30 câu hỏi
|
Investment |
Expected Return E(r) |
Standard Deviation |
|
1 |
0.12 |
0.3 |
|
2 |
0.15 |
0.5 |
|
3 |
0.21 |
0.16 |
|
4 |
0.24 |
0.21 |
1. U = E(r) − (A/2)s2, where A = 4.0.Based on the utility function above, which investment would you select?
2
1
4
3
cannot tell from the information given 11.
Investment | Expected Return E(r) | Standard Deviation |
A | 10% | 5% |
B | 21% | 11% |
C | 18% | 23% |
D | 24% | 16% |
According to the mean-variance criterion, which of the statements below is correct?
Investment B dominates Investment C.
Investment D dominates only Investment B.
Investment B dominates Investment A.
Investment D dominates all of the other investments.
Investment C dominates investment A
Steve is more risk-averse than Edie. On a graph that shows Steve and Edie's indifference curves, which of the following is true? Assume that the graph shows expected return on the vertical axis and standard deviation on the horizontal axis. I) Steve and Edie's indifference curves might intersect; II) Steve's indifference curves will have flatter slopes than Edie's; III) Steve's indifference curves will have steeper slopes than Edie's; IV) Steve and Edie's indifference curves will not intersect; V) Steve's indifference curves will be downward sloping and Edie's will be upward sloping.
III and IV
I and III
I and II
II and IV
I and V
The certainty equivalent rate of a portfolio is
represented by the scaling factor "−.005" in the utility function.
the rate that a risk-free investment would need to offer with certainty to be considered equally attractive as the risky portfolio.
the rate that equates "A" in the utility function with the average risk aversion coefficient for all risk-averse investors.
the minimum rate guaranteed by institutions such as banks.
the rate that the investor must earn for certain to give up the use of his money.
The exact indifference curves of different investors
None of these is correct.
cannot be known with perfect certainty.
can be calculated precisely with the use of advanced calculus.
allow the advisor to create more suitable portfolios for the client.
cannot be known with perfect certainty but they do allow the advisor to create more suitable portfolios for the client.
The presence of risk means that
final wealth will be greater than initial wealth.
investors will lose money.
terminal wealth will be less than initial wealth.
more than one outcome is possible.
the standard deviation of the payoff is larger than its expected value
The utility score an investor assigns to a particular portfolio, other things equal,
will increase as the rate of return increases.
will decrease as the rate of return increases.
will decrease as the standard deviation decreases.
will increase as the variance increases.
will decrease as the variance decreases.
The variable (A) in the utility function represents the:
the security's variance.
minimum required utility of the portfolio.
investor's return requirement.
investor's aversion to risk.
certainty-equivalent rate of the portfolio
To maximize her expected utility, which one of the following investment alternatives would she choose?
A portfolio that pays 10 percent with 40 percent probability or 5 percent with a 60 percent probability.
A portfolio that pays 12 percent with 20 percent probability or 2 percent with 80 percent probability.
A portfolio that pays 10 percent with a 60 percent probability or 5 percent with 40 percent probability.
A portfolio that pays 12 percent with 60 percent probability or 5 percent with 40 percent probability.
A portfolio that pays 12 percent with 40 percent probability or 5 percent with 60 percent probability.
When an investment advisor attempts to determine an investor's risk tolerance, which factor would they be least likely to assess?
The investor's feelings about loss
The investor's prior investing experience
The investor's tendency to make risky or conservative choices
The level of return the investor prefers
The investor's degree of financial security
Which of the following statements is (are) true? I) Risk-averse investors reject investments that are fair games; II) Risk-neutral investors judge risky investments only by the expected returns; III) Risk- averse investors judge investments only by their riskiness; IV) Risk- loving investors will not engage in fair games.
I and II only
II, III, and IV only
II and III only
I only
II only
Which of the following statements regarding risk-averse investors is true?
They only accept risky investments that offer risk premiums over the risk- free rate.
They only care about the rate of return and accept investments that are fair games.
They only care about the rate of return.
They accept investments that are fair games.
They are willing to accept lower returns and high risk.
A reward-to-volatility ratio is useful in:
assessing the effects of inflation.
measuring the standard deviation of returns.
understanding how returns increase relative to risk increases.
analyzing returns on variable rate bonds.
None of these is correct.
An investor invests 30 percent of his wealth in a risky asset with an expected rate of return of 0.15 and a variance of 0.04 and 70 percent in a T-bill that pays 6 percent. His portfolio's expected return and standard deviation are ______and ________, respectively.
0.087; 0.06
0.087; 0.12
0.114; 0.12
0.795; 0.14
0.295; 0.12
An investor invests 40 percent of his wealth in a risky asset with an expected rate of return of 0.18 and a variance of 0.10 and 60 percent in a T-bill that pays 4 percent. His portfolio's expected return and standard deviation are _____and ______, respectively.
