q1) __________ can be used to create a perfect inflation hedge
A)Gold
B)Real estate
C)CPI-linked bonds
D)The S&P 500 Index
E)None of the options
Q2) Professional financial planners should
A)assess their client's risk and return requirements on a one-time basis.
B)explain the investment plan to the client.
C)inform the client about the outcome of the plan.
D)assess their client's risk and return requirements on a one-time basis, explain the investment plan to the client, and inform the client about the outcome of the plan.
E)explain the investment plan to the client and inform the client about the outcome of the plan.
Q3) Target-date retirement funds
A)are funds of funds diversified across stocks and bonds.
B)are inappropriate for most investors.
C)have very high fees.
D)function much like hedge funds.
Page 30
To view all questions and flashcards with answers, click on the resource link above.