23.Suppose the most efficient risky portfolio to combine with a risk-f

1.You are interested in constructing a portfolio benchmarked to the S&P500with a standard deviation of returns less than or equal to 10%per year.Assume the CAPMholds,if the risk-free rate is 2%per year and the expected return on the S&P500is 8%per year with a standard deviation of 25%per year,what is the highest expected return you could achieve on your portfolio?

2.A risk manager is analyzing the expected performance of a group of assets which are all benchmarked to the same market index. For the analysis, the risk manager assumes that the returns on the market index are greater than the risk-free rate and that the assumptions of the CAPM hold. Holding all other things constant, which of the following statements is correct? 选项： A:The expected return on an asset increases when its correlation with the market return decreases. B:For an asset with a negative correlation of return to the market, an increase in the risk-free rate will decrease its expected return. C:An asset with a beta of 2.5 will always have a higher standard deviation of return than an asset with a beta of 0.5. D:When comparing two assets, the asset with the higher beta will always have the higher expected return. E:Capital Asset Pricing Model

3.The securities market line describes: 选项： A:The relationship between theexpected return of a security and its systemic risk; B:The relationship between the expected return of asecurity and its total risk; C:The relationship between securities returns and indexreturns; D:The complete asset portfolioconsisting of market asset portfolio and risk-free assets

4.The capital asset pricing model states that the required rate of return on an investment is a function of the: 选项： A: risk- free rate and the investment's systematic risk. B: risk- free rate and the expected return on the market. C: risk- free rate, the expected return on the market and the investment's systematic risk. D: the expected return on the market and the investment's systematic risk.

5.The efficient frontier is defined by the set of portfolios that, for each volatility level, maximizes the expected return. According to the capital asset pricing model (CAPM), which of the following statements are correct with respect to the efficient frontier?I. The capital market line is the straight fine connecting the risk-free asset with the zero beta minimum variance portfolio.II. The capital market line always has a positive slope and its steepness depends on the market risk premium and the volatility of the market portfolio.III. The complete efficient frontier without a risk-free asset can be obtained by combining the minimum variance portfolio and the market portfolio.IV. The efficient frontier allows different individuals to have different portfolios of risky assets based upon their own risk aversion and forecast for asset returns.V. The efficient frontier assumes no transaction costs, no taxes, a common investment horizon for all investors, and that the return distribution has no skewness. 选项： A:II and V B:I, II and III C:I, IV and V D:II, III and IV E:Capital Asset Pricing Model

6.An investment security with high risk will have a(n) 选项： A、Low expected return. B、Lower price than an asset with low risk. C、Increasing expected rate of return. D、High standard deviation of returns.

7.19.Again using the optimal portfolio of AT&T and Microsoft stock when the correlation of their price movements is 0.6, take $10,000 and determine the allocations among the riskless asset, AT&T stock, and Microsoft stock for:a. a portfolio which invests 75% in a money market fund and 25% in the portfolio of AT&T and Microsoft stock. What is this portfolio’s expected return?b. a portfolio which invests 25% in a money market fund and 75% in the portfolio of AT&T and Microsoft stock. What is this portfolio’s expected return?c. a portfolio which invests nothing in a money market fund and 100% in the portfolio of AT&T and Microsoft stock. What is this portfolio’s expected return?

8.A portfolio manager has a portfolio with a beta of 0.8. The one-year risk-free rate of interest is 5%, the return on the market during the year is 7%, and the portfolio manager's return is 9%. What is the manager's alpha?（）选项： A:0.022 B:0.024 C:0.030

9.Two risk analysts are discussing the efficient frontier following a presentation on the different measures of financial risk. According to the CAPM, which of the following statements is correct with respect to the efficient frontier? 选项： A:The capital market line always has a positive slope and its steepness depends on the market risk premium and the volatility of the market portfolio. B:The capital market line is the straight line connecting the risk-free asset with the zero beta minimum variance portfolio. C:Investors with the lowest risk aversion will typically hold the portfolio of risky assets that has the lowest standard deviation on the efficient frontier. D:The efficient frontier allows different individuals to have different portfolios of risky assets based upon their individual forecasts for asset returns.

