Investments Analysis and Management 12Th Edition Jones Test Bank Full Chapter PDF

Investments Analysis and Management
12th Edition Jones Test Bank

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File: Ch.07, Chapter 7: Portfolio Theory
Multiple Choice Questions
1. With a continuous probability distribution,:
a. a probability is assigned to each possible outcome.

b. possible outcomes are constantly changing.
c. an infinite number of possible outcomes exist.
d. there is no variance.
Ans: c
Difficulty: Moderate
Ref: Dealing With Uncertainty
2. The expected value is the:
a. inverse of the standard deviation

b. correlation between a security’s risk and return.
c. weighted average of all possible outcomes.
d. same as the discrete probability distribution.
Ans: c
Difficulty: Easy
3. -------------------is concerned with the interrelationships between security returns

as well as the expected returns and variances of those returns.
a. random diversification.
b. correlating diversification
c. Friedman diversification
d. Markowitz diversification
Ans: d
Ref: Introduction to Modern Portfolio Theory
4. Which of the following would be considered a random variable:
a. expected value.
b. correlation coefficient between two assets
c. one-period rate of return for an asset.
d. beta.
Ans: c
Difficulty: Easy
Chapter Seven 82
Portfolio Theory
5. Given the following probability distribution, calculate the expected return of
security XYZ.
Security XYZ's
Potential return Probability
20% 0.3
30% 0.2
-40% 0.1
50% 0.1
10% 0.3
a. 16 percent
b. 22 percent
c. 25 percent
d. 18 percent
Ans: b
Solution: E(R) = Ripri = (20)(0.3)+ (30)(0.2)+(- 40)(0.1)+(50)(0.1) +(10)(0.3)= 22%.
6. Probability distributions:
a. are always discrete.

b. are always continuous.
c. can be either discrete or continuous.
d. are inverse to interest rates.
Ans: c
Difficulty: Easy
7. The bell-shaped curve, or normal distribution, is considered:
a. discrete.
b. downward sloping
c. linear
d. continuous
Ans: d
Difficulty: Easy
8. Portfolio weights are found by:
a. dividing standard deviation by expected value

b. calculating the percentage each asset’s value to the total portfolio value
c. calculating the return of each asset to total portfolio return
Chapter Seven 83
Portfolio Theory
d. dividing expected value by the standard deviation
Ans: b
Ref: Portfolio Return and Risk
9. Which of the following statements regarding expected return of a portfolio

is true?
a. It can be higher than the weighted average expected return of individual assets
b. It can be lower than the weighted average return of the individual assets
c. It can never be higher or lower than the weighted average expected return of
individual assets
d. Expected return of a portfolio is impossible to calculate
Ans: c
10. In order to determine the expected return of a portfolio, all of the following must
be known, except:
a. probabilities of expected returns of individual assets

b. weight of each individual asset to total portfolio value
c. expected return of each individual asset
d. variance of return of each individual asset and correlation of returns between
assets
Ans: a
Difficulty: Difficult
11. Which of the following is true regarding the expected return of a portfolio?
a. It is a weighted average only for stock portfolios

b. It can only be positive
c. It can never be above the highest individual asset return
d. It is always below the highest individual asset return
Ans: c
12. Which of the following is true regarding random diversification?
a. Investment characteristics are considered important in random diversification

b. The benefits of random diversification eventually no longer continue as more
securities are added
c. Random diversification, if done correctly, can eliminate all risk in a portfolio
Chapter Seven 84
Portfolio Theory
d. Random diversification eventually removes all company specific risk from a
portfolio
Ans: b
Ref: Analyzing Portfolio Risk
13. Company specific risk is also known as:
a. market risk
b. systematic risk
c. non-diversifiable risk
d. idiosyncratic risk
Ans: d
14. The relevant risk for a well-diversified portfolio is:
a. interest rate risk

b. inflation risk
c. business risk
d. market risk
Ans: d
Difficulty: Easy
15. Which of the following statements regarding the correlation coefficient is

not true?
a. It is a statistical measure
b. It measure the relationship between two securities’ returns
c. It determines the causes of the relationship between two securities’ returns
d. It is greater than or equal to -1 and less than or equal to +1
Ans: c
16. Two stocks with perfect negative correlation will have a correlation coefficient of:
a. +1.0
b. -2.0
c. 0
d. –1.0
Ans: d
Chapter Seven 85
Portfolio Theory
Difficulty: Easy
17. Security A and Security B have a correlation coefficient of 0. If Security A’s

return is expected to increase by 10 percent,
a. Security B’s return should also increase by 10 percent

b. Security B’s return should decrease by 10 percent
c. Security B’s return should be zero
d. Security B’s return is impossible to determine from the above information
Ans: d
18. Which of the following portfolios has the least reduction of risk?
a. A portfolio with securities all having positive correlation with each other
b. A portfolio with securities all having zero correlation with each other
c. A portfolio with securities all having negative correlation with each other
d. A portfolio with securities all having skewed correlation with each other
Ans: a
19. The major difference between the correlation coefficient and the
covariance is that:
a. the correlation coefficient can be positive, negative or zero while the covariance is
always positive
b. the correlation coefficient measures relationship between securities and the
covariance measures relationships between a security and the market
c. the correlation coefficient is a relative measure showing association between
security returns and the covariance is an absolute measure showing association
between security returns
d. the correlation coefficient is a geometric measure and the covariance is a
statistical measure
Ans: c
20. Which of the following statements regarding portfolio risk and number of stocks
is generally true?
a. Adding more stocks increases risk

b. Adding more stocks decreases risk but does not eliminate it
c. Adding more stocks has no effect on risk
Chapter Seven 86
Portfolio Theory
d. Adding more stocks increases only systematic risk
Ans: b
21. When returns are perfectly positively correlated, the risk of the portfolio is:
a. zero
b. the weighted average of the individual securities risk
c. equal to the correlation coefficient between the securities
d. infinite
Ans: b
22. Portfolio risk is most often measured by professional investors using the:
a. expected value
b. portfolio beta
c. weighted average of individual risk
d. standard deviation
Ans: d
Difficulty: Easy
23. A change in the correlation coefficient of the returns of two securities in a

portfolio causes a change in
a. both the expected return and the risk of the portfolio

b. only the expected return of the portfolio
c. only the risk level of the portfolio
d. neither the expected return nor the risk level of the portfolio
Ans: c
24. Markowitz's main contribution to portfolio theory is:
a. that risk is the same for each type of financial asset

b. that risk is a function of credit, liquidity and market
factors
c. risk is not quantifiable
d. insight about the relative importance of variance and covariance in determining
portfolio risk
Chapter Seven 87
Portfolio Theory
Ans: d
25. Owning two securities instead of one will not reduce the risk taken by an investor
if the two securities are
a. perfectly positively correlated with each other

b. perfectly independent of each other
c. perfectly negatively correlated with each other
d. of the same category, e.g. blue chips
Ans: a
Difficulty: Easy
26. When the covariance is positive, the correlation will be:
a. positive
b. negative
c. zero
d. impossible to determine
Ans: a
Difficulty: Easy
27. Calculate the risk (standard deviation) of the following two-security portfolio if
the correlation coefficient between the two securities is equal to 0.5.
Variance Weight (in the portfolio)

