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pehormance within of an index of share returns for a particular country or industry sector a...
Need help on these 4 multiple choice questions please! 2 Marks and has only one correct answer. 1. Which of the following is NOT an advantage of investing in an open-end mutual fund A. Professional management B. Daily liquidity C. You can buy units of the fund on margin or sell short D. Provides an opportunity to easily invest in global markets E. None of the above. All are advantages of investing in open-end mutual funds rou purchased a mutual...
15. Which of the following statements is True? When creating a complete portfolio by a risky portfolio and a risk-free asset, a higher allocation to the risky portfolio increases the Sharpe ratio. The lower the risk-free rate, the lower the Sharpe ratios of levered portfolios. With a positive and fixed risk-free rate, doubling the expected return and standard deviation of the risky portfolio will double the Sharpe ratio. Holding constant the risk premium of the risky portfolio, a higher risk-free...
According to the CAPM, which of the following sentences is incorrect? A. All securities' expected returns must lie on the capital market line (CML). B. All securities' expected returns must be on the security market line (SML). C. The slope of the security market line (SML) must be the market risk premium. D. The slope of the capital market line (CML) is the Sharpe Ratio of the market portfolio. E. A security's beta coefficient will be negative if its return...
(2*5) Consider a market with many risky assets and a risk-free security. Asset’s returns are not perfectly correlated. All the CAPM assumptions hold and the market is in equilibrium. The risk-free rate is 5%, the expected return on the market is 15%. Mr. T and Mrs. R are two investors with mean-variance utility functions and different risk-aversion coefficients. They both invest into efficient portfolios composed of the market portfolio and the risk-free security. Mr. T’s portfolio has an expected return...
Question 1 Consider two risky assets A and B with E(rA)= 15%, Sigma_A= 32%, E(rB)= 0.09, Sigma_B= 23%, corrA,B= 0.2. The risk free rate is 5%. The optimal risky portfolio of comprised of the two risky assets is to allocate 64% to A and the rest to B. What is the standard deviation of the optimal risky portfolio ? Select one: a. 20.75% b. 23.61% c. 22.86% d. 23.00% Question 2 Continued with previous question. What is the Sharpe ratio...
Which of the following is a TRUE statement? A The tangent portfolio is the risky portfolio on the efficient frontier whose tangent line cuts the horizontal axis at the risk-free rate. B The new (or super) efficient frontier represents the portfolios composed of the risk-free rate and the tangent portfolio that offers the highest expected rate of return for any given level or risk. C The separation theorem states that the investment decision, (how to construct the portfolio of risky...
answer all. For the next question, assume an investor with the following utility function U-E)-3/2) 12. To maximize her expected uility, she would choose the set with an espect rate of return of and a standard deviation ofrspectively A. 1296; 20% B. 10%; 15% C. 1056; 1056 D, 8%, 10% Е.none ofthe above 13. Which of the following statements regarding the Capital Allocation Line (CAL) false? A. The CAL shows risk-return combinations. B. The slope of the CAL equals the...
SECTION IT these questions are worth double in weight -41. (Double weight question) Suppose in security. The securities returns are: r on) Suppose investors form portfolios by combing one risky security with one risk free security. The Risk free -0.03 risky -0.15 and SD -0.25 Let wl denote the share of wealth in the risky asset utility function. wealth in the risky asset. Determine the optimal portfolio for an investor with the following (This is of the form E(u)-(expected return...
3 Question 3 In a market are listed two risky assets whose returns are described by the following parameters HA=0.01. MB = 0.07, 01 = 0.2 and op = 0.12. The correlation among the securities is constant and equal to p=0.1. 1. Derive the equation for the frontier 2. Derive the minimum variance portfolio and the equation for the efficient frontier 3. Let's add a risk free asset among the possible investments with return r = 0.03 and derive the...
which of the following statement is true regarding the selection of a portfolio from this e that lie on the capital allocation line? a. less risk-averse investors will invest more in the risk -free security and less in the optimal risky portfolio than more risk averse investors. b. more risk-averse investors will invest less in the optimal risky portfolio and more in the risk-free security than less risk -averse investors. c. all investors will have the same capital allocation d....