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| 1 | |
Most professionally managed equity funds generally |
| | A) | outperform the S&P 500 index on both raw and risk-adjusted return measures. |
| | B) | underperform the S&P 500 index on raw return measures and outperform the S&P 500 index on risk-adjusted return measures. |
| | C) | outperform the S&P 500 index on raw return measures and underperform the S&P 500 index on risk-adjusted return measures. |
| | D) | underperform the S&P 500 index on both raw and risk-adjusted return measures. |
| | E) | match the performance of the S&P 500 index on both raw and risk-adjusted return measures. |
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| 2 | |
A pension fund that begins with $500,000 earns (and pays out) 15% the first year and 10% the second year. At the beginning of the second year, the sponsor contributes another $300,000. The dollar-weighted and time-weighted rates of return, respectively, were |
| | A) | 11.7% and 12.5%. |
| | B) | 12.1% and 12.5%. |
| | C) | 12.5% and 11.7%. |
| | D) | 12.5% and 12.1%. |
| | E) | none of the above |
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| 3 | |
The Sharpe, Treynor, and Jensen portfolio performance measures are derived from the CAPM; |
| | A) | therefore, it does not matter which measure is used to evaluate a portfolio manager. |
| | B) | however, the Sharpe and Treynor measures use different risk measures, therefore the measures vary as to whether or not they are appropriate, depending on the investment scenario. |
| | C) | therefore, all measure the same attributes. |
| | D) | A and B |
| | E) | none of the above. |
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| 4 | |
Suppose the risk-free return is 3%. The beta of a managed portfolio is 1.75, the alpha is 0%, and the average return is 16%. Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio as |
| | A) | 12.3%. |
| | B) | 10.4%. |
| | C) | 15.1%. |
| | D) | 16.7%. |
| | E) | none of the above |
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| 5 | |
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. __________ arithmetic average return. |
| | A) | Stock A has the higher |
| | B) | Stock B has the higher |
| | C) | The two stocks have the same |
| | D) | At least three periods are needed to calculate the |
| | E) | none of the above |
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| 6 | |
Suppose two portfolios have the same average return, the same standard deviation of returns, but portfolio X has a higher beta than portfolio Y. According to the Sharpe measure, the performance of portfolio X |
| | A) | is the same as the performance of portfolio Y. |
| | B) | is better than the performance of portfolio Y. |
| | C) | is poorer than the performance of portfolio Y. |
| | D) | cannot be measured as there is no data on the alpha of the portfolio. |
| | E) | None of the above is true. |
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| 7 | |
The __________ measures the reward to volatility trade-off by dividing the average portfolio excess return by the standard deviation of returns. |
| | A) | Jensen measure |
| | B) | Treynor measure |
| | C) | Sharpe measure |
| | D) | information ratio |
| | E) | none of the above |
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| 8 | |
The Jensen portfolio evaluation measure |
| | A) | is an absolute measure of return over and above that predicted by the CAPM. |
| | B) | is a measure of return per unit of risk, as measured by standard deviation. |
| | C) | is a measure of return per unit of risk, as measured by beta. |
| | D) | A and B |
| | E) | B and C |
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| 9 | |
The M-squared measure |
| | A) | considers only the return when evaluating mutual funds. |
| | B) | considers only the market risk when evaluating mutual funds. |
| | C) | considers only the total risk when evaluating mutual funds. |
| | D) | considers the risk-adjusted return when evaluating mutual funds. |
| | E) | none of the above |
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| 10 | |
A portfolio manager's ranking within a comparison universe may not provide a good measure of performance because |
| | A) | portfolio durations can vary across managers. |
| | B) | portfolio returns may not be calculated in the same way. |
| | C) | if managers follow a particular style or subgroup, portfolios may not be comparable. |
| | D) | A and C |
| | E) | none of the above |
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