0.106; 0.137
0.114; 0.112
0.096; 0.126
0.087; 0.144
0.087; 0.063
Asset allocation
may involve the decision as to the allocation between a risk-free asset and a risky asset and may involve the decision as to the allocation among different risky assets.
may involve considerable security analysis.
may involve the decision as to the allocation between a risk-free asset and a risky asset and may involve considerable security analysis.
may involve the decision as to the allocation among different risky assets only.
may involve the decision as to the allocation between a risk-free asset and a risky asset only
Based on their relative degrees of risk tolerance
all investors will have the same portfolio asset allocations.
investors would perform vastly different levels of security analysis.
investors will hold varying amounts of the risky asset in their portfolios.
investors will hold varying amounts of the risk-free asset in their portfolios.
investors will hold varying amounts of the risky asset and the risk-free asset in their portfolios
Consider a T-bill with a rate of return of 5% and the following risky securities:
Security A: E(r) = 0.15; Variance = 0.04 Security B: E(r) = 0.10; Variance = 0.0225 Security C: E(r) = 0.12; Variance = 0.01 Security D: E(r) = 0.13; Variance = 0.0625
From which set of portfolios, formed with the T-bill and any one of the four risky securities, would a risk-averse investor always choose his portfolio?
Cannot be determined.
The set of portfolios formed with the T-bill and security A.
The set of portfolios formed with the T-bill and security D.
The set of portfolios formed with the T-bill and security C.
The set of portfolios formed with the T-bill and security B
Given the capital allocation line, an investor's optimal portfolio is the portfolio that
maximizes her expected utility.
maximizes her expected profit.
minimizes both her risk and return.
minimizes her risk.
maximizes her risk
In the mean-standard deviation graph, the line that connects the risk- free rate and the optimal risky portfolio, P, is called_______.
skewness
the Indifference Curve
the investor's utility line
the Security Market Line
the Capital Allocation Line
The Capital Market Line:
I) is a special case of the Capital Allocation Line;
II) represents the opportunity set of a passive investment strategy;
III) has the one-month T-Bill rate as its intercept;
IV) uses a broad index of common stocks as its risky portfolio.
I, II, and III
III and IV
II, III, and IV
I, II, III, and IV
I, III, and IV
The change from a straight to a kinked capital allocation line is a result of:
an investor's risk tolerance is decreasing.
borrowing rate exceeding lending rate.
increase in the portfolio proportion of the risk-free asset.
reward-to-volatility ratio increasing.
a flawed theory
The first major step in asset allocation is:
analyzing financial statements.
assessing risk tolerance.
estimating security betas.
determining how much money a client needs to make.
identifying market anomalies.
To build an indifference curve we can first find the utility of a portfolio with 100% in the risk-free asset, then
change the standard deviation of the portfolio and find the expected return the investor would require to maintain the same utility level.
change the risk-free rate and find the utility level that results in the same standard deviation.
change the expected return of the portfolio and equate the utility to the standard deviation.
find another utility level with 0% risk.
find the utility of a portfolio with 0% in the risk-free asset.
Treasury bills are commonly viewed as risk-free assets because
maturity is identical to most investors' desired holding periods.
Both their short-term nature makes their values insensitive to interest rate fluctuations and the inflation uncertainty over their time to maturity is negligible.
both the inflation uncertainty over their time to maturity is negligible and their term to
their short-term nature makes their values insensitive to interest rate fluctuations.
the inflation uncertainty over their time to maturity is negligible.
their term to maturity is identical to most investors' desired holding periods
You are considering investing \$1,000 in a T-bill that pays 0.05 and a risky portfolio, P, constructed with two risky securities, X and Y. The weights of X and Y in P are 0.60 and 0.40, respectively. X has an expected rate of return of 0.14 and variance of 0.01, and Y has an expected rate of return of 0.10 and a variance of 0.0081.
What would be the dollar value of your positions in X, Y, and the T-bills, respectively, if you decide to hold a portfolio that has an expected outcome of \$1,120?
\$568; \$378; \$54
\$108; \$514; \$378
\$568; \$54; \$378
\$378; \$54; \$568
Cannot be determined
Which of the following statements regarding the Capital Allocation Line (CAL) is false?
The CAL shows risk-return combinations and is also called the efficient frontier of risky assets in the absence of a risk-free asset.
The CAL is also called the efficient frontier of risky assets in the absence of a risk-free asset.
The CAL shows risk-return combinations.
The slope of the CAL is also called the reward-to-volatility ratio.
The slope of the CAL equals the increase in the expected return of the complete portfolio per unit of additional standard deviation.
You are considering investing \$1,000 in a T-bill that pays 0.05 and a risky portfolio, P, constructed with 2 risky securities, X and Y. The weights of X and Y in P are 0.60 and 0.40, respectively. X has an expected rate of return of 0.14 and variance of 0.01, and Y has an expected rate of return of 0.10 and a variance of 0.0081. If you want to form a portfolio with an expected rate of return of 0.11, what percentages of your money must you invest in the T-bill and P, respectively?
0.50; 0.50
0.25; 0.75
cannot be determined
0.19; 0.81
0.65; 0.35
You invest \$100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.20 and a T-bill with a rate of return of 0.03. What percentages of your money must be invested in the risky asset and the risk-free asset, respectively, to form a portfolio with an expected return of 0.08?
62.5% and 37.5%
75% and 25%
cannot be determined
57% and 43%
85% and 15%
You invest \$100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.20 and a T-bill with a rate of return of 0.03. What percentages of your money must be invested in the risk-free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 0.08?
50% and 50%
30% and 70%
Cannot be determined.
60% and 40%
40% and 60%