Question 1 (1 point)

Under the _____ approach, excess returns on a portfolio are compared to the total risk of the portfolio.

Question 1 options:

A)

Sharpe

B)

Treynor

C)

Jensen

D)

More than one of the above

Question 2 (1 point)

Investors act as if security markets are relatively efficient. True or false?

Question 2 options:

True

False

Question 3 (1 point)

Once an asset allocation has been determined and securities selected, no changes in the portfolio is needed unless the asset allocation changes. True or false?

Question 3 options:

True

False

Question 4 (1 point)

Under all three - Sharpe, Treynor, Jensen- approaches, the return measurement must be compared to risk in some form. True or False?

Question 4 options:

True

False

Question 5 (1 point)

Passive investors try to outperform a benchmark. True or false

Question 5 options:

True

False

Question 6 (1 point)

Asset allocation focuses on determining the correct mixture of asset classes that is most likely to provide a combination of risk and expected returns that is optimal for the investor. True or false?

Question 6 options:

True

False

Question 7 (1 point)

Asset allocation represents an attempt by individuals or portfolio managers to determine what

Question 7 options:

A)

Percentage of assets should be distributed to beneficiaries

B)

Mutual funds are appropriate for investment based on risk and return

C)

Percent of funds under management should be invested in stocks, bonds, etc.

D)

Brokerages houses best meet their needs

Question 8 (1 point)

The Sharpe ratio measure on a portfolio which earns 12 percent, with a standard deviation of 30 percent and beta of 1.27 is

Question 8 options:

A)

0.40

B)

0.094

C)

0.508

D)

There is not enough information

Question 9 (1 point)

Tactical asset allocation produces temporary asset allocation weights that occur in response to temporary changes in capital market conditions. True or false?

Question 9 options:

True

False

Question 10 (1 point)

A benchmark portfolio should include be;

Question 10 options:

A)

Relevant

B)

Feasible

C)

Known in advance

D)

All of the above

Question 11 (1 point)

Which of the following is the final measure used to evaluate a portfolio manager's performance using the Jensen approach?

Question 11 options:

A)

Alpha ONLY

B)

Alpha and the portfolio's beta

C)

Alpha, beta, and the return on a market-based portfolio

D)

None of the above

Question 12 (1 point)

Portfolio beta can be used as an indication of the amount of market risk that the portfolio had during the time interval. True or false?

Question 12 options:

True

False

Question 13 (1 point)

Annual Return12.5% (Portfolio P)13.7% (Benchmark)

Standard Deviation15.3% (Portfolio P)17.5% (Benchmark)

Beta1.06

Risk Free Rate3.6%

What is Jensen's alpha for Portfolio P?

Question 13 options:

A)

-1.81%

B)

-0.63%

C)

0.00%

D)

+1.58%

E)

+1.79%

Question 14 (1 point)

Strategic asset allocation identifies asset classes and the proportions for those asset classes that would comprise the normal asset allocation. True or false?

Question 14 options:

True

False

Question 15 (1 point)

Under the Jensen approach, if the market rate of excess returns is 5.75 percent, a portfolio with beta of .9 should provide excess returns of

Question 15 options:

A)

5.175 percent

B)

4.5 percent

C)

5 percent

D)

There is not enough information to tell

Question 16 (1 point)

If the portfolio is completely diversified. The following measures will agree on the ranking of the portfolio:

Question 16 options:

A)

Sharpe

B)

Treynor

C)

Jensen Alpha

D)

Sharpe and Treynor

E)

Sharpe, Treynor, and Jensen

Question 17 (1 point)

Annual Return12.5% (Portfolio P)13.7% (Benchmark)

Standard Deviation15.3% (Portfolio P)17.5% (Benchmark)

Beta1.06 (Portfolio P)

Risk Free Rate3.6%

What is the Treynor ratio for Portfolio P?

Question 17 options:

A)

8.40%

B)

10.20%

C)

11.79%

D)

12.92%

E)

14.43%

Question 18 (1 point)

The only difference between the Sharpe and Treynor approaches is that the Treynor approach evaluate excess returns based on

Question 18 options:

A)

Total risk

B)

Unsystematic risk (specific risk)

C)

Systematic risk (market risk)

D)

None of the above

Question 19 (1 point)

An investor deposited $10,000 into a portfolio at the beginning of the year. The portfolio increased by 8% by the end of the year. The investor withdrew half his funds and left the remaining on deposit. These funds increased by 20% over the next year. The investor then closed his account. What is the investor's two year holding period return?

Question 19 options:

A)

8.0%

B)

14.0%

C)

16.6%

D)

18.8%

E)

20.0%

Question 20 (1 point)

If the portfolio return is 10 percent and the U.S. T-bill rate is 5.75 percent what is the Treynor measure of excess returns?

Question 20 options:

A)

0.4250

B)

0.0425

C)

0.7391

D)

There is not enough information to tell