Security A 10 0.3
Security B 20 0.7
a. 17.0 percent
b. 5.4 percent
c. 2.0 percent
d. 3.7 percent
Solution: p = [w1212 + w2222 + 2(w1)(w2)(1,2)12]1/2

= [(0.3)2(10) + (0.7)2(20) +
= 2(0.3)(0.7)(0.5)(10)1/2(20)1/2]1/2 = 3.7%
Ans: d
28. The major problem with the Markowitz model is its:
a. lack of accuracy
Chapter Seven 88
Portfolio Theory
b. predictability flaws
c. complexity
d. inability to handle large number of inputs
Ans: c
Ref: Calculating Portfolio Risk
29. With a discrete probability distribution:
a. a probability is assigned to each possible outcome

b. possible outcomes are constantly changing
c. an infinite number of possible outcomes exist
d. there is no variance
Ans: a
True-False Questions
1. Standard deviations for well-diversified portfolios are reasonably steady over

time.
Ans: T
2. A probability distribution shows the likely outcomes that may occur and the
probabilities associated with these likely outcomes.
Ans: T
Difficulty: Easy
3. Portfolio risk is a weighted average of the individual security risks.
Ans: F
4. A negative correlation coefficient indicates that the returns of two

securities have a tendency to move in opposite directions.
Ans: T
Difficulty: Easy
Ref: The Components of Portfolio Risk
Chapter Seven 89
Portfolio Theory
5. Investments in commodities such as precious metals may provide additional
diversification opportunities for portfolios consisting primarily of stocks and
bonds.
Ans: T
6. According to the Law of Large Numbers, the larger the sample size, the more
likely it is that the sample mean will be close to the population expected value.
Ans: T
7. Throwing a dart at the WSJ and selecting stocks on this basis would be
considered random diversification.
Ans: T
Difficulty: Easy
8. Portfolio risk can be reduced by reducing portfolio weights for assets with
positive correlations.
Ans: T
Ref: Calculating Portfolio Risk
9. If an analyst uses ex post data to calculate the correlation coefficient and

covariance and uses them in the Markowitz model, the assumption is that
past relationships will continue in the future.
Ans: T
Ref: Obtaining the Data
10. In the case of a four-security portfolio, there will be 8 covariances.
Ans: F
Ref: Obtaining the Data
11. The correlation coefficient explains the cause in the relative movement in returns
between two securities.
Ans: F
Difficulty: Easy
Chapter Seven 90
Portfolio Theory
12. In a portfolio consisting of two perfectly negatively correlated securities, the
highest attainable expected return will consist of a portfolio containing 100% of
the asset with the highest expected return.
Ans: T
Short-Answer Questions
1. Are the expected returns and standard deviation of a portfolio both weighted
averages of the individual securities expected returns and standard deviations? If
not, what other factors are required?
Answer: The expected return is a weighted average. The portfolio standard

deviation is not a weighted average but also requires correlation
coefficients among the securities.
2. How is the correlation coefficient important in choosing among securities for a

portfolio?
Answer: If security returns are highly correlated (high positive correlation)

diversification does little to reduce risk of returns. The lower the
correlation coefficients among the securities, the more advantage is
gained from diversification.
3. Why was the Markowitz model impractical for commercial use when it was first
introduced in 1952? What has changed by the 1990s?
Answer: The volume of calculations required for a large portfolio was

physically impractical in the 1950s. By the 1990s, the proliferation
of computers has made the volume of calculations practical.
4. Provide an example of two industries that might have low correlation with one
another. Give an example that might exhibit high correlation.
Answer: Low correlation might be found between large appliances and retail
food markets in that retail food is somewhat steady through
economic ups and downs, while appliances tend to fall off during
economic slow downs. High correlation might be found between auto
manufacturers and steel manufacturers.
Chapter Seven 91
Portfolio Theory
5. When constructing a portfolio, standard deviations, expected returns, and
correlation coefficients are typically calculated from historical data. Why may
that be a problem?
Answer: The problem is that historical patterns may not be repeated in the future.
We are planning a portfolio for the future and would like to have future
(ex ante) data but have only historical (ex post) data.
6. A portfolio consisting of two securities with perfect negative correlation in the

proper proportions can be shown to have a standard deviation of zero. What
makes this riskless portfolio impossible to achieve in the real world?
Answer: Perfect negative correlation is not achievable in most cases since most
securities have positive correlation or low correlation. Even if it were
observed for a period of time, it could not be counted on to hold for long
in the future.
Fill-in-the-blank Questions
1. Markowitz diversification, also called _____________ diversification, removes

_________________ risk from the portfolio.
Answer: efficient, idiosyncratic (also known as company specific, unsystematic, or

diversifiable)
2. An efficiently diversified portfolio still has _____________________ risk.
Answer: market (also known as systematic or un-diversifiable)

3. The major problem with Markowitz diversification model is that it requires a full
set of ________________________ between the returns of all securities being
considered in order to calculate portfolio variance.
Answer: covariances
4. The number of covariances in the Markowitz model is ________ ; the number of

unique covariances is [n (n-1)]/2.
Answer: n(n-1)
Chapter Seven 92
Portfolio Theory
Critical Thinking/Essay Questions
1. Conventional wisdom has long held that diversification of a stock portfolio

should be across industries. Does the correlation coefficient indirectly
recommend the same thing?
Answer: Correlation coefficients between securities in different industries

represent the extent to which their fortunes depend on mutual factors.
The correlation coefficients, then, simply give investors a way to measure
conventional wisdom.
2. Why is more Difficult to put Markowitz diversification into effect than random
diversification?
Answer: It requires more quantitative analysis and generally the use of a

computer software program. In addition, it is Difficulter to find
securities with either negative correlation or low correlation than it is to
simply select securities in different industries and sectors as is done in
random diversification.
Problems
1. Calculate the expected return and risk (standard deviation) for General Fudge for
200X, given the following information:
Probabilities 0.20 0.15 0.50 0.15

