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FINS2624-Portfolio Mgmt - s1/2013

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Online Quiz 9

Take Test: Online quiz 9

Take Test: Online quiz 9

Description
Instructions
Multiple Attempts This Test allows 3 attempts. This is attempt number 2.
Force Completion This Test can be saved and resumed later.

Test/Surv ey Status

Question 1

10 points

Suppose you buy 100 shares of Abolishing Dividend Corporation at the

beginning of year 1 for $80. Abolishing Dividend Corporation pays no
dividends. The stock price at the end of year 1 is $100, the price $120 at
the end of year 2, and the price is $150 at the end of year 3. The stock
price declines to $100 at the end of year 4, and you sell your 100 shares.
For the four years, your geometric average return per annum is
0.0%
1.0%
5.7%
9.2%
34.5%

Question 2

10 points

Suppose you purchase 100 shares of GM stock at the beginning of year 1, and
purchase another 100 shares at the end of year 1. You sell all 200 shares at
the end of year 2. Assume that the price of GM stock is $50 at the beginning
of year 1, $55 at the end of year 1, and $65 at the end of year 2. Assume no
dividends were paid on GM stock. Your dollar-weighted return on the stock
will be __________ your time-weighted return on the stock.
higher than
the same as
less than
exactly proportional to
more information is necessary to answer this question

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Question 3

10 points

Suppose the risk-free return is 4%. The beta of a managed portfolio is 1.2,
the alpha is 1%, and the average return is 14%. Based on Jensen's measure of
portfolio performance, you would calculate the return on the market portfolio
as
11.5%
14%
15%
16%
none of the above
Test/Surv ey Status

Question 4

10 points

Suppose you own two stocks, A and B. In year 1, stock A earns a 2% return and
stock B earns a 9% return. In year 2, stock A earns an 18% return and stock B
earns an 11% return. Which stock has the higher geometric average return?
stock A
stock B
the two stocks have the same geometric average return
at least three periods are needed to calculate the geometric average return.
none of the above

Question 5

10 points

The Jensen portfolio evaluation measure

is a measure of excess return per unit of risk, as measured by standard
deviation.
is an absolute measure of abnormal return above or below that predicted by
the CAPM.
is a measure of excess return per unit of risk, as measured by beta.
A and B.
B and C.

Question 6

10 points
Seminole

Market Portfolio

Average Return

18%

14%

Standard Deviation of Returns

30%

22%

Beta

1.4

1.0

Residual Standard Deviation

4.0%

0.0%

2
The risk free return is 6%. Calculate M for the Seminole Fund.

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4.0%
20.0%
2.86%
0.8%
40.0%

Question 7

10 points

You want to evaluate three mutual funds using the Treynor measure for
performance evaluation. The risk-free return during the sample period is 6%.
The average returns, standard deviations, and betas for the three funds are
given below, in addition to information regarding the S&P 500 index.
Average
Standard
Beta
Test/Surv ey Status
Return
Fund A

13%

10%

0.5

Fund B

19%

20%

1.0

Fund C

25%

30%

1.5

S&P500

18%

16%

1.0

The fund with the highest Treynor measure is __________.

Fund A
Fund B
Fund C
Funds A and B are tied for highest
Funds A and C are tied for highest

Question 8

10 points

You want to evaluate three mutual funds using the Sharpe measure for
performance evaluation. The risk-free return during the sample period is 6%.
The average returns, standard deviations and betas for the three funds are
given below, as is the data for the S&P 500 index.
Average
Standard
Beta
Return
Deviation
Fund A

24%

30%

1.5

Fund B

12%

10%

0.5

Fund C

22%

20%

1.0

S&P500

18%

16%

1.0

The fund with the highest Sharpe measure is __________.

Fund A
Fund B
Fund C
Funds A and B are tied for highest
Funds A and C are tied for highest

Question 9

10 points

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Suppose two portfolios have the same average excess return, the same standard
deviation of returns, but portfolio A has a higher beta than portfolio B.
According to the Treynor measure, the performance of portfolio A __________.
is better than the performance
is the same as the performance
is poorer than the performance
cannot be measured as there is
none of the above is true.

Question 10

of
of
of
no

portfolio B
portfolio B
portfolio B
data on the alpha of the portfolio

Test/Surv ey Status

10 points

Suppose two portfolios have the same average excess return, the same standard
deviation of returns, but Buckeye Fund has a higher beta than Gator Fund.
According to the Sharpe measure, the performance of Buckeye Fund _________.
is better than the performance
is the same as the performance
is poorer than the performance
cannot be measured as there is
none of the above is true.

of
of
of
no

Gator Fund.
Gator Fund.
Gator Fund.
data on the alpha of the portfolio

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