投资学第7版testbank答案07.docx
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投资学第7版testbank答案07
MultipleChoiceQuestions
1.Marketriskisalsoreferredtoas
A）systematicrisk,diversifiablerisk.
B）systematicrisk,nondiversifiablerisk.
C）uniquerisk,nondiversifiablerisk.
D）uniquerisk,diversifiablerisk.
E）noneoftheabove.
Answer:
BDifficulty:
Easy
Rationale:
Market,systematic,andnondiversifiableriskaresynonymsreferringtotheriskthatcannotbeeliminatedfromtheportfolio.Diversifiable,unique,nonsystematic,andfirm-specificrisksaresynonymsreferringtotheriskthatcanbeeliminatedfromtheportfoliobydiversification.
2.Theriskthatcanbediversifiedawayis
A）firmspecificrisk.
B）beta.
C）systematicrisk.
D）marketrisk.
E）noneoftheabove.
Answer:
ADifficulty:
Easy
Rationale:
Seeexplanationsfor1and2above.
3.Thevarianceofaportfolioofriskysecurities
A）isaweightedsumofthesecurities'variances.
B）isthesumofthesecurities'variances.
C）istheweightedsumofthesecurities'variancesandcovariances.
D）isthesumofthesecurities'covariances.
E）noneoftheabove.
Answer:
CDifficulty:
Moderate
Rationale:
Thevarianceofaportfolioofriskysecuritiesisaweightedsumtakingintoaccountboththevarianceoftheindividualsecuritiesandthecovariancesbetweensecurities.
4.Theexpectedreturnofaportfolioofriskysecurities
A）isaweightedaverageofthesecurities'returns.
B）isthesumofthesecurities'returns.
C）istheweightedsumofthesecurities'variancesandcovariances.
D）AandC.
E）noneoftheabove.
Answer:
ADifficulty:
Easy
5.Otherthingsequal,diversificationismosteffectivewhen
A）securities'returnsareuncorrelated.
B）securities'returnsarepositivelycorrelated.
C）securities'returnsarehigh.
D）securities'returnsarenegativelycorrelated.
E）BandC.
Answer:
DDifficulty:
Moderate
Rationale:
Negativecorrelationamongsecuritiesresultsinthegreatestreductionofportfoliorisk,whichisthegoalofdiversification.
6.Theefficientfrontierofriskyassetsis
A）theportionoftheinvestmentopportunitysetthatliesabovetheglobalminimumvarianceportfolio.
B）theportionoftheinvestmentopportunitysetthatrepresentsthehigheststandarddeviations.
C）theportionoftheinvestmentopportunitysetwhichincludestheportfolioswiththeloweststandarddeviation.
D）thesetofportfoliosthathavezerostandarddeviation.
E）bothAandBaretrue.
Answer:
ADifficulty:
Moderate
Rationale:
Portfoliosontheefficientfrontierarethoseprovidingthegreatestexpectedreturnforagivenamountofrisk.Onlythoseportfoliosabovetheglobalminimumvarianceportfoliomeetthiscriterion.
7.TheCapitalAllocationLineprovidedbyarisk-freesecurityandNriskysecuritiesis
A）thelinethatconnectstherisk-freerateandtheglobalminimum-varianceportfoliooftheriskysecurities.
B）thelinethatconnectstherisk-freerateandtheportfoliooftheriskysecuritiesthathasthehighestexpectedreturnontheefficientfrontier.
C）thelinetangenttotheefficientfrontierofriskysecuritiesdrawnfromtherisk-freerate.
D）thehorizontallinedrawnfromtherisk-freerate.
E）noneoftheabove.
Answer:
CDifficulty:
Moderate
Rationale:
TheCapitalAllocationLinerepresentsthemostefficientcombinationsoftherisk-freeassetandriskysecurities.OnlyCmeetsthatdefinition.
8.Consideraninvestmentopportunitysetformedwithtwosecuritiesthatareperfectlynegativelycorrelated.Theglobalminimumvarianceportfoliohasastandarddeviationthatisalways
A）greaterthanzero.
B）equaltozero.
C）equaltothesumofthesecurities'standarddeviations.
D）equalto-1.
E）noneoftheabove.
Answer:
BDifficulty:
Difficult
Rationale:
Iftwosecuritieswereperfectlynegativelycorrelated,theweightsfortheminimumvarianceportfolioforthosesecuritiescouldbecalculated,andthestandarddeviationoftheresultingportfoliowouldbezero.
9.Whichofthefollowingstatementsis（are）trueregardingthevarianceofaportfoliooftworiskysecurities
A）Thehigherthecoefficientofcorrelationbetweensecurities,thegreaterthereductionintheportfoliovariance.
B）Thereisalinearrelationshipbetweenthesecurities'coefficientofcorrelationandtheportfoliovariance.
C）Thedegreetowhichtheportfoliovarianceisreduceddependsonthedegreeofcorrelationbetweensecurities.
D）AandB.
E）AandC.
Answer:
CDifficulty:
Moderate
Rationale:
Thelowerthecorrelationbetweenthereturnsofthesecurities,themoreportfolioriskisreduced.
10.EfficientportfoliosofNriskysecuritiesareportfoliosthat
A）areformedwiththesecuritiesthathavethehighestratesofreturnregardlessoftheirstandarddeviations.
B）havethehighestratesofreturnforagivenlevelofrisk.
C）areselectedfromthosesecuritieswiththeloweststandarddeviationsregardlessoftheirreturns.
