In: Finance
Portfolio Theory
1. What type of risk does a portfolio have with a beta of 1.5?
a. Systematic risk only. b. Unsystematic risk only. c. Systematic and unsystematic risk. d. Cannot determine from the question.
2. Which tools can help to determine an optimal investment portfolio?
1. Mean-variance optimization model. 2. Risk tolerance questionnaire. 3. Tactical asset allocation.
a. 1 only. b. 2 only. c. 1 and 2. d. All of the above.
3. The highest annual range of returns for the S&P 500 has occurred for which of the following?
a. 1-year rolling returns. b. 5-year rolling returns. c. 10-year rolling returns. d. 20-year rolling returns.
4. The _____ is a graphical representation of expected return and risk, as measured by beta.
a. ALA. b. CML. c. SML. d. Efficient frontier
5. Jocko was just told that the expected return for Echo stock was 20%, based on the CAPM. Assuming that the market return and the risk-free rate are 12% and 4%, respectively, what is the beta for Echo?
a. 1.0. b. 1.5. c. 2.0. d. 2.5.
1. What type of risk does a portfolio have with a beta of 1.5?
a. Systematic risk only.
Beta refers to the movement of the portfolio with respect to the movement in market index
2. Which tools can help to determine an optimal investment portfolio?
d. All of the above.
All the three approaches mentioned are used by investors to obtain maximum returns while minimizing risk
3. The highest annual range of returns for the S&P 500 has occurred for which of the following?
a. 1-year rolling returns. .
The Highest annual range of S&P happens in 1 year rolling returns
4. The _____ is a graphical representation of expected return and risk, as measured by beta.
c. SML
SML depicts Beta and expected return on graphical representation
5. Jocko was just told that the expected return for Echo stock was 20%, based on the CAPM. Assuming that the market return and the risk-free rate are 12% and 4%, respectively, what is the beta for Echo?
c. 2.0
Beta = Expected return - Risk Free rate) / (market rate - Risk Free rate)
Beta = 20% - 4%) / (12% - 4%)
Beta = 2.0