Podcast
Questions and Answers
A line that represents the possible portfolios that combine a risky asset and a risk free asset is most accurately described as a:
A line that represents the possible portfolios that combine a risky asset and a risk free asset is most accurately described as a:
- capital allocation line. (correct)
- capital market line.
- characteristic line.
Which of the following statements about the efficient frontier is least accurate?
Which of the following statements about the efficient frontier is least accurate?
- Investors will want to invest in the portfolio on the efficient frontier that offers the highest rate of return. (correct)
- Portfolios falling on the efficient frontier are fully diversified.
- The efficient frontier shows the relationship that exists between expected return and total risk in the absence of a risk-free asset.
The optimal portfolio in the Markowitz framework occurs when an investor achieves the diversified portfolio with the:
The optimal portfolio in the Markowitz framework occurs when an investor achieves the diversified portfolio with the:
- lowest risk.
- highest utility. (correct)
- highest return.
Which of the following statements about the optimal portfolio is NOT correct? The optimal portfolio:
Which of the following statements about the optimal portfolio is NOT correct? The optimal portfolio:
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:
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:
Investors who are less risk averse will have what type of indifference curves for risk and expected return?
Investors who are less risk averse will have what type of indifference curves for risk and expected return?
Smith has more steeply sloped risk-return indifference curves than Jones. Assuming these investors have the same expectations, which of the following best describes their risk preferences and the characteristics of their optimal portfolios? Smith is:
Smith has more steeply sloped risk-return indifference curves than Jones. Assuming these investors have the same expectations, which of the following best describes their risk preferences and the characteristics of their optimal portfolios? Smith is:
The particular portfolio on the efficient frontier that best suits an individual investor is determined by:
The particular portfolio on the efficient frontier that best suits an individual investor is determined by:
According to Markowitz, an investor's optimal portfolio is determined where the:
According to Markowitz, an investor's optimal portfolio is determined where the:
Becky Scott and Sid Fiona have the same expectations about the risk and return of the market portfolio; however, Scott selects a portfolio with 30% T-bills and 70% invested in the market portfolio, while Fiona holds a leveraged portfolio, having borrowed to invest 130% of his portfolio equity value in the market portfolio. Regarding their preferences between risk and return and their indifference curves, it is most likely that:
Becky Scott and Sid Fiona have the same expectations about the risk and return of the market portfolio; however, Scott selects a portfolio with 30% T-bills and 70% invested in the market portfolio, while Fiona holds a leveraged portfolio, having borrowed to invest 130% of his portfolio equity value in the market portfolio. Regarding their preferences between risk and return and their indifference curves, it is most likely that:
Three portfolios have the following expected returns and risk:
Portfolio, Expected return, Standard deviation:
Jones, 4%, 4%.
Kelly, 5%, 5%.
Lewis, 6%, 5%.
A risk-averse investor choosing from these portfolios could rationally select:
Three portfolios have the following expected returns and risk: Portfolio, Expected return, Standard deviation: Jones, 4%, 4%. Kelly, 5%, 5%. Lewis, 6%, 5%. A risk-averse investor choosing from these portfolios could rationally select:
Risk aversion means that an individual will choose the less risky of two assets:
Risk aversion means that an individual will choose the less risky of two assets:
The graph below combines the efficient frontier with the indifference curves for two different
investors, X and Y.
I can't put the image, but I will do my best to describe it
X-axis: Standard deviation of returns; Y-axis: Expected Return
Efficient frontier curve looks like a sqrt(x) curve - steep, then smooths out.
Investor X indifference curve is steep, above the indifference curve, and touches around the steep part.
Investor Y indifference curve is shallow, above the indifference curve, and touches around the smooth part.
Which of the following statements about the above graph is least accurate?
The graph below combines the efficient frontier with the indifference curves for two different investors, X and Y. I can't put the image, but I will do my best to describe it X-axis: Standard deviation of returns; Y-axis: Expected Return Efficient frontier curve looks like a sqrt(x) curve - steep, then smooths out. Investor X indifference curve is steep, above the indifference curve, and touches around the steep part. Investor Y indifference curve is shallow, above the indifference curve, and touches around the smooth part.
Which of the following statements about the above graph is least accurate?
A stock has an expected return of 4% with a standard deviation of returns of 6%. A bond has an expected return of 4% with a standard deviation of 7%. An investor who prefers to invest in the stock rather than the bond is best described as:
A stock has an expected return of 4% with a standard deviation of returns of 6%. A bond has an expected return of 4% with a standard deviation of 7%. An investor who prefers to invest in the stock rather than the bond is best described as:
Flashcards
Capital of France (example flashcard)
Capital of France (example flashcard)
Paris