Possible Outcomes 20% 15% 11% -5%
Solution: E(Ri) = .20(.20) + .15(.15) + .50(.11) + .15(-.05)

= .04 + .0225 + .055 + (-.0075)
= .1
m
  [  [ R i  E( R i )]2 pri ]1 / 2
i 1
(1) (2) (3) (4) (5) (6)

Possible
Outcome ER R-ER (PR-ER)2 Prob. (4) x (5)
.20 .11 .09 .0081 .20 .00162
.15 .11 .04 .0016 .15 .00024
.11 .11 .00 .0000 .50 .00000
-.05 .11 -.16 .0256 .15 .00384
.00570
Chapter Seven 93
Portfolio Theory
 = (.00570)1/2 = 7.55 percent
Chapter Seven 94
Portfolio Theory
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Sayre places so much confidence in the power of this elastic tension to
overcome contractions that he rarely resorts to tenotomy in the treatment
of paralytic talipes. Hueter, however,180 considers tenotomy much the
speediest, and therefore the most desirable, way of removing
contractions.181
180 Loc. cit.
181 Loc. cit.
Seeligmüller quotes with approval Böttger's method for the treatment of

deformities, where the weight of the body is utilized to stretch the
retracted tendons. Thus, for talipes equino-varus an over-reduction is
effected under ether, and the foot forced into a position of moderate
calcaneo-valgus. In this position it is retained by the immediate
application of a plaster or silica bandage. After this has hardened the
child should be encouraged to walk in the mould, with the addition of felt
shoes having a slanting sole that is thickened like a wedge at the inner
side of the foot and strapped on like a skate. Then, during the act of
walking the body tends to constantly force down the heel and thus stretch
the retracted tendo Achillis, while the bandage and felt sole (acting like a
splint) prevent the inner side of the foot from slipping up.
For talipes valgus the method is analogous, but the foot is forced into an
equino-varus position, so that the tendo Achillis is artificially shortened,
and ultimately becomes a rigid band, capable, in spite of the sural
paralysis, of sustaining the heel.
A cause of relapse in talipes not unfrequently overlooked is the presence

of even slight contractions of the hip- and knee-joints. These by
shortening the limb tend to the production of equinus, since the foot
points itself in order to reach the ground. These contractions, whose
rigidity is far inferior to that induced by chronic arthritis, may be overcome
by forced extension under ether or gradually by manipulations, or by the
weight-and-pulley apparatus, applied in the recumbent position, as in
morbus coxarius. The obvious objection to the latter method is the
confinement in bed which it necessitates in a child enjoying at the time
perhaps robust general health.
The contraction once overcome, the limb must be placed in apparatus
which shall both maintain suitable extension and assist in supporting the
trunk during station and locomotion. The latter purpose is effected, as in
apparatus for chronic joint diseases, by transferring the weight of the
body to steel splints running up each side of the limb, the outer one as far
as a girdle which encircles the hips; the inner to a band surrounding the
upper part of the thigh. Thus is extended the support which in paralysis
limited to the leg-muscles is given by the steel splints inserted in the side
of the club-foot shoes.
In the simplest form of apparatus locomotion is expected to be

accomplished by the action of muscles inserted above the seat of the
paralysis. Thus, when the muscles passing over the ankle-joint are
paralyzed, the foot is moved as a dead weight by means of the
quadriceps extensor, popliteus, and hamstring muscles inserted at the
upper extremity of the leg. If the quadriceps cruris is paralyzed, the
rotators of the thigh, ilio-psoas, sartorius, and adductor muscles, passing
from the pelvis to the thigh, and which are so frequently intact in atrophic
paralysis, are enabled to move the limb if the weight of the body is borne
by steel splints, if these be light and properly jointed at the hip, knees,
and ankle.182
182 Or the joint of the knee may be kept locked while the patient walks, when extension of
the limb is mainly required, during both the active and passive movements of locomotion, the
necessary flexion being supplied at the hip and ankle. By means of a key the knee-joint can
be flexed during the sitting positions.
But an important aid to locomotion may be obtained from the artificial

muscles, whose elastic tension is of such value in overcoming
contractions. The quadriceps extensor, the most frequently paralyzed,
may be supplemented by an India-rubber band and chain passing down
the front of the thigh from a point on the pelvic girdle corresponding to the
anterior iliac spine to a point on a leg-band, imitating the tibial insertion of
the quadriceps tendon. Analogous bands stretched on the posterior
aspect of the thigh simulate the hamstring muscles. When the external
rotators are paralyzed, the artificial muscle must stretch from the pelvic
girdle to a band encircling the upper part of the thigh.
The action of these muscles, apart from their elastic tension of repose, is
thus explained by Duchenne: When any effort is made to move a
paralyzed limb, the intact antagonists to the paralyzed muscles contract;
thus, the flexors of the leg. But this contraction, being constantly opposed
by the elastic tension of the artificial quadriceps, is restrained and
gradual, instead of being brusque, jerking, and excessive, as it otherwise
would be. This is the first result obtained. In the second place, contraction
of the antagonist having ceased, the artificial muscle which has been
stretched returns upon itself in virtue of its elasticity, and restores the limb
to the position of normal equilibrium.
For the act of walking, however, the artificial quadriceps would require to
be made tense enough to resist flexion, and thus keep the limb in
extension. An artificial anterior tibial muscle, however, would require to
yield to the intact gastrocnemius while the heel was being raised from the
floor; then its elastic force should be sufficient to retract the point of the
foot in dorsal flexion during the pendulum movement which passively
swings the leg forward. The tension of the artificial muscle should
therefore be so adjusted that it can only be overcome by the active
contraction of the gastrocnemius, and at the moment of greatest tension,
immediately after stretching, it should be able to quite overcome the
gastrocnemius, then relatively183 relaxed.
183 We say relatively, believing that the simultaneous contraction of antagonist muscles has
been well established as a constant normal phenomenon.
The anterior tibial, gastrocnemius, and many other of the artificial muscles
devised by Duchenne are still in use in the modified form given to them by
Barwell. On the other hand, the action of the long peroneus in pronating
the foot, and which Duchenne imitated by an elaborate artificial tendon
following the exact course of the natural one, is to-day generally
supplemented by the jointed shoe and laced bandage.
In paralysis of all the muscles surrounding a joint, when the limb is placid
and no retractions by adapted atrophy have taken place, the artificial
muscles can only serve to oppose the malpositions which are threatened
from mechanical influences.
In the upper extremities prothetic apparatus has been principally used for
progressive muscular atrophy. Paralysis of the wrist extensors is perhaps
the only case in which the artificial muscle is required in anterior
poliomyelitis. A string may be necessary to support the arm in paralysis of
the deltoid, to avert luxation of the humerus.
Duchenne's ingenuity did not shrink from the difficult task of

