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LOS b: Explain the minimum variance and the efficient frontiers; and discuss the steps to solve for the minimum–variance frontier.
Q1. Which of the portfolios represented in the table below are NOT efficient?
|
Portfolio |
A |
B |
C |
D |
E |
F |
G |
H |
|
(Rp) |
10% |
12.5% |
15% |
16% |
17% |
18% |
18% |
20% |
|
sp |
23% |
21% |
25% |
29% |
29% |
32% |
35% |
45% |
A) B, D, and F.
B) A, D, and G.
C) B, E, and F.
Q2. The efficient frontier enables managers to reduce that number of possible portfolios considered because the portfolios on the efficient frontier:
A) have higher expected returns for every level of risk than all other possible portfolios.
B) have lower risk levels for every level of expected return than all other possible portfolios.
C) have higher risk levels for every level of expected return than all other possible portfolios.
Q3. An analyst has gathered the following data:
|
Portfolio |
Weight S& (%) |
Weight EAFE(%) |
PORT σ (%) |
E(Rp)(%) |
|
A |
100 |
0 |
10 |
10 |
|
B |
70 |
30 |
6 |
|
|
C |
30 |
70 |
11 |
|
|
D |
0 |
100 |
15 |
20 |
Which portfolio represents the minimum variance portfolio?
A) Portfolio C.
B) Portfolio B.
C) Portfolio A.
Q4. For a U.S. investor with extreme risk aversion, is there a benefit to international diversification?
A) Yes, since a 100% weighting in international stocks results in a doubling of the expected return with only a 50% increase in risk.
B) Yes, since a 70% weighting in the EAFE index results in a much higher expected return with a minimal increase in portfolio standard deviation than 100% investment in the S& index.
C) Yes, since a 30% weighting in the EAFE index results in an increased return and decreased standard deviation than 100% investment in the S& index.
Q5. Assume the annual Treasury bill (T-bill) yields 4%. Which portfolio is the most desirable (i.e., highest Sharpe ratio)?
A) Portfolio A.
B) Portfolio C.
C) Portfolio B.
Q6. The efficient frontier consists of portfolios that have:
A) the minimum standard deviation for any given level of expected return.
B) the maximum expected return for any given standard deviation.
C) capital allocation lines with slopes greater than 1.0.
Q7. The portfolio on the minimum-variance frontier that has the smallest standard deviation is the:
A) market portfolio.
B) global minimum-variance portfolio.
C) optimal efficient portfolio.
Q8. When solving for the minimum-variance frontier for many assets, the constraint is:
A) weighted-average covariances must sum to zero.
B) portfolio weights must sum to one.
C) weighted-average expected asset returns must sum to expected portfolio return.
Q9. The efficient frontier is useful for portfolio management because:
A) it significantly reduces the number of portfolios a manager must consider.
B) portfolios on the efficient frontier are useful as factor portfolios.
C) portfolios on the efficient frontier are optimal: the correlation between each efficient portfolio, and the market portfolio is negative.
Q10. What set of portfolios are being determined by the following procedure? For each level of expected return the single portfolio with the smallest variance is determined, subject to the constraint that the portfolio weights sum to one. Assume there is no risk-free asset.
A) Efficient frontier.
B) Minimum-variance frontier.
C) Capital allocation line.
[此贴子已经被作者于2009-4-2 11:04:14编辑过] | 
发表于 2009-4-2 11:00
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