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发表于 2010-4-21 14:22 | 只看该作者

Reading 50: An Introduction to Portfolio Management LOS f习题

朝花夕拾
LOS f: Describe the efficient frontier and explain the implications for incremental returns as an investor assumes more risk.

An investment manager is looking at ten possible stocks to include in a client’s portfolio. In order to achieve the maximum efficiency of the portfolio, the manager must:

A)
 include only the stocks that have the lowest volatility at a given expected rate of return.
B)
 include all ten stocks in the portfolio in equal amounts.
C)
 find the combination of stocks that produces a portfolio with the maximum expected rate of return at a given level of risk.

The most efficient portfolio will be the one that lies on the efficient frontier. It will offer the highest expected return at a given level of risk compared to all other possible portfolios.

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honeycfa

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2#
发表于 2010-4-21 14:23 | 只看该作者

Which of the following statements best describes an investment that is not on the efficient frontier?

A)
 There is a portfolio that has a lower return for the same risk.
B)
 There is a portfolio that has a lower risk for the same return.
C)
 The portfolio has a very high return.


The efficient frontier outlines the set of portfolios that gives investors the highest return for a given level of risk or the lowest risk for a given level of return. Therefore, if a portfolio is not on the efficient frontier, there must be a portfolio that has lower risk for the same return. Equivalently, there must be a portfolio that produces a higher return for the same risk.

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honeycfa

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3#
发表于 2010-4-21 14:23 | 只看该作者

Which of the following statements concerning the efficient frontier is most accurate? It is the:

A)
 set of portfolios where there are no more diversification benefits.
B)
 set of portfolios that gives investors the lowest risk.
C)
 set of portfolios that gives investors the highest return.


The efficient frontier outlines the set of portfolios that gives investors the highest return for a given level of risk or the lowest risk for a given level of return. It is also the point at which there are no more benefits to diversification.

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honeycfa

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4#
发表于 2010-4-21 14:25 | 只看该作者

Which one of the following portfolios does not lie on the efficient frontier?

Portfolio Expected Return Standard Deviation
A 7 5
B 9 12
C 11 10
D 15 15

A)
 B.
B)
 A.
C)
 C.


Portfolio B has a lower expected return than Portfolio C with a higher standard deviation.

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honeycfa

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5#
发表于 2010-4-21 14:25 | 只看该作者

In a two-asset portfolio, reducing the correlation between the two assets moves the efficient frontier in which direction?

A)
 The efficient frontier is stable unless the asset’s expected volatility changes. This depends on each asset’s standard deviation.
B)
 The efficient frontier is stable unless return expectations change. If expectations change, the efficient frontier will extend to the upper right with little or no change in risk.
C)
 The frontier extends to the left, or northwest quadrant representing a reduction in risk while maintaining or enhancing portfolio returns.


Reducing correlation between the two assets results in the efficient frontier expanding to the left and possibly slightly upward. This reflects the influence of correlation on reducing portfolio risk.

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honeycfa

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6#
发表于 2010-4-21 14:26 | 只看该作者

On a graph of risk, measured by standard deviation and expected return, the efficient frontier represents:

A)
 the group of portfolios that have extreme values and therefore are “efficient” in their allocation.
B)
 the set of portfolios that dominate all others as to risk and return.
C)
 all portfolios plotted in the northeast quadrant that maximize return.


The efficient set is the set of portfolios that dominate all other portfolios as to risk and return. That is, they have highest expected return at each level of risk.

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honeycfa

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7#
发表于 2010-4-21 14:26 | 只看该作者

Which of the following statements about the efficient frontier is FALSE?

A)
 The efficient frontier line bends backwards due to less than perfect correlation between assets.
B)
 A portfolio to the left of the efficient frontier is not attainable, while a portfolio to the right of the efficient frontier is inefficient.
C)
 The slope of the efficient frontier increases steadily as one moves up the curve.


This statement should read, "The slope of the efficient frontier decreases steadily as one moves up the curve." The other statements are true.

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honeycfa

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8#
发表于 2010-4-21 14:26 | 只看该作者

In a set of portfolios, the portfolio with the highest rate of return, but the same variance of the rate of return as the others, would be considered a(n):

A)
 positive beta portfolio.
B)
 positive alpha portfolio.
C)
 efficient portfolio.


The efficient frontier, which represents the set of portfolios that provides the highest return at each level of risk, is comprised of efficient portfolios. The optimal portfolio for each investor is the point on the highest indifference curve that is tangent to the efficient frontier.

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honeycfa

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9#
发表于 2010-4-21 14:27 | 只看该作者

Which of the following inputs is least likely required for the Markowitz efficient frontier? The:

A)
 level of risk aversion in the market.
B)
 covariation between all securities.
C)
 expected return of all securities.


The level of risk aversion in the market is not a required input. The model requires that investors know the expected return and variance of each security as well as the covariance between all securities.

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