supplementing the muscles of the trunk. This he did by inserting the
elastic spirals in corsets in a direction following that of the muscles
paralyzed. Thus, a unilateral paralysis of the sacro-lumbalis may be met
by a spiral splint running up one side of the spine; below, to the lateral
posterior portion of a pelvic girdle. In bilateral paralysis two springs are
used to antagonize the action of the abdominal muscles.
In Barwell's apparatus for the trunk184 India-rubber bands are again

substituted for spiral springs. No attempt is made to imitate the direction
of muscles, but the force is applied in any direction required to antagonize
the pressure producing the deformity.185
184 Especially designed for habitual scoliosis, but applicable also to the paralytic deformity.
185 Volkmann (loc. cit., p. 778) thinks that the force of Barwell's India-rubber straps, whether
for scoliosis or club-foot apparatus, is inadequate, and much inferior to metallic springs.
It is always important to remember the rarity of scoliosis caused by spinal

paralysis of the trunk-muscles, and the much greater frequency with
which this deformity occurs as a consequence of the paralytic shortening
of a leg. A high shoe, equalizing the length of the lower extremities, is
then the simple and efficient remedy.
In cases of long standing, even when the scoliosis is due to this cause,
certain muscles on the concave side of the curve may become so
retracted and rigid as to require tenotomy. Before this operation it is
necessary to put the rigid muscles on the stretch as much as possible;
and this may be done, if necessary, by means of Sayre's hanging
apparatus. After this operation the spine may be straightened out with
ease—an important distinction from advanced habitual scoliosis, where
the alteration in the shape of the vertebræ defeats all attempts at
rectification. The position may be maintained by elastic straps or corsets
and by removing the condition which has led to the deformity.
Seeligmüller criticises too unfavorably the entire system of elastic tension

in the prophylaxis and treatment of paralytic deformities. He quotes
Duchenne's admission, that in certain cases traction upon rigidly-retracted
tissues becomes insupportably painful, and must be abandoned. It is in
these cases that tenotomy becomes an indispensable preliminary to the
use of apparatus. Sayre insists that the necessity for tenotomy is
indicated when pressure on the rigid muscle is followed by instantaneous
spasmodic contraction in the affected or neighboring muscles. He
declares that such contractions indicate reflex irritations, show that the
muscle has undergone structural change, and that any attempt to stretch
or lengthen it would be followed by an excess of irritation and pain.
This explanation can hardly be accepted, since muscles, whether

imperfectly or not at all paralyzed, which from position and adapted
atrophy have become retracted, have necessarily undergone structural
changes. The greater these changes, the greater the diminution of reflex
excitability; and in any muscle completely paralyzed and degenerated this
is entirely lost. If, however, the afferent nerves retain enough vitality, if the
muscle be slightly paralyzed or altogether intact, then irritation of its
tendon by stretching may serve to excite contractions in the belly of the
muscle. The possibility of such spinal reflexes is demonstrated by the
now familiar phenomenon of the tendon reflex in various spinal
diseases.186 The contractions must be painful from the impediments
offered to the progress of the contracting nerve, and from the
exaggeratedly vicious position into which they tend to force the limb.
Under these circumstances prothetic apparatus must be deferred until
section of the tendons has been made.
186 “Passive muscular tension excites tonic contraction in a muscle, and this action may, in
abnormal conditions, be excessive, as in the myelitic contractions (so-called tendon
reflexes).... The afferent nerves commence in the fibrous tissues of the muscle, and seem to
be especially stimulated by extension” (Gowers, On Epilepsy, 1881, p. 97).
DISEASE OF ONE LATERAL HALF OF THE SPINAL

CORD.
BY H. D. SCHMIDT, M.D.
SYNONYMS.—Unilateral lesion of the spinal cord; Spinal hemiplegia

and hemiparaplegia; Unilateral spinal paralysis.
INTRODUCTION.—This disease remained unnoticed until twenty years

ago, when Brown-Séquard, observing that certain lesions of the
spinal cord were accompanied by symptoms resembling those which
he witnessed in animals after section of one lateral half of the cord,
recognized it as a special affection. Although some of the
accompanying phenomena of such a section had likewise been
observed by Stilling, Budge, Eigenbrodt, Tuerk, Schiff, Von Bezold,
and Van Kempen,1 nevertheless this whole group of symptoms, as
belonging to the same disease, was first clearly recognized and
anatomically demonstrated by Brown-Séquard.2 According to this
physiologist, a section or a destruction of a small portion of a lateral
half of the spinal cord in its cervical region gives rise to the following
phenomena: namely, on the injured side is observed a paralysis of
voluntary motion, of the muscular sense, and of the blood-vessels;
the latter, manifesting itself by a greater supply of blood and a higher
temperature of the parts, may continue to exist for some years.
There is, furthermore, an increased sensibility of the trunk and
extremity to touch, prick, heat, cold, electricity, etc., owing to vaso-
motor paralysis, though in some cases a slight anæsthesia may exist
in a limited zone above the hyperæsthetic part, and also in certain
parts of the arm, breast, and neck. Besides these symptoms, vaso-
motor paralysis of the corresponding side of the face and of the eye,
manifested by an elevated temperature and sensibility, partial
closure of the eyelid, contracted pupil, slight contraction of some of
the muscles of the face, etc., may also be present. On the opposite
side of the injury an anæsthesia of all kinds of sensation, excepting
the muscular sense, is observed in both extremities; there is also an
absence of motor paralysis. The anæsthesia on this side is owing to
the decussation of the sensory nerves in the spinal cord.
1 Eckhard, “Physiologie des Nervensystems,” in Handbuch der Physiologie, edited by
L. Hermann, 2d part of vol. ii. p. 165.
2 “On Spinal Hemiplegia,” Lancet, Nov. 7, 21, and Dec. 12, 26, 1868, reported in
Virchow and Hirsch's Jahresbericht for the year 1868, vol. ii. p. 37.
If the hemisection of the cord is made in the dorsal region, the

functional disturbances are limited to that part of the body below the
point of division, and a hemiparaplegia, or paralysis of the
corresponding lower extremity, will be the result.
From these facts it will be readily understood that a lesion occurring

