Reading 50: An Introduction to Portfolio Management - LOS following, statements, about, style, black

cfaedu

答案和详解如下：

1.Which of the following statements about portfolio diversification is TRUE?

A)   The efficient frontier represents individual securities.

B)   When a risk-averse investor is confronted with two investment opportunities having the same expected return, the investor will take the opportunity with the lower risk.

C)   When a portfolio is efficient, it will lie above and to the left of the efficient frontier.

D)   As the correlation coefficient moves from +1 to zero, the potential for diversification diminishes.

The correct answer was B)

The other statements are false. The lower the correlation coefficient; the greater the potential for diversification. Efficient portfolios lie on the efficient frontier.

2.Risk aversion means that if two assets have identical expected returns, an individual will choose the asset with the:

A)   higher standard deviation.

B)   shorter payback period.

C)   higher unsystematic risk.

D)   lower risk level.

The correct answer was D)

Investors are risk averse.  Given a choice between assets with equal rates of expected return, the investor will always select the asset with the lowest level of risk.  This means that there is a positive relationship between expected returns (ER) and expected risk (Es) and the risk return line (capital market line [CML] and security market line [SML]) is upward sloping.

Standard deviation is a way to quantify risk. Unsystematic risk is diversifiable risk. The payback period is used to evaluate capital projects, not investment returns.

3.Which of the following statements is NOT consistent with the assumption that individuals are risk averse with their investment portfolios?

A)   There is a positive relationship between expected returns and expected risk.

B)   Higher betas are associated with higher expected returns.

C)   Many individuals purchase lottery tickets.

D)   The security market line is upward sloping.

The correct answer was C)

Investors are risk averse. Given a choice between two assets with equal rates of return, the investor will always select the asset with the lowest level of risk. This means that there is a positive relationship between expected returns (ER) and expected risk and the risk return line (capital market line [CML] and security market line [SML]) is upward sweeping. However, investors can be risk averse in one area and not others, as evidenced by their purchase of lottery tickets.

4.The basic premise of the risk-return trade-off suggests that risk-averse individuals purchasing investments with higher non-diversifiable risk should expect to earn:

A)   lower rates of return.

B)   rates of return equal to the market.

C)   higher rates of return.

D)   unknown-depends on individual utility curves.

The correct answer was C)

Investors are risk averse.  Given a choice between two assets with equal rates of return, the investor will always select the asset with the lowest level of risk.  This means that there is a positive relationship between expected returns (ER) and expected risk (Es) and the risk return line (capital market line [CML] and security market line [SML]) is upward sweeping.

5.Which of the following statements about risk aversion is TRUE?

A)   Risk averse investors will not take on risk.

B)   Most investors are not risk averse.

C)   Risk aversion implies that the risk-return line, the CML, and the SML are downward sloping curves.

D)   Given a choice between two assets with equal rates of return, the investor will always select the asset with the lowest level of risk.

The correct answer was D)

Risk aversion implies that an investor will not assume risk unless compensated.

6.Which of the following statements best describes risk aversion?

A)   The investor will always choose the asset with the least risk.

B)   The asset with the least risk and least return will always be chosen.

C)   Given a choice between two assets of equal return, the investor will choose the asset with the least risk.

D)   There is an indirect relationship between expected returns and expected risk.

The correct answer was C)

Risk aversion is best defined as: given a choice between two assets of equal return, the investor will choose the asset with the least risk. The investor will not always choose the asset with the least risk or the asset with the least risk and least return. As well, there is a positive, not indirect, relationship between risk and return.

cfaedu

1.Which of the following statements about portfolio diversification is TRUE?

A)   The efficient frontier represents individual securities.

B)   When a risk-averse investor is confronted with two investment opportunities having the same expected return, the investor will take the opportunity with the lower risk.

C)   When a portfolio is efficient, it will lie above and to the left of the efficient frontier.

D)   As the correlation coefficient moves from +1 to zero, the potential for diversification diminishes.

2.Risk aversion means that if two assets have identical expected returns, an individual will choose the asset with the:

A)   higher standard deviation.

B)   shorter payback period.

C)   higher unsystematic risk.

D)   lower risk level.

3.Which of the following statements is NOT consistent with the assumption that individuals are risk averse with their investment portfolios?

A)   There is a positive relationship between expected returns and expected risk.

B)   Higher betas are associated with higher expected returns.

C)   Many individuals purchase lottery tickets.

D)   The security market line is upward sloping.

4.The basic premise of the risk-return trade-off suggests that risk-averse individuals purchasing investments with higher non-diversifiable risk should expect to earn:

A)   lower rates of return.

B)   rates of return equal to the market.

C)   higher rates of return.

D)   unknown-depends on individual utility curves.

5.Which of the following statements about risk aversion is TRUE?

A)   Risk averse investors will not take on risk.

B)   Most investors are not risk averse.

C)   Risk aversion implies that the risk-return line, the CML, and the SML are downward sloping curves.

D)   Given a choice between two assets with equal rates of return, the investor will always select the asset with the lowest level of risk.

6.Which of the following statements best describes risk aversion?

A)   The investor will always choose the asset with the least risk.

B)   The asset with the least risk and least return will always be chosen.

C)   Given a choice between two assets of equal return, the investor will choose the asset with the least risk.

D)   There is an indirect relationship between expected returns and expected risk.