Reading 51: An Introduction to Asset Pricing Models - LOS black, style

cfaedu

1.All portfolios on the Capital Market Line are:

A)   distinct from each other.

B)   unrelated except that they all contain the risk-free asset.

C)   perfectly negatively correlated.

D)   perfectly positively correlated.

2.According to capital market theory, which of the following represents the risky portfolio that should be held by all investors who desire to hold risky assets?

A)   Any point on the efficient frontier and to the left of the point of tangency between the CML and the efficient frontier.

B)   The point of tangency between the capital market line (CML) and the efficient frontier.

C)   Any point on the efficient frontier and to the right of the point of tangency between the CML and the efficient frontier.

D)   Any point on the efficient frontier and above the CML.

3.Which of the following is the vertical axis intercept for the Capital Market Line (CML)?

A)   Expected return on the portfolio.

B)   Risk-free rate.

C)   Expected return on the market.

D)   Efficient frontier.

4.The slope of the capital market line (CML) is a measure of the level of:

A)   expected return over the level of inflation.

B)   risk over the level of excess return.

C)   excess return per unit of risk.

D)   inflation over the level of expected return.

cfaedu

答案和详解如下：

1.All portfolios on the Capital Market Line are:

A)   distinct from each other.

B)   unrelated except that they all contain the risk-free asset.

C)   perfectly negatively correlated.

D)   perfectly positively correlated.

The correct answer was D)

The introduction of a risk-free asset changes the Markowitz efficient frontier into a straight line. This straight efficient frontier line is called the capital market line (CML). Since the line is straight, the math implies that any two assets falling on this line will be perfectly, positively correlated with each other. Note: When r_a,b = 1, then the equation for risk changes to sport = W_As_A + W_Bs_B, which is a straight line.

2.According to capital market theory, which of the following represents the risky portfolio that should be held by all investors who desire to hold risky assets?

A)   Any point on the efficient frontier and to the left of the point of tangency between the CML and the efficient frontier.

B)   The point of tangency between the capital market line (CML) and the efficient frontier.

C)   Any point on the efficient frontier and to the right of the point of tangency between the CML and the efficient frontier.

D)   Any point on the efficient frontier and above the CML.

The correct answer was B)

Capital market theory suggests that all investors should invest in the same portfolio of risky assets, and this portfolio is located at the point of tangency of the CML and the efficient frontier of risky assets. Any point below the CML is suboptimal, and points above the CML are not feasible.

3.Which of the following is the vertical axis intercept for the Capital Market Line (CML)?

A)   Expected return on the portfolio.

B)   Risk-free rate.

C)   Expected return on the market.

D)   Efficient frontier.

The correct answer was B)

The CML originates on the vertical axis from the point of the risk-free rate.

4.The slope of the capital market line (CML) is a measure of the level of:

A)   expected return over the level of inflation.

B)   risk over the level of excess return.

C)   excess return per unit of risk.

D)   inflation over the level of expected return.

The correct answer was C)

The slope of the CML indicates the excess return (expected return less the risk-free rate) per unit of risk.

buy1get1free

 gd