in any portion of one lateral half of the spinal cord of man must be
followed by some or all of the above-mentioned symptoms, and that
the phenomena produced by physiological experiments on animals
constitute, in reality, the pathological basis of unilateral spinal
paralysis in man. They will be more clearly understood by calling to
mind the course of the musculo-motor, vaso-motor, and sensitive
tracts in the spinal cord. Thus, the musculo-motor tracts, after having
descended to the crura cerebri, cross one another in the pyramids of
the medulla oblongata and adjoining upper portion of the spinal cord,
forming the so-called decussation of the pyramids; they then
descend through the spinal cord to supply the muscles of the same
side of the body.3 A section of one lateral half of the cord therefore
causes motor paralysis on the same side. The vaso-motor tracts
remain uncrossed, and pass, each, through one lateral half of the
cord to supply the vessels on the same side; some regions of the
body are stated to make an exception to this rule. According to
Brown-Séquard, the sensitive tracts conducting the different kinds of
sensation, with the exception of the muscular sense, on the contrary,
cross over to the opposite half of the spinal cord soon after their
entrance into it, and thence pursue their further course to the brain.
A section of one lateral half of the cord, therefore, will be followed by
a loss of sensation of touch, pain, heat, tickling, etc. on the other
side of the body.
3 Though, in the majority of cases, a complete decussation of the motor tracts
probably takes place in the pyramids, the researches of Flechsig have shown (Die
Leitungsbahnen im Gehirn und Rückenmark des Menschen, p. 273) that there are a
number of others in which the decussation is not complete, but where a part of these
tracts passes to the spinal marrow uncrossed on the inner surface of the anterior
white columns.
The symptoms above mentioned must of course vary according to

the extent, the intensity, and the particular nature of the lesion, as
well as the height at which it is located in the spinal cord.
DEFINITION.—The chief characters of unilateral spinal disease are

motor paralysis, hemiplegia, or hemiparaplegia, paralysis of the
muscular sense and of the blood-vessels on the side of the lesion,
and paralysis of sensation with preservation of the muscular sense
on the other side of the body. These symptoms may vary, and be
accompanied by other phenomena according to the particular seat,
extent, and depth of the lesion.
SYMPTOMS.—According to the nature of the lesion, the symptoms of

unilateral disease of the spinal cord may be developed suddenly, as,
for instance, when caused by traumatic injuries; or in a gradual and
slow manner, when they may be preceded by premonitory
symptoms, such as vertigo, pain on the side of the lesion, etc. The
most prominent clinical phenomena, as before mentioned, are motor
paralysis on the side of the lesion, and anæsthesia on the opposite
side of the body. The motor paralysis on the side of the lesion may,
according to the seat of the latter, manifest itself in either the form of
a hemiplegia or hemiparaplegia, and even extend in a light form to
the opposite side of the body. In typical cases, however, in which the
injury or disease is strictly confined to one lateral half of the cord, the
motor power on the other side of the body remains entirely
undisturbed. At the same time, the muscular sense on the injured
side is paralyzed or considerably diminished, and in some cases
(Fieber, Lanzoni, Allessandrini) the electro-muscular excitability also
has been found lowered, while in others it has remained normal.
There is furthermore observed, on the side of the lesion, a vaso-
motor paralysis, manifesting itself by a greater supply of blood to,
and a higher temperature of, the paralyzed trunk and limbs, giving
rise to an increase of sensibility (hyperæsthesia) of touch, prick,
heat, cold, electricity, etc. in these parts. If the seat of the lesion is
sufficiently high up in the cord, this paralysis extends, moreover, to
the corresponding side of the face and eye, where it also causes an
elevation of temperature, increase of sensibility, partial closure of the
eyelid, contracted pupil, slight contraction of some of the muscles of
the face, etc. In a number of cases at the boundary of the
hyperæsthetic region a narrow anæsthetic zone is observed to exist
on the breast, neck, or arm. This anæsthesia is owing to the division,
at the level of the section, of some nerves of sensation on their way
to the other half of the spinal cord. An increase of the reflex irritability
of the tendons has in some cases (Erb, Schulz, Revillons) been
observed, while in one case (Glaeser) the reflex was found to be
absent. Swelling and œdema of the paralyzed limbs have also been
met with (Glaeser), and in one case (Allessandrini) even swelling
and pain in all the joints of the injured side were observed before
death, while masses of coagulated blood in these joints, particularly
in the knee, were revealed by the autopsy. The inflammatory
affection of the knee-joint of the paralyzed leg has, moreover, been
observed by Viguès, Joffroy, and Solomon.4 Frequently, atrophy of
the paralyzed muscles takes place, especially in chronic cases. In
one case (Fieber) even atrophy of the upper extremity of the
uninjured side of the body was observed.
4 Erb, “Diseases of the Spinal Cord, etc.,” Cyclopædia of the Practice of Medicine,
edited by H. v. Ziemssen, Amer. ed.
The most prominent symptoms observed on the side of the body

opposite to the seat of the lesion are anæsthesia of every kind of
sensation, preservation of the muscular sense, and absence of
motor paralysis. Reflex action and electro-muscular contractility
generally remain normal, though in one case (Fieber) the latter was
found increased. Although the anæsthesia of the skin generally
comprises every kind of sensation, three cases were observed
(Fieber) in which the sensation of heat remained unimpaired, while
the electro-cutaneous sensibility appeared to be lost. As a general
rule, there is no vaso-motor paralysis on the uninjured side, though
in some cases (Erb, Allessandrini) an elevation of temperature has
been observed.
Besides the above symptoms, some others, less characteristic in

nature, are now and then observed in individual cases. They are
painful sensations on one or the other side, or even simultaneously
on both sides of the body, and also a feeling of constriction at the
level of the lesion (Erb). Disturbances of the functions of the bowels
or bladder are also met with, though in other cases they are absent.
PATHOLOGICAL ANATOMY.—The pathological changes taking place in

the spinal cord of patients affected with unilateral spinal paralysis
must vary in different cases according to the particular nature of the
lesion giving rise to the characteristic symptoms. In those cases
reported to have terminated by a gradual disappearance of the
symptoms with or without therapeutic interference it is very probable
that the exciting cause was a hyperæmia or a myelitis of a small
portion of one lateral half of the spinal cord, sufficiently high in
degree to impair the conducting power of the nerve-fibres passing
through it. In some cases the myelitis may lead to a degeneration of
the nerve-fibres, or even extend to the other half of the cord, and by
calling forth additional symptoms render the case more complicated.
In syphilitic cases the disease depends upon syphilitic deposits or
neoplasms in the affected portion of the spinal cord; these cases,
however, generally yield to treatment. In the same manner may
circumscribed sclerosis give rise to the disease. Another cause may
be found in the compression of the cord caused by meningeal
tumors or by the fractured portions of some of the vertebræ. Chronic
disease of the vertebral bones themselves (Pott's disease) may also,
by encroaching upon the spinal cord, become an exciting cause.
The most typical cases, however, are those depending upon