10.As part of the portfolio management process, Jill Mathews is collecting data in order to estimate the Security Market line. The slope of the Security Market Line corresponds to:() 选项： A、the amount of risk per unit return that investors must take in the market. B、the nominal risk-free rate. C、the return per unit risk required by all investors.

11.The line that represents the combination of an optimal risky portfolio and a risk-free asset is known as the: 选项： A: indifference curve. B: capital allocation line. C: efficient frontier.

12.According to the portfolio selection theory, when there exists a riskless asset and many risky assets in the market, which of the following statements are not correct?选项： A:The best portfolio selection strategy depends on the investors’ preferences.; B:A risk-tolerant, aggressive investor would be most likely to short sell the riskless asset and then invest in the tangency portfolio.; C:The optimal combination of risky assets depends on the investors’ preferences.; D:All investors who agree on the forecast of return rate will hold the same tangency portfolio in combination with the riskless asset.

13. When stocks with the same expected return are combined into a portfolio , ______选项： A: the expected return of the portfolio is less than the weighted average expected return of the stocks.; B:he expected return of the portfolio is greater than the weighted average expected return of stocks.; C:the expected return of the portfolio is equal to the weighted average expected return of the stocks.; D:there is no relationship between the expected return of the portfolio and the expected return the stocks.

14.According to the portfolio selection theory, when there is a riskless asset in the market, which of the following statements is wrong?选项： A:The optimal combination of risky assets depends on the investors’ wealth or preferences; B:The best portfolio selection strategy depends on the investors’ wealth or preferences; C:A risk-tolerant, aggressive investor would be most likely to short sell the riskless asset and then invest in the tangency portfolio; D:All investors who agree on the probability distribution for rates of return will hold the same tangency portfolio in combination with the riskless asset

15.The capital allocation line can be described as the ( ) 选项： A、investment
opportunity set formed with a risky asset and a risk-free asset. B、investment
opportunity set formed with two risky assets. C、line
on which lie all portfolios that offer the same utility to a
particular investor. D、line
on which lie all portfolios with the same expected rate of return and
different standard deviations.

16.James Tulsma, FRM, is analyzing a publicly traded firm and is using the company’s beta, the risk-free rate of return, and the expected return on the market to estimate the company’s required rate of return. He is somewhat concerned that the underlying assumptions of this technique are not realistic. Which of the following statements is an assumption of the capital asset pricing model (CAPM)? 选项： A:Investors minimize their expected utility of wealth at the end of the period. B:Investors are risk-neutral. C:Investors are only concerned with the mean and standard deviation of returns. D:Assets are not divisible.

17.Which of the following statements about portfolio theory is least accurate() A. As the correlation between two assets increases, the benefits of diversification also increase. B. The optimal portfolio for each investor is at the point where her highest indifference curve is tangent to the efficient frontier. C. The efficient frontier represents the set of portfolios that has the highest rate of return for every given level of risk, or the lowest risk for every level of return.

18.According to the capital asset pricing model, which factor is related to the return rate of a fully decentralized asset portfolio? 选项： A:Market risk; B:Non-systemic risk; C:Individual risk; D:Reinvestment risk

19.Stock A and Stock B both have an expected return of 10 percent and a standard deviation of 25 percent. Stock A has a beta of 0.8 and Stock B has a beta of 1.2. The correlation coefficient, r, between the two stocks is 0.6. Portfolio P is a portfolio with 50 percent invested in Stock A and 50 percent invested in Stock B. Which of the following statements is most correct? （）选项： A:Portfolio P has a coefficient of variation equal to 2.5 B:Portfolio P has more market risk than Stock A but less market risk than Stock B C:Portfolio P has a standard deviation of 25 percent and a beta of 1.0 D:All of the statements above are correct E:None of the statements above is correct

20.Suppose the risk-free nominal interest rate on a one-year U.S. Treasury bill is 6% per year and the expected rate of inflation is 4% per year. What is the expected real rate of return on the T-bill？_假选项： A、1.92% B、2% C、5% D、1.89%