4/29/2020 Quiz 4: Portfolio Selection and Asset Allocation: Attempt review

Started on Friday, 24 April 2020, 11:43 PM

State Finished
Completed on Tuesday, 28 April 2020, 10:49 PM
Time taken 3 days 23 hours
Mark 20.00 out of 20.00 (100%)

Question 1
Complete The purpose of diversification is to:
Mark 1.00 out
of 1.00 Select one:
a. increase a portfolio’s expected return.

b. reduce a portfolio’s non-diversifiable risk.

c. reduce a portfolio’s total risk.

d. reduce a portfolio’s systematic risk.

Question 2
Complete Systematic risk is also called:
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of 1.00 Select one:
a. random risk.

b. market risk.

c. diversifiable risk.

d. company-specific risk.

Question 3
Complete The optimal portfolio is the efficient portfolio with the:
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of 1.00 Select one:
a. highest risk.

b. least investment.

c. lowest risk.

d. highest utility.

Question 4
Complete A portfolio which lies below the efficient frontier is described as:
Mark 1.00 out
of 1.00 Select one:
a. unattainable.

b. dominant.

c. dominated.

d. optimal.

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4/29/2020 Quiz 4: Portfolio Selection and Asset Allocation: Attempt review

Question 5
Complete Different investors estimate the inputs to the Markowitz model differently because:
Mark 1.00 out
of 1.00 Select one:
a. investors have their own risk/return preferences.

b. there is an inherent uncertainty in security analysis.

c. there is a random selection process used by individual investors.

d. every investor has access to different information about securities.

Question 6
Complete Which of the following is not an assumption of Markowitz portfolio theory?
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of 1.00 Select one:
a. A single investment period

b. The availability of a risk-free asset

c. Investor preferences are based only on expected return and risk

d. Low transactions costs

Question 7
Complete The beta for the S&P 500 is generally considered to be:
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of 1.00 Select one:
a. beta = 0.

b. beta = 1.0.

c. beta = -1.0.

d. impossible to determine.

Question 8
Complete Which of the following is not true regarding Markowitz portfolio theory? The Markowitz model:
Mark 1.00 out
of 1.00 Select one:
a. implies that no portfolio on the efficient frontier dominates any other portfolio on the efficient
frontier.

b. is cumbersome to work with due to the large variance-covariance matrix needed for a set of stocks.

c. generates an entire set, or efficient frontier, of portfolios.

d. is considered a three-parameter model.

Question 9
Complete Which of the following is true regarding the Markowitz model?
Mark 1.00 out
of 1.00 Select one:
a. An investor’s optimal portfolio occurs where the investor’s indifference curve is tangent to the
efficient frontier.

b. It fully addresses the use of leverage.

c. The inputs to the model are the portfolio asset weights.

d. Markowitz diversification is inefficient diversification.

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4/29/2020 Quiz 4: Portfolio Selection and Asset Allocation: Attempt review

Question 10
Complete Which of the following statements regarding indifference curves is not true?
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of 1.00 Select one:
a. The greater the indifference curve’s slope, the greater the investor’s risk aversion.

b. Indifference curves cannot intersect.

c. The indifference curves for all risk-averse investors will be upward sloping.

d. Investors have a finite number of indifference curves.

Question 11
Complete Which of the following would not be considered a source of systematic risk?
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of 1.00 Select one:
a. A hostile takeover

b. A decrease in GDP

c. A panic on Wall Street

d. An increase in inflation

Question 12
Complete According to the Markowitz model, rational investors will seek efficient portfolios because these portfolios
Mark 1.00 out are optimal based on:
of 1.00

Select one:
a. transactions costs.

b. risk.

c. expected return.

d. expected return and risk.

Question 13
Complete Asset allocation is one of the most widely used applications of:
Mark 1.00 out
of 1.00 Select one:
a. modern portfolio theory.

b. the Capital Asset Pricing Model.

c. random diversification.

d. passive portfolio approach.

Question 14
Complete Bob holds a portfolio of 20 stocks from different industries, whereas Sharon holds only one stock in
Mark 1.00 out her portfolio. Assuming they each add a stock to their portfolio, which of the following is most likely? Relative to Bob’s
of 1.00 portfolio, Sharon’s portfolio will experience the:

Select one:
a. larger increase in return.

b. larger decrease in market risk.

c. larger increase in total risk.

d. larger decrease in total risk.

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4/29/2020 Quiz 4: Portfolio Selection and Asset Allocation: Attempt review

Question 15
Complete For an investor in a life-cycle fund, the bond allocation generally:
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of 1.00 Select one:
a. is 0%.

b. decreases over time.

c. increases over time.

d. remains constant over time.

Question 16
Complete An indifference curve shows:
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of 1.00 Select one:
a. the one most desirable portfolio for an investor.

b. all combinations of portfolios that are equally desirable to all investors.

c. all combinations of portfolios that are equally desirable to an investor.

d. the one most desirable portfolio for all investors.

Question 17
Complete The efficient set of portfolios represents:
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of 1.00 Select one:
a. portfolio return, whereas indifference curves reflect investor preferences.

b. portfolio possibilities, whereas indifference curves reflect investor preferences.

c. investor risk, whereas indifference curves reflect portfolio return.

d. investor preferences, whereas indifference curves reflect portfolio possibilities.

Question 18
Complete Which of the following portfolios cannot be on the efficient frontier?
Mark 1.00 out
of 1.00 Select one:
a. Point C has expected return of 38 percent; standard deviation of 38 percent

b. Point A has expected return of 10 percent; standard deviation of 8 percent

c. Point B has expected return of 18 percent; standard deviation of 13 percent

d. Point D has expected return of 15 percent; standard deviation of 14 percent

Question 19
Complete The optimal portfolio for a risk-averse investor:
Mark 1.00 out
of 1.00 Select one:
a. occurs at the point of tangency between the highest indifference curve and the efficient set of
portfolios.

b. cannot be determined.

c. occurs at the point of tangency between the highest indifference curve and the highest expected
return.

d. occurs at the point of tangency between the highest expected return and lowest-risk efficient
portfolio.

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4/29/2020 Quiz 4: Portfolio Selection and Asset Allocation: Attempt review

Question 20
Complete Given the following information on Asset X and Asset Y:
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of 1.00

Calculate the portfolio's expected return and standard deviation:

Select one:
a. expected return = 16%; standard deviation = 13.11

b. expected return = 19%; standard deviation = 13.11

c. expected return = 19%; standard deviation = 72

d. expected return = 19%; standard deviation = 172.0

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Investing and Portfolio Theory

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