Question #1 of 12 Question ID: 439282

An investor is evaluating the following possible portfolios. Which of the following portfolios would least likely lie on the
efficient frontier?

Portfolio Expected Return Standard Deviation

A 26% 28%

B 23% 34%

C 14% 23%

D 18% 14%

E 11% 8%

F 18% 16%

A) A, B, and C.

B) C, D, and E.

C) B, C, and F.

D) A, E, and F.

Question #2 of 12 Question ID: 439281

Adding a stock to a portfolio will reduce the risk of the portfolio if the correlation coefficient is less than which of the following?

A) 0.00.

B) +1.00.

C) +0.50.

D) +0.30.

Question #3 of 12 Question ID: 439284

Which one of the following portfolios does not lie on the efficient frontier?

Expected Standard
Portfolio
Return Deviation
A 7 5
 B 9 12
C 11 10
D 15 15

A) C.

B) B.

C) A.

D) D.

Question #4 of 12 Question ID: 439285

On a graph of risk, measured by standard deviation, and expected return, the efficient frontier represents:

A) all portfolios plotted in the northeast quadrant that maximize return.

B) the set of portfolios that dominate all others as to risk and return.

C) the group of portfolios that have extreme values and therefore are "efficient" in their allocation.

D) all portfolios plotted to the left of the graph that maximize either risk or return.

Question #5 of 12 Question ID: 439289

Which of the following are properties of a Coherent risk metric?

A) Sub-additivity.
B) All of these.

C) Monotonicity.

D) Positive homogeneous.

Question #6 of 12 Question ID: 439283

Which of the following portfolios falls below the Markowitz efficient frontier?

Portfolio Expected Return Expected Standard Deviation

A 12.1% 8.5%

B 14.2% 8.7%

C 15.1% 8.7%
 D 16.2% 9.4%

A) Portfolio C.
B) Portfolio A.

C) Portfolio B.

D) Portfolio D.

Question #7 of 12 Question ID: 439287

A portfolio manager is concerned about the downside risk of his portfolios that contain financial products with option-
like payoffs. The manager has been using the delta-normal VAR method to assess the portfolio's downside risk.
Which of the following statements most accurately describes the characteristics of the delta-normal VAR method?
I. Assumes a normal distribution.
II. Adjusts for non-normal distributions.
III. Adjusts for option-like payoffs.
IV. Adjusts for fat-tail distributions.

A) II and III.

B) II, III, and IV.

C) I only.

D) I and II.

Question #8 of 12 Question ID: 439290

Which of the following is a property of a coherent risk metric?

A) Positive Heterogeneous.
B) Sub-Monotonic.
C) Sub-Additive.

D) All of these.

Question #9 of 12 Question ID: 439280

There are benefits to diversification as long as:

A) the correlation coefficient between the assets is 1.

B) the correlation coefficient between the assets is less than 1.

 C) there must be perfect negative correlation between the assets.

D) there is perfect positive correlation between the assets.

Question #10 of 12 Question ID: 439279

Stock A has a standard deviation of 0.5 and Stock B has a standard deviation of 0.3. Stock A and Stock B are perfectly
positively correlated. According to Markowitz portfolio theory how much should be invested in each stock to minimize the
portfolio's standard deviation?

A) 30% in Stock A and 70% in Stock B.

B) 100% in Stock A.

C) 100% in Stock B.

D) 50% in Stock A and 50% in Stock B.

Question #11 of 12 Question ID: 439286

Given a set of risky assets, a Markowitz efficient frontier:

A) consists of the portfolios that provide the lowest risk for every level of expected return.

B) can be calculated from the assets' expected returns and the correlations of returns for
each pair of assets.

C) includes all portfolios that reduce the risk level compared to holding a single asset.

D) cannot be generated unless one of the assets has a beta of zero.

Question #12 of 12 Question ID: 439288

Which of the following is NOT a correct description of a coherent risk measure property?

I. Homogeneity - the size of a portfolio will impact the size of its risk.
II. Monotonicity - a portfolio with greater future returns will likely have less risk.
III. Subadditivity - the risk of a portfolio is always more than the risk of the assets within the portfolio.
IV. Translation invariance - the risk of a portfolio is independent of the assets within the portfolio.

A) I and II.
B) III and IV.

C) I and III.
D) II and III.