1．The best possible risk-return trade-off attainable, given the investor’s expectations of expected returns, variances, and covariances, is represented by the: A) standard deviation of the market portfolio. B) the expected return on the market portfolio. C) slope of the capital allocation line (CAL). D) the slope of the minimum-variance frontier at the global minimum-variance portfolio. The correct answer was C) We can interpret the slope coefficient [(E(RT) – RF)/sT] of the CAL the same way we do the slope of any straight line: it’s the change in E(RT) for a one unit change in sT. Thus, it represents the risk-return trade from moving along the CAL: how much additional expected return do we get for a one-unit increase in risk? Because the tangency portfolio T is the best portfolio, the slope of the CAL line represents the best possible risk-return trade-off attainable, given the investor’s expectations of expected returns, variances, and covariances. 2．The intercept of the capital market line is the: A) risk-free rate. B) expected market return. C) return on the tangency portfolio. D) expected return on the tangency portfolio. The correct answer was A) The capital market line (CML) is the capital allocation line with the market portfolio as the tangency portfolio. The equation of the CML is: E(RP) = RF + [(E(RM) – RF)/sM] sp where:
E(RM) = the expected return on the market portfolio, M
sM = the standard deviation of the market portfolio, M
RF = the risk-free return The intercept is the risk-free rate, RF. The slope is equal to [(E(RT) – RF)/sT], where [E(RT) – RF] is the expected risk premium on the tangency portfolio. 3．The slope of the capital allocation line is equal to: A) the inverse of the slope of the security market line. B) the expected return on the tangency portfolio divided by the standard deviation of the tangency portfolio. C) the expected risk premium on the tangency portfolio divided by the standard deviation of the tangency portfolio. D) the expected risk premium on the tangency portfolio divided by the beta of the tangency portfolio. The correct answer was C) Because the capital allocation line is a straight line, we can express it as the equation of a straight line (y = mx + b) where the dependent variable, y, is the expected return E(Rp) and the independent variable, x, is the standard deviation sp: E(RP) = RF + [(E(RT) – RF)/sT] sp where:
E(RT) = the expected return on the tangency portfolio, T
sT = the standard deviation of the tangency portfolio, T
RF= the risk-free return The slope is equal to [(E(RT) – RF)/sT], where [E(RT) – RF] is the expected risk premium on the tangency portfolio. 4．The equation of the capital market line (CML) says that the expected return on any portfolio equals the: A) risk-free rate plus the product of the market price of risk and the portfolio's standard deviation. B) risk-free rate plus the product of the market price of risk and the market's portfolio standard deviation. C) risk-free rate plus the product of the market risk premium and the market's portfolio standard deviation. D) market risk premium plus the product of the risk-free rate and the portfolio's standard deviation. The correct answer was A) The CML is the capital allocation line with the market portfolio as the tangency portfolio. The equation of the CML is: E(RP) = RF + [(E(RM) – RF)/sM] sp where:
E(RM) = the expected return on the market portfolio, M
sM = the standard deviation of the market portfolio, M
RF = the risk-free return The intercept is the risk-free rate, RF. The slope is equal to [(E(RT) – RF)/sT], where [E(RT) – RF] is the expected risk premium on the tangency portfolio. 5．Which of the following does NOT describe the capital allocation line (CAL)? A) It runs through the global minimum-variance portfolio. B) The intercept of the CAL is the risk-free rate. C) The CAL is tangent to the minimum-variance frontier. D) It is the efficient frontier when a risk-free asset is available. The correct answer was A) If a risk-free investment is part of the investment opportunity set, then the efficient frontier is a straight line called the capital allocation line (CAL). The y-intercept of the CAL is the risk-free rate. The CAL is tangent to the minimum-variance frontier of risky assets; therefore, it cannot run through the global minimum-variance portfolio. | 
发表于 2008-4-14 17:13
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