Portfolio Risk and Return II
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Question 1 of 8
1. Question
Capital Market Theory
An investor’s portfolio is 60% financed with debt borrowed at the risk-free rate of 4%. The portfolio is fully invested in an S&P500 ETF, with an expected return of 11%, and standard deviation of 28%.
What is the expected return of the investor’s portfolio?
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Question 2 of 8
2. Question
Capital Market Theory
Nguyen is an active portfolio manager. Which of the following statements is the most accurate?
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Question 3 of 8
3. Question
Systematic vs Unsystematic Risk
In an efficient market, the total risk of two stocks A and B are about the same, but stock A trades at a significantly lower expected return than stock B. Which of the following is the most likely reason?
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Question 4 of 8
4. Question
Returns Generating Models and Beta
Which of the following is not one of the factors for the Fama and French model?
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Question 5 of 8
5. Question
Returns Generating Models and Beta
A return of a Japanese stock has a covariance of 1378 with the return of the Nikkei Average. If the variance of Nikkei is 998, what is the estimated beta of the stock?
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Question 6 of 8
6. Question
CAPM and Security Market Line
The beta of a stock is 0.7. Based on a market risk premium of 17% and a risk-free rate of 2.5%, what is the expected return of the stock using CAPM?
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Question 7 of 8
7. Question
CAPM and Security Market Line
The beta of a stock is 1.3. The return of the market is 24%, and the risk-free rate is 3%. An analyst forecasts that the stock will give a return of 17.4% in the next year.
Based on the analyst’s forecast, the stock is most likely:
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Question 8 of 8
8. Question
Measures of Portfolio Performance
An investor would like to know if the return of one of his many portfolios is outperforming the market on a risk-adjusted basis. Which of the following measures is the most appropriate?
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