D）havethehighestriskandratesofreturnandthehigheststandarddeviations.
E）havetheloweststandarddeviationsandthelowestratesofreturn.
Answer:
BDifficulty:
Moderate
Rationale:
Portfoliosthatareefficientarethosethatprovidethehighestexpectedreturnforagivenlevelofrisk.
11.Whichofthefollowingstatement（s）is（are）trueregardingtheselectionofaportfoliofromthosethatlieontheCapitalAllocationLine
A）Lessrisk-averseinvestorswillinvestmoreintherisk-freesecurityandlessintheoptimalriskyportfoliothanmorerisk-averseinvestors.
B）Morerisk-averseinvestorswillinvestlessintheoptimalriskyportfolioandmoreintherisk-freesecuritythanlessrisk-averseinvestors.
C）Investorschoosetheportfoliothatmaximizestheirexpectedutility.
D）AandC.
E）BandC.
Answer:
EDifficulty:
Moderate
Rationale:
Allrationalinvestorsselecttheportfoliothatmaximizestheirexpectedutility;forinvestorswhoarerelativelymorerisk-averse,doingsomeansinvestinglessintheoptimalriskyportfolioandmoreintherisk-freeasset.
Usethefollowingtoanswerquestions12-18:
ConsiderthefollowingprobabilitydistributionforstocksAandB:
12.TheexpectedratesofreturnofstocksAandBare_____and_____,respectively.
A）%;9%
B）14%;10%
C）%;%
D）%;%
E）noneoftheabove
Answer:
CDifficulty:
Easy
Rationale:
E（RA）=（10%）+（13%）+（12%）+（14%）+（15%）=%;E（RB）=（8%）+（7%）+（6%）+（9%）+（8%）=%.
13.ThestandarddeviationsofstocksAandBare_____and_____,respectively.
A）%;%
B）%;%
C）%;%
D）%;%
E）noneoftheabove
Answer:
DDifficulty:
Moderate
Rationale:
sA=[（10%-%）2+（13%-%）2+（12%-%）2+（14%-%）2+（15%-%）2]1/2=%;sB=[（8%-%）2+（7%-%）2+（6%-%）2+（9%-%）2+（8%-%）2=%.
14.ThecoefficientofcorrelationbetweenAandBis
A）.
B）.
C）
D）.
E）noneoftheabove.
Answer:
ADifficulty:
Difficult
Rationale:
covA,B=（10%-%）（8%-%）+（13%-%）（7%-%）+（12%-%）（6%-%）+（14%-%）（9%-%）+（15%-%）（8%-%）=;rA,B=[]=.
15.Ifyouinvest40%ofyourmoneyinAand60%inB,whatwouldbeyourportfolio'sexpectedrateofreturnandstandarddeviation
A）%;3%
B）%;%
C）11%;%
D）11%;3%
E）noneoftheabove
Answer:
BDifficulty:
Difficult
Rationale:
E（RP）=%）+%）=%;sP=[22+22+2]1/2=%.
16.LetGbetheglobalminimumvarianceportfolio.TheweightsofAandBinGare__________and__________,respectively.
A）;
B）;
C）;
D）;
E）;
Answer:
EDifficulty:
Difficult
Rationale:
wA=[2-]/[2+2-
（2）=;wB=1-=thattheabovesolutionassumesthesolutionsobtainedinquestion13and14.
17.Theexpectedrateofreturnandstandarddeviationoftheglobalminimumvarianceportfolio,G,are__________and__________,respectively.
A）%;%
B）%;%
C）%;%
D）%;%
E）noneoftheabove
Answer:
DDifficulty:
Moderate
Rationale:
E（RG）=%）+%）=%.9%;sG=[22+22+
（2）]1/2=%.
18.Whichofthefollowingportfolio（s）is（are）ontheefficientfrontier
A）Theportfoliowith20percentinAand80percentinB.
B）Theportfoliowith15percentinAand85percentinB.
C）Theportfoliowith26percentinAand74percentinB.
D）Theportfoliowith10percentinAand90percentinB.
E）AandBarebothontheefficientfrontier.
Answer:
CDifficulty:
Difficult
Rationale:
ThePortfolio'sE（Rp）,sp,Reward/volatilityratiosare20A/80B:
%,%,;15A/85B:
%,%,;26A/74B:
%,%,;10A/90B:
%,%,.Theportfoliowith26%inAand74%inBdominatesalloftheotherportfoliosbythemean-variancecriterion.
Usethefollowingtoanswerquestions19-21:
ConsidertwoperfectlynegativelycorrelatedriskysecuritiesAandB.Ahasanexpectedrateofreturnof10%andastandarddeviationof16%.Bhasanexpectedrateofreturnof8%andastandarddeviationof12%.
19.TheweightsofAandBintheglobalminimumvarianceportfolioare_____and_____,respectively.
A）;
B）;
C）;
D）;
E）;
Answer:
DDifficulty:
Moderate
Rationale:
wA=12/（16+12）=;wB=1-=.
20.Therisk-freeportfoliothatcanbeformedwiththetwosecuritieswillearn_____rateofreturn.
A）%
B）%
C）%
D）%
E）noneoftheabove
Answer:
CDifficulty:
Difficult
Rationale:
E（RP）=（10%）+（8%）=%.
21.Whichofthefollowingportfolio（s）is（are）mostefficient
A）45percentinAand55percentinB.
B）65percentinAand35percentinB.
C）35percentinAand65percentinB.
D）AandBarebothefficient.
E）AandCarebothefficient.
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