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发表于 2010-4-21 14:28 | 只看该作者

Reading 50: An Introduction to Portfolio Management LOS g习题

investor, different, 2010, between
LOS g: Explain the concept of an optimal portfolio and show how each investor may have a different optimal portfolio.

The optimal portfolio is determined by the point of tangency between:

A)
 a line connecting the risk-free rate and the current market return on the efficient frontier.
B)
 the capital allocation line and the investor's utility curve.
C)
 the efficient frontier and the individual's utility curve with the highest possible utility.


The optimal portfolio for each investor is the highest indifference curve that is tangent to the efficient frontier.  The optimal portfolio is the portfolio that gives the investor the greatest possible utility.

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honeycfa

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2#
发表于 2010-4-21 14:28 | 只看该作者

The particular portfolio on the efficient frontier that best suits an individual investor is determined by:

A)
 the individual's utility curve.
B)
 the current market risk-free rate as compared to the current market return rate.
C)
 the individual's asset allocation plan.


The optimal portfolio for each investor is the highest indifference curve that is tangent to the efficient frontier.  The optimal portfolio is the portfolio that gives the investor the greatest possible utility.

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honeycfa

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3#
发表于 2010-4-21 14:28 | 只看该作者

Investors who are less risk averse will have what type of utility curves?

A)
 Inverted.
B)
 Flatter.
C)
 Steeper.


Investors who are less risk averse will have flat utility curves, meaning they are willing to take on more risk for a slightly higher return. Investors who are more risk averse require a much higher return to accept more risk, producing a steep utility curve.

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honeycfa

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4#
发表于 2010-4-21 14:29 | 只看该作者

The graph below combines the efficient frontier with the indifference curves for two different investors, X and Y.

Which of the following statements about the above graph is least accurate?

A)
 The efficient frontier line represents the portfolios that provide the highest return at each risk level.
B)
 Investor X's expected return will always be less than that of Investor Y.
C)
 Investor X is less risk-averse than Investor Y.


Investor X has a steep indifference curve, indicating that he is risk-averse. Flatter indifference curves, such as those for Investor Y, indicate a less risk-averse investor. The other choices are true. A more risk-averse investor will likely obtain lower returns than a less risk-averse investor.

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honeycfa

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5#
发表于 2010-4-21 14:29 | 只看该作者

Which one of the following statements about portfolio diversification is FALSE?

A)

In a well diversified portfolio of over 25 stocks market risk will account for over 85% of the portfolio's total risk.

B)

As more securities are added to a portfolio total risk falls, but at a decreasing rate.

C)

The lower the correlation coefficient between the portfolio and a stock, the lower the diversification effect from adding that stock to the portfolio.



This statement should read, "The lower the correlation coefficient between the portfolio and a stock, the greater the diversification effect from adding that stock to the portfolio.

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honeycfa

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6#
发表于 2010-4-21 14:30 | 只看该作者

According to Markowitz, an investor’s optimal portfolio is determined where the:

A)
 investor's lowest utility curve is tangent to the efficient frontier.
B)
 investor's utility curve meets the efficient frontier.
C)
 investor's highest utility curve is tangent to the efficient frontier.

The optimal portfolio for an investor is determined as the point where the investor’s highest utility curve is tangent to the efficient frontier.

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honeycfa

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7#
发表于 2010-4-21 14:30 | 只看该作者

The optimal portfolio in the Markowitz framework occurs when an investor achieves the diversified portfolio with the:

A)
 highest return.
B)
 highest utility.
C)
 lowest risk.

The optimal portfolio in the Markowitz framework occurs when the investor achieves the diversified portfolio with the highest utility.

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honeycfa

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8#
发表于 2010-4-21 14:30 | 只看该作者

The graph below combines the efficient frontier with the indifference curves for two different investors, X and Y (represented by U(X) and U(Y)). The letters A, B, C, and D represent four distinct portfolios.

Which of the following statements about the above graph is least accurate?

A)
 Investor X's return will always be less than that of Investor Y.
B)
 Investor X would be better off moving to indifference curve U(X)1 and Portfolio C because of the higher return on that portfolio.
C)
 Portfolios A and B are both optimal portfolios.


Any portfolio on the efficient frontier is superior to one that is not. Thus, Investor X would not be better off with Portfolio C (this portfolio is on a lower indifference curve and has more risk.)

The other choices are correct. The optimal portfolio for each investor is the one on the highest indifference curve that is tangent to the efficient frontier. Thus, portfolios A and B are both optimal portfolios, but for different investors. In addition, Investor X has a steeper indifference curve, indicating that he is risk-averse. Flatter curves, such as those for investor Y, indicate a less risk-averse investor. As a result, X’s return will be less than Y’s.

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honeycfa

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9#
发表于 2010-4-21 14:31 | 只看该作者

Which of the following statements about the optimal portfolio is FALSE? The optimal portfolio:

A)

lies at the point of tangency between the efficient frontier and the indifference curve with the highest possible utility.

B)

is the portfolio that gives the investor the maximum level of return.

C)

may be different for different investors.



This statement is incorrect because it does not specify that risk must also be considered.

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honeycfa

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10#
发表于 2010-4-21 14:31 | 只看该作者

Which of the following statements about the efficient frontier is least accurate?

A)
 Portfolios falling on the efficient frontier are fully diversified.
B)
 Investors will want to invest in the portfolio on the efficient frontier that offers the highest rate of return.
C)
 The efficient frontier shows the relationship that exists between expected return and total risk in the absence of a risk-free asset.


The optimal portfolio for each investor is the highest indifference curve that is tangent to the efficient frontier.

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