MCQ

Practitioners often use a ________ % VaR, meaning that ________ % of returns will exceed the VaR, and ________ % will be worse.

5, 95, 5

The change from a straight to a kinked capital allocation line is a result of:

Borrowing rate exceeding lending rate.

As the number of securities in a portfolio is increased, what happens to the average portfolio standard deviation?

It decreases at a decreasing rate

____________ is/are financial assets.

Stocks and bonds,

Asset allocations refers to _______

The allocation of assets into broad asset classes.

What is the expected return of a zero-beta security?

The risk-free rate.

Which of the following measures of risk best highlights the potential loss from extreme negative returns?

Value at risk (VaR)

The yield curve shows at any point in time ___

the relationship between yield on a bond and the time to maturity on the bond.

The material wealth of a society is a function of.

All real assets.

Which of the following would increase the net asset value of a mutual fund share, assuming all other things remain unchanged?

An increase in the value of one of the fund's stocks.

Which of the following portfolio construction methods starts with security analysis?

Bottom-up

If you believe in the reversal effect, you should.

Buy stocks this period that performed poorly last period.

Security selection refers to ____________.

Choosing which securities to hold based on their valuation

Which of the following securities is a money market instrument?

Commercial paper.

According to the CAPM, the risk premium an investor expects to receive on any stock or portfolio increases.

Directly with beta.

Most actively managed mutual funds, when compared to a market index such as the Wilshire 5000.

Do not generally outperform the market.

According to the mean-variance criterion, which one of the following investments dominates all others?

E(r) = 0.15; Variance = 0.20

When comparing investments with different horizons the ____________ provides the more accurate comparison.

Effective annual rate.

The means by which individuals hold their claims on real assets in a well-developed economy are.

Financial assets.

What two types of investor irrationalities does an investor that use the last month's return to determine the attractiveness of stocks suffer from?

Forecasting error and sample size neglection.

Which of the following orders instructs the broker to buy at or below a specified price?

Limit-buy order

Which of the following orders instructs the broker to buy at the current market price?

Market order

The unsystematic risk of a specific security

Results from factors unique to the firm.

Other things equal, diversification is most effective when.

Securities' returns are negatively correlated

Investors in closed-end funds who wish to liquidate their positions must.

Sell their shares through a broker.

Historical records regarding return on stocks, Treasury bonds, and Treasury bills between 1926 and 2009 show that.

Stocks offered investors greater rates of return than bonds and bills.

Which of the following orders is most useful to short sellers who want to limit their potential losses?

Stop-buy order.

Analysts may use regression analysis to estimate the index model for a stock. When doing so, the slope of the regression line is an estimate of ____

The beta of the asset.

Skewness is a measure of ____________.

The normality of a distribution by measuring if it is symmetric

Kurtosis is a measure of ____________.

The normality of a distribution by measuring the fatness of it's tails

The bid price of a T-bill in the secondary market is.

The price at which the dealer in T-bills is willing to buy the bill.

One of the assumptions of the CAPM is that investors exhibit myopic behavior. What does this mean?

They plan for one identical holding period.

Which of the following portfolio construction methods starts with asset allocation?

Top-down