A negative alpha would mean that a the portfolio have earned enough return given the amount of risk he was taking a. maybe b. it depends c. false d. true
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A negative alpha would mean that a the portfolio have earned enough return given the amount of risk he was taking
a. maybe
b. it depends
c. false
d. true
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- An investor must look not only at the over-all return of a portfolio but also the risk of that portfolio to see if the investments return compensates for the risk it takes a. it depends b. maybe c. true d.falseAssume a utility function of ? = ?[?] − 1 ?? 2. Which statement(s) is/are correct about investors with this utility function? [I] An investor with a higher degree of risk aversion chooses the optimal portfolio with a higher risk premium [II] An investor with a higher degree of risk aversion chooses the optimal portfolio with lower risk [III] An investor with a higher degree of risk aversion chooses the optimal portfolio with a higher sharpe ratio [IV] The extent to which the investor dislikes risk is captured by ? 2 A. [II] only B. [I], [II] only C. [III] , [IV] only D. [II], [IV] only E. [I], [II], [III] onlywhich of the folowing models CANNT be applied to measure the Value-at-Risk of a cash-flow portfolio? A.Normal linear VaR B.Monte Carlo VaR C.None of the answers is correct D.Historical VaR
- In the context of CAPM, a risky asset with negative beta (beta<0) will have a positive expected excess return. (Assuming investors are risk-averse.) True or False?A portfolio that is positively correlated with the market portfolio but not particularly sensitive to market risk factors would have a beta that is A. Equal to zero. B. Equal to one. C. Less than zero. D. Between 0 and 1. E. Greater than 1.Answer whether each of the following statements is correct and explain your argument. \ (a) According to CAPM, the expected return of a risky asset is larger than the risk free rate. (b) According to CAPM, the expected return of a risky asset increases with its variance. (c) According to the separation property, the optimal risky portfolio for an investor dependson the investor’s personal preference. (d) A less risk-averse investor has a steeper indifference curve for the utility function.
- The probability distribution of a less risky return is more peaked than that ofa riskier return. What shape would the probability distribution have for (a)completely certain returns and (b) completely uncertain returns?d. Would this asset be considered more or less risky than the market? The asset is a. Equally as risky the market portfolio, which has a beta of a. 1 b. less risky than b. 0 c. more risky than c. -1Supposing the return from an investment has the following probability distribution Return Probability R (%) 8 0.2 10 0.2 12 0.5 14 0.1 Required: What is the expected return of the investment? What is the risk as measured by the standard deviation of expected returns?
- Assume that using the Security Market Line(SML) the required rate of return(RA)on stock A is found to be halfof the required return (RB) on stock B. The risk-free rate (Rf) is one-fourthof the required return on A. Return on market portfolio is denoted by RM. Find the ratioof betaof A(A) tobeta of B(B). Thank you for your help.Which of the following is INCORRECT? A. Anticipated returns on any given stock are always greater than 0. B. A negative beta stock has an expected return less than the risk-free rate. C. Two assets with a correlation of -1 could be combined to create a portfolio with a standard deviation of zero (no risk). D. All a stock’s risk could be unsystematic.Given the indifference curves above, which of the following statements isCORRECT? A) The investor prefers portfolio A because it has a lower level of risk. B) The investor prefers portfolio B because it has the greatest expected return. C) The investor prefers portfolio E because it is on the indifference curve 2, which is higher than the indifference curve 1, where both portfolios A and B are situated. D) The investor does not prefer one portfolio from another as each portfolio lies on an indifferent curve.