Question 1

The return on the risky portfolio is 15%. The risk-free rate, as well as the investor's borrowing rate, is 10%. The standard deviation of return on the risky portfolio is 20%. If the standard deviation on the complete portfolio is 25%, the expected return on the complete portfolio is ________.

Accepted Answer

A)   6%
B)   8.75 %
C)   10%
D)   16.25%E) B) and C)
F) A) and B)

Question 2

From 1926 to 2013 the world stock portfolio offered ________ return and ________ volatility than the portfolio of large U.S. stocks.

Accepted Answer

A)   lower; higher
B)   lower; lower
C)   higher; lower
D)   higher; higherE) B) and D)
F) A) and B)

Question 3

The holding period return on a stock is equal to ________.

Accepted Answer

A)   the capital gain yield over the period plus the inflation rate
B)   the capital gain yield over the period plus the dividend yield
C)   the current yield plus the dividend yield
D)   the dividend yield plus the risk premiumE) C) and D)
F) All of the above

Question 4

Which one of the following measures time-weighted returns and allows for compounding?

Accepted Answer

A)   geometric average return
B)   arithmetic average return
C)   dollar-weighted return
D)   historical average returnE) A) and B)
F) None of the above

Question 5

The arithmetic average of -11%, 15%, and 20% is ________.

Accepted Answer

A)   15.67%
B)   8%
C)   11.22%
D)   6.45%E) A) and B)
F) B) and D)

Question 6

You invest $1,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 16% and a standard deviation of 20% and a Treasury bill with a rate of return of 6%. ________ of your complete portfolio should be invested in the risky portfolio if you want your complete portfolio to have a standard deviation of 9%.

Accepted Answer

A)   100%
B)   90%
C)   45%
D)   10%E) A) and B)
F) None of the above

Question 7

During the 1926-2013 period which one of the following asset classes provided the lowest real return?

Accepted Answer

A)   Small U.S. stocks
B)   Large U.S. stocks
C)   Long-term U.S. Treasury bonds
D)   Equity world portfolio in U.S. dollarsE) B) and C)
F) All of the above

Question 8

You have $500,000 available to invest. The risk-free rate, as well as your borrowing rate, is 8%. The return on the risky portfolio is 16%. If you wish to earn a 22% return, you should ________.

Accepted Answer

A)   invest $125,000 in the risk-free asset
B)   invest $375,000 in the risk-free asset
C)   borrow $125,000
D)   borrow $375,000E) A) and B)
F) All of the above

Question 9

Security A has a higher standard deviation of returns than security B. We would expect that:
I. Security A would have a risk premium equal to security B.
II. The likely range of returns for security A in any given year would be higher than the likely range of returns for security B.
III. The Sharpe ratio of A will be higher than the Sharpe ratio of B.

Accepted Answer

A)   I only
B)   II only
C)   II and III only
D)   I, II, and IIIE) C) and D)
F) A) and B)

Exam 5: Risk, Return, and the Historical Record

You have $500,000 available to invest. The risk-free rate, as well as your borrowing rate, is 8%. The return on the risky portfolio is 16%. If you wish to earn a 22% return, you should ________.

Correct Answer
verified

The return on the risky portfolio is 15%. The risk-free rate, as well as the investor's borrowing rate, is 10%. The standard deviation of return on the risky portfolio is 20%. If the standard deviation on the complete portfolio is 25%, the expected return on the complete portfolio is ________.

Correct Answer
verified

Correct Answer
verified

The arithmetic average of -11%, 15%, and 20% is ________.

Correct Answer
verified

Correct Answer
verified

During the 1926-2013 period which one of the following asset classes provided the lowest real return?

Correct Answer
verified

Which one of the following measures time-weighted returns and allows for compounding?

Correct Answer
verified

From 1926 to 2013 the world stock portfolio offered return and volatility than the portfolio of large U.S. stocks.

Correct Answer
verified

The holding period return on a stock is equal to ________.

Correct Answer
verified

Exam 5: Risk, Return, and the Historical Record

You have $500,000 available to invest. The risk-free rate, as well as your borrowing rate, is 8%. The return on the risky portfolio is 16%. If you wish to earn a 22% return, you should ________.

Correct AnswerverifiedShow Answer

The return on the risky portfolio is 15%. The risk-free rate, as well as the investor's borrowing rate, is 10%. The standard deviation of return on the risky portfolio is 20%. If the standard deviation on the complete portfolio is 25%, the expected return on the complete portfolio is ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The arithmetic average of -11%, 15%, and 20% is ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

During the 1926-2013 period which one of the following asset classes provided the lowest real return?

Correct AnswerverifiedShow Answer

Which one of the following measures time-weighted returns and allows for compounding?

Correct AnswerverifiedShow Answer

From 1926 to 2013 the world stock portfolio offered ________ return and ________ volatility than the portfolio of large U.S. stocks.

Correct AnswerverifiedShow Answer

The holding period return on a stock is equal to ________.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

From 1926 to 2013 the world stock portfolio offered return and volatility than the portfolio of large U.S. stocks.

Correct Answer
verified

Correct Answer
verified