traumatic injuries, by which one lateral half of the spinal cord is
forcibly divided. These lesions resemble in nature the division of the
cord in the physiological experiments on animals, and are most
frequently caused by a stab from a knife penetrating to the cord
through the intervertebral spaces.
DIAGNOSIS.—In those cases in which the symptoms of unilateral

spinal paralysis appear soon after an external injury to the spine, it
becomes obvious that the latter is the exciting cause. In cases of a
more chronic character, in which the symptoms appear gradually, the
nature of the exciting cause can only be correctly determined by the
observation of certain collateral symptoms characteristic of such
causes as might give rise to the symptoms of the disease in
question. As regards the diagnostic symptoms of unilateral spinal
paralysis themselves, they are sufficiently characteristic to be easily
distinguished from those of other forms of hemiplegia or
hemiparaplegia. Thus, cerebral hemiplegia may be distinguished
from the disease under discussion by the sensory disturbances
being either absent or on the same side as the paralysis;
furthermore, by the one-sided paralysis of the face and of the tongue
and by the affection of various cranial nerves. The hemiplegic form
of spasmodic spinal paralysis is distinguished by the absence of
sensory disturbance, etc. Lastly, hemiplegia depending upon lesion
of one side of the cauda equina is distinguished from unilateral
spinal disease by the paralysis and anæsthesia being confined to the
same side, and by generally affecting certain nervous districts of the
lower extremities.
PROGNOSIS.—In unilateral spinal lesions the prognosis depends

obviously on the particular nature and intensity of the exciting cause.
On the whole, there are quite a number of cases reported, even of
traumatic origin, which have terminated favorably.
TREATMENT.—The treatment of unilateral spinal paralysis depends,

like the prognosis, upon the nature of the exciting cause. The
principles upon which it is to be pursued of course are the same as
those upon which the treatment of the various lesions causing the
disease—such as hyperæmia, myelitis, sclerosis, wound of the
spinal cord, etc.—is based.
PROGRESSIVE LABIO-GLOSSO-LARYNGEAL
PARALYSIS.
BY H. D. SCHMIDT, M.D.
SYNONYMS.—Chronic progressive bulbar paralysis; Progressive

muscular paralysis of the tongue, soft palate, and lips.
HISTORY.—Although the particular group of symptoms constituting

this disease must have been met with and known to the older
medical observers, they were nevertheless first recognized as a
special variety of paralysis in 1841 by Trousseau,1 who named the
affection labio-glosso-laryngeal paralysis. But as the memorandum
prepared by this distinguished physician at the time when, in
consultation with a medical colleague, he had observed the
particular symptoms of this affection, unfortunately remained
unpublished, twenty years more elapsed before the first accurate
and detailed description of the symptoms and progressive nature of
this disease under the name of progressive muscular paralysis of the
tongue, soft palate, and lips was rendered by Duchenne. The
writings of this author directed at once the attention of other medical
men to this disease, and since that time a large number of cases
have been reported and discussed,2 while the microscopical
examination accompanying the autopsies of many of them finally
revealed that the seat of the lesion giving rise to the phenomena of
this disease was to be sought in the nervous nuclei of the medulla
oblongata. Hence at the present time the pathology of this disease is
thoroughly understood.
1 Clinique médicale de l'Hôtel Dieu de Paris, vol. ii. p. 334.
2 A very considerable number of cases of this disease, and discussions thereon, will
be found reported in Virchow and Hirsch's Jahresbericht über die Leistungen und
Fortschritte der Gesammten Medizin, for the years 1866-80, vol. ii., section
“Krankheiten des Nervensystems.”
DEFINITION.—That form of labio-glosso-laryngeal paralysis to be

treated in the following pages is characterized by a progressive
paralysis and atrophy of the muscles of the tongue, lips, palate,
pharynx, and larynx, interfering in a greater or lesser degree with the
articulation of words and sounds and with the functions of
mastication and deglutition—affecting, furthermore, in the later
stages of the disease, the voice and the function of respiration. The
paralysis is caused by a progressive degeneration and atrophy of the
ganglion-cells of those nerve-centres in the medulla oblongata from
which the muscles of the above-named organs receive their supply
of nervous energy, though in most cases the pathological process
extends to, or even beyond, the roots of those nerves which
originate in these centres and terminate in the respective muscles. In
many cases the pathological process extends to the spinal marrow,
and there causes paralysis and atrophy of the muscles of the trunk,
and, generally, of the upper extremities. Almost in every case the
disease, as its name indicates, slowly progresses until it terminates
in death.
There are, however, a number of cases observed which, though

exhibiting the same or similar symptoms, do not, in reality, depend
upon a progressive degeneration and atrophy of the centres and
nerve-roots of the medulla, but, on the contrary, owe their symptoms
to other causes; as, for instance, to tumors, hemorrhages, syphilitic
neoplasms, etc., which, either by pressing upon the medulla from
without, or, if situated within, by deranging in various manners the
individual nervous elements of that part, may give rise to some or
even all of the symptoms of true labio-glosso-laryngeal paralysis.
These symptoms, however, according to the character of the lesion,
may, after remaining stationary for some time, retrograde, and even
disappear, as has been observed in syphilitic cases; or they may
progress, and finally end in death. In order to distinguish these cases
from the chronic or progressive bulbar paralysis some authors have
attached the term retrogressive to this form of the disease.
SYMPTOMS.—As the degeneration of the nerve-centres in the medulla

