5513 MID-exam Essay

1302 WordsSep 26, 20136 Pages
Name: Student ID Signature The University of New South Wales School of Banking and Finance FINS 5513: Investments and Portfolio Selection Mid-Session Sample Examination Session 1, 2013 Time Allowed: 2 Hours Reading Time: 5 minutes All pages of this examination must be returned This examination contains 23 questions in 2 sections and has 35 total marks: • • 20 multiple-choice questions, each question carries 1 mark, 20 total marks; 3 short-answer questions, each question carries 5 marks, 15 total marks; Instructions: 1. Write your name and student number and sign on the top of this page. 2. Attempt all questions. 3. Mark your answer to the multiple choice questions in pencil on the generalized answer sheet…show more content…
E. Exchange rates. 11. Other things equal, diversification is most effective when A. securities' returns are uncorrelated. B. securities' returns are positively correlated. C. securities' returns are high. D. securities' returns are negatively correlated. E. both securities' returns are positively correlated and securities' returns are high. 12. Consider an investment opportunity set formed with two securities that are perfectly negatively correlated. The global minimum variance portfolio has a standard deviation that is always A. greater than zero. B. equal to zero. C. equal to the sum of the securities' standard deviations. D. equal to -1. E. between zero and -1. 13. Which one of the following portfolios cannot lie on the efficient frontier as described by Markowitz? A. Only portfolio W cannot lie on the efficient frontier. B. Only portfolio X cannot lie on the efficient frontier. C. Only portfolio Y cannot lie on the efficient frontier. D. Only portfolio Z cannot lie on the efficient frontier. E. Cannot tell from the information given. 14. The index model has been estimated for stocks A and B with the following results: RA= 0.03 + 0.7RM+ eA RB= 0.01 + 0.9RM+ eB σM= 0.35 σ(eA) = 0.20 σ(eB) = 0.10 The covariance between the returns on stocks A and B is ___________. A. 0.0384 B. 0.0406 C. 0.1920 D. 0.0772 E. 0.4000 15. Consider the single-index model. The alpha of a stock is 0%. The return on the market index is 16%. The risk-free