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FINS2624-Portfolio Mgmt - s1/2013

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Online quizzes

Online Quiz 7

Take Test: Online quiz 7

Take Test: Online quiz 7

Description
Instructions
Multiple Attempts This Test allows 3 attempts. This is attempt number 1.
Force Completion This Test can be saved and resumed later.

Test/Surv ey Status

Question 1

10 points

The index model has been estimated for stocks A and B with the following results:
R = 0.01 + 0.8R + e
A
M
A
R = 0.02 + 1.2R + e
B
M
B
= 0.20 (e ) = 0.17 (e ) = 0.10
M
A
B
The standard deviation of returns of stock A is __________.

0.0545
0.0676
0.2335
0.2600
none of the above

Question 2

10 points

Analysts may use regression analysis to estimate the single index model for a stock. When doing so, the
slope of the regression line is an estimate of ______________.
the alpha of the asset
the beta of the asset
the sigma of the asset
the gamma of the asset
none of the above

Question 3

10 points

Which of the following is correct about the stocks alpha?

Under CAPM, alpha is zero at all times
Under CAPM, the value of alpha is zero when the market is at equilibrium
alpha cannot be negative
alpha must be greater than or equal to 0
none of the above.

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Question 4

10 points

A single-index model uses __________ as a proxy for the systematic risk factor.
a market index, such as the S&P/ASX 300 index
the current account deficit
the growth rate in GNP
the unemployment rate
none of the above

Question 5

10 points

Test/Surv
ey AStatus
In order to calculate the weight of a mispriced
asset
in a portfolio, the following would be used:
Alpha of the asset A.
The variance of the residuals of asset A
The variance of the market portfolio
A and B are true.
A and B and C are true

Question 6

10 points

An investor will take as large a position as possible when an equilibrium price

relationship is violated. This is an example of _________.
a dominance argument
the mean-variance efficiency frontier
a risk-free arbitrage
the capital asset pricing model
the SML
Question 7

10 points

Consider the multifactor model APT with two factors. Portfolio A has a beta of 0.75 on
factor 1 and a beta of 1.25 on factor 2. The risk premiums on the factor 1 and factor 2
portfolios are 1% and 7%, respectively. The risk-free rate of return is 7%. The
expected return on portfolio A is __________ if no arbitrage opportunities exist.
13.5%
15.0%
16.5%
23.0%
18.7%

Question 8

10 points

A _________ portfolio is a well-diversified portfolio constructed to have a beta of 1 on

one of the factors and a beta of 0 on any other factor

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factor
market
index
factor and market
factor, market, and index

Question 9

10 points

As diversification increases, the firm-specific risk of a portfolio approaches ____________.

0
1
infinity
n-1 * n
none of the above

Test/Surv ey Status

Question 10

10 points

The APT requires a benchmark portfolio

that is equal to the true market portfolio.
that contains all securities in proportion to their market values.
that need not be well-diversified.
that is well-diversified and lies on the SML.
that is unobservable.
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