oblongata, upon which the disease depends, does not proceed in a
regular fixed order, the order in which the clinical symptoms
successively appear also varies in different cases. In the majority of
cases, however, the symptoms appear gradually, manifesting
themselves generally in the form of a greater or lesser impediment in
the articulation of certain sounds or letters depending upon the
movements of the tongue, such as e, i, k, l, s, and c, while at the
same time a difficulty of mastication and deglutition may be
experienced by the patient, due to the progressive development of
the paralysis, which deprives the tongue of its lateral and forward
movements. To this cause also, at this period, the apparently
increased secretion of saliva, running from the corners of the mouth,
must be attributed. With intelligent patients these symptoms are
rendered less prominent by the special effort which they make to
pronounce slowly for the purpose of hiding the deficiency in their
speech. But as the disease advances the difficulty of articulation
increases on account of the paralysis extending to the orbicularis
oris, thus affecting the mobility of the lips and interfering with the
pronunciation of the labial sounds p, b, f, m, and w. With the loss of
power of articulation the patient's speech becomes gradually
reduced to monosyllables, or even, finally, to incomprehensible and
inarticulated grunts, by which he expresses his wants to his friends.
In consequence of the paralysis of the lips the patient becomes
unable to whistle or blow or to perform any movement depending
upon these organs, while at the same time, through the disturbance
created in the co-ordination of the facial muscles by the paralysis of
the orbicularis oris, the mouth becomes transversely elongated and
drawn downward by the action of the remaining unparalyzed
muscles upon its angles. With the mouth partially open and the lower
lip hanging down, the face of the patient has a peculiar sad and
painful expression, while the voice assumes a nasal sound on
account of the paralysis of the palate.
After a while the difficulty of deglutition, caused by the inability of the

tongue to properly assist in the formation of the bolus of food and its
propulsion into the pharynx, increases on account of the paralysis
extending to the muscles of the pharynx. The failure of these
muscles in the performance of their special function of grasping the
food and carrying it to the œsophagus obliges the patient to push it
down the pharynx with his fingers. In some cases the difficulty of
swallowing rests with solids, in others with fluids. The defective
deglutition furthermore gives rise to spells of coughing and
suffocation by portions of food getting between the epiglottis and
larynx, while the paralyzed muscles of the palate allow the fluids to
pass through the nose and enter the posterior nares.
As the case slowly proceeds the symptoms grow worse. The

paralysis of the orbicularis oris reaches a point when this muscle is
no more able to close the oral cavity; the mouth of the patient
therefore remains open. The tongue, having now entirely lost its
lateral, forward, or upward movements, rests motionless upon the
floor of the mouth, evincing no other signs of life but occasional slight
muscular twitchings. In some cases a diminution of the sense of
taste, and also of that of touch in the tongue, pharynx, and larynx,
has been observed. Atrophy of the tongue and lips now sets in, and
the function of speech is almost entirely lost. The only letter which
the patient is still able to pronounce is a (broad); all other sounds are
indistinct and can hardly be understood. The paralysis of the tongue
and other muscles of deglutition gives rise, furthermore, to an
accumulation of the now excessively secreted saliva, which, being
retained in the oral cavity, assumes the form of a viscid mucous
liquid dripping from the mouth, extending, in the form of strings or
ribbons, between the surfaces of the lips. Finally, when, through the
progressive paralysis of the orbicularis oris, the patient can no more
close the lips, the flow of saliva from the mouth becomes continuous;
he is then seen engaged in the constant use of his handkerchief for
removing the secretion.
In the latter stages of the disease the pathological process extends

to the centres of respiration, paralyzing not only the muscles of
respiration, but diminishing at the same time the contractile power of
the lungs. A great difficulty of breathing—consisting not only in the
want of depth of the inspirations, but, moreover, in a feebleness of
expiration (manifested by weak, powerless coughing)—then ensues,
and the patient is no further able to blow his nose or clear his
bronchial tubes from the accumulating mucus. The paralysis of the
muscles of the larynx, also occurring at this stage, not only increases
the difficulties of deglutition, but most seriously affects the voice of
the patient by decreasing the innervation of the vocal cords; the
voice then becomes hoarse and weak, to be finally entirely lost.
The decrease in the innervation of the heart—which, lastly, also

occurs—gives rise to irregularities in the action of this organ,
followed by irregularity of the pulse, attacks of syncope, feelings of
extreme weakness, and fears of death; whilst simultaneously the
insufficient performance of the respiratory function renders the
breathing of the patient weaker and weaker. Feelings of great
oppression in the chest then arise, and the patient may die during
one of the now frequent attacks of dyspnœa and suffocation.
No fever or pain is observed during the course of this disease;

sensation remains unaffected and the mind is perfectly clear. It is
owing to these circumstances that frequently the patient walks about
and attends to the duties of life, until shortly before death he
becomes confined to bed by the great weakness caused by the want
of nutrition. The appetite also remains good, but, unfortunately, in
consequence of the difficulties attending the act of deglutition, the
patient cannot satisfy the demands of his stomach. In the latter
stages of the disease, therefore, when feeding can only be
accomplished by the aid of the stomach-tube, every attempt to
relieve the terrible gnawings and pains of hunger ends in a failure.
With starvation staring in his face, the unhappy victim of the disease
finally sinks into a state of extreme inanition, which, if life is not
suddenly extinguished by an attack of suffocation, slowly leads to
final dissolution.
The symptoms above described are those generally observed in

uncomplicated cases of labio-glosso-laryngeal paralysis. There are,
however, a number of cases reported in which the degenerative
process has passed from the medulla oblongata to the spinal cord,
and given rise to paralysis of the muscles of the neck, especially of
the trapezius, and to those of the shoulders, and even to those of the
upper extremities. Atrophy of the interosseus muscles of the hand,
with those of the ball of the thumb, is not unfrequently observed. In
other cases the disease has been found associated with progressive
muscular atrophy, and in others, again, with paralysis of the lower
extremities, accompanied by contractures and depending upon
amyotrophic lateral sclerosis.
Labio-glosso-laryngeal paralysis is, as before mentioned, slow but

progressive in its course, the duration of which is from one to three,
or even five, years. It always terminates in death within the limits of
this time, either from suffocation, inanition, paralysis of the heart, or
some other intercurrent disease.
PATHOLOGICAL ANATOMY.—The macroscopical and microscopical

examinations made during the last fifteen years of the cerebro-spinal
axis in quite a number of cases of progressive labio-glosso-laryngeal
paralysis show that this disease depends upon a degeneration of the
nervous elements of the nuclei or nerve-centres in the medulla
oblongata, involving also the roots of the nerves arising from the
latter, and supplying with nervous energy the muscles of the different
organs paralyzed in this disease. The exact nature of this
degeneration—that is, whether it represents the sequel of a
previously existing myelitis or originates in a so-called
parenchymatous inflammation—appears to be as yet not definitely
settled, though a number of pathologists entertain the view that it is
preceded by a chronic myelitis. This view appears to be corroborated
by the fact that frequently portions of the medulla oblongata and
cervical portion of the spinal cord are found in a state of sclerosis.
The uncertainty in the determination of the exact nature of the
pathological process here concerned chiefly depends upon the
diverse conditions in which the blood-vessels of the medulla are
found. For while, in some cases, perhaps the majority, they have
been found empty and in a normal condition, they have in others
been met with congested with blood—a condition pointing to a
chronic inflammatory process. In other cases, again, their walls have
been found thickened or undergoing fatty degeneration.
At any rate, whether inflammatory or not, the now numerous

microscopical examinations have revealed that the main features of
the process are a degeneration and atrophy, not only of the
ganglion-cells of the respective nervous nuclei with their plexuses,
but also of the fibres of the roots of the peripheral nerves arising
from these centres; frequently the degeneration extends to some
distance upon the nerves themselves. The microscopical changes in
the ganglion-cells consist of an increase of yellow pigment, a gradual
disappearance of their nuclei, terminating in an atrophy of the
ganglionic bodies themselves, the pathological process leaving,
finally, nothing but irregularly-shaped masses of pigment in the
places of these bodies. The degeneration of the nerve-fibres
appears to consist, as elsewhere, in a swelling of the axis-cylinder,
accompanied by atrophy of the medullary sheath—a condition which
finally leads to the complete destruction of these elements of the
nerve-fibres, so that, at last, the whole nerve is only represented by
the connective tissue of its neurolemma. Besides these changes,
certain pathological products, such as conglomerations of fatty
granules or globules, amylaceous bodies, etc., are also found in the
degenerated nerve-centres and nerve-fibres.
Although in different cases the route which the degenerative process

pursues is not the same, a certain general order, in which the nerves
and nerve-centres are successively affected, and corresponding to
the clinical symptoms, appears, nevertheless, to exist. It is thus that
the nucleus of the hypoglossus has been observed to degenerate
before the other nerve-centres. The nuclei of the spinal accessory
and pneumogastric nerves, and also that part of the facial nucleus
from which the inferior division of the facial nerve arises, appear to
be affected next. The glosso-pharyngeal nucleus appears not to be
affected in all cases, and still less frequently the nuclei and roots of
the abducens, auditory, and trifacial nerves. The fibres forming the
anterior pyramids have frequently been found degenerated
throughout the medulla oblongata and pons; sclerosis also has been
met with in this locality. In many cases, as has been remarked
before, the pathological process descends into the spinal cord. Here,
as in the medulla oblongata, the degeneration is principally confined
to the motor centres located in the anterior horns, while the posterior
horns, together with the lateral and posterior white columns, remain
free from disease. The degree of degeneration taking place in the
fibres of the respectively paralyzed muscles also corresponds to that
of the elements of the nerve-centres from which they are supplied.
The microscopical changes observed in the muscular fibres consist
in a decrease of their diameter, accompanied by an increase in the
number of their nuclei, as well as in the quantity of the connective
tissue surrounding the primary bundles; some authors have
observed amyloid degeneration of the muscular fibres.
ETIOLOGY.—The causes which give rise to the pathological process

above described are but little known. Nevertheless, in a number of
cases the disease has been traced back to taking cold, to physical
as well as cerebral over-exertion, mental excitement, sorrow caused
by misfortunes, poverty of nutrition, excessive use of tobacco, etc. In
some cases the disease commences in the spinal cord in the form of
progressive muscular atrophy or amyotrophic lateral sclerosis, and
gradually extends to the medulla oblongata; in many other cases no
particular cause can be found. The disease is rarely if ever met with
in persons under twenty years of age, but is confined to adult life and
old age. It occurs in both high and low walks of life, attacking more
frequently men than women.
DIAGNOSIS.—The symptoms of progressive labio-glosso-laryngeal

paralysis are so characteristic in themselves as to exclude any

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Multiple Choice Questions

1. With a continuous probability distribution,:

a. a probability is assigned to each possible outcome.

2. The expected value is the:

a. inverse of the standard deviation

3. -------------------is concerned with the interrelationships between security returns

4. Which of the following would be considered a random variable:

a. are always discrete.

7. The bell-shaped curve, or normal distribution, is considered:

8. Portfolio weights are found by:

a. dividing standard deviation by expected value

9. Which of the following statements regarding expected return of a portfolio

a. probabilities of expected returns of individual assets

a. It is a weighted average only for stock portfolios

12. Which of the following is true regarding random diversification?

a. Investment characteristics are considered important in random diversification

13. Company specific risk is also known as:

14. The relevant risk for a well-diversified portfolio is:

a. interest rate risk

15. Which of the following statements regarding the correlation coefficient is

17. Security A and Security B have a correlation coefficient of 0. If Security A’s

a. Security B’s return should also increase by 10 percent

a. Adding more stocks increases risk

23. A change in the correlation coefficient of the returns of two securities in a

a. both the expected return and the risk of the portfolio

24. Markowitz's main contribution to portfolio theory is:

a. that risk is the same for each type of financial asset

a. perfectly positively correlated with each other

26. When the covariance is positive, the correlation will be:

Variance Weight (in the portfolio)

Solution: p = [w1212 + w2222 + 2(w1)(w2)(1,2)12]1/2

28. The major problem with the Markowitz model is its:

29. With a discrete probability distribution:

a. a probability is assigned to each possible outcome

1. Standard deviations for well-diversified portfolios are reasonably steady over

3. Portfolio risk is a weighted average of the individual security risks.

4. A negative correlation coefficient indicates that the returns of two

9. If an analyst uses ex post data to calculate the correlation coefficient and

10. In the case of a four-security portfolio, there will be 8 covariances.

Answer: The expected return is a weighted average. The portfolio standard

2. How is the correlation coefficient important in choosing among securities for a

Answer: If security returns are highly correlated (high positive correlation)

Answer: The volume of calculations required for a large portfolio was

6. A portfolio consisting of two securities with perfect negative correlation in the

1. Markowitz diversification, also called _____________ diversification, removes

Answer: efficient, idiosyncratic (also known as company specific, unsystematic, or

2. An efficiently diversified portfolio still has _____________________ risk.

Answer: market (also known as systematic or un-diversifiable)

4. The number of covariances in the Markowitz model is ________ ; the number of

1. Conventional wisdom has long held that diversification of a stock portfolio

Answer: Correlation coefficients between securities in different industries

Answer: It requires more quantitative analysis and generally the use of a

Probabilities 0.20 0.15 0.50 0.15

Solution: E(Ri) = .20(.20) + .15(.15) + .50(.11) + .15(-.05)

(1) (2) (3) (4) (5) (6)

181 Loc. cit.

Seeligmüller quotes with approval Böttger's method for the treatment of

A cause of relapse in talipes not unfrequently overlooked is the presence

In the simplest form of apparatus locomotion is expected to be

But an important aid to locomotion may be obtained from the artificial