Chaminade Univ MBA 754 (Investment Mgmt) Week 5 – Ch. 05 Quiz (Graded)

Grading SummaryThese
are the automatically computed results of your exam. Grades for essay
questions, and comments from your instructor, are in the “Details”
section below. Date Taken: Time Spent: Points Received:
Question
Type: # Of Questions: Multiple Choice 22

Grade
Details – All QuestionsQuestion 1. Question : Maximum international
diversification can be achieved by investing solely in U.S. multinational
corporations.
Student
Answer: True
False

Question
2. Question : Traditional portfolio management
Student
Answer: concentrates on only the most recent “hot” sectors of the market.
typically
centers on interindustry diversification.
includes
only diversified bonds in a laddered portfolio.
is
based on statistical measures to develop the portfolio plan.

Question
3. Question : Which one of the following conditions can be effectively
eliminated through portfolio diversification?
Student
Answer: a general price increase nationwide
an
interest rate reduction by the Federal Reserve
increased
government regulation of auto emissions
change
in the political party that controls Congress

Question
4. Question : Diversifiable risk is also called systematic risk.
Student
Answer: True
False

Question
5. Question : Currency exchange rate risk can be hedged using forwards, futures
and options.
Student
Answer: True
False

Question
6. Question : Portfolio objectives should be established before beginning to
invest.
Student
Answer: True
False

Question
7. Question : A stock with a beta of 1.3 is less risky than a stock with a beta
of 0.42.
Student
Answer: True
False

Question
8. Question : A beta of 0.5 means that a stock is 5% more risky than the
overall market.
Student
Answer: True
False

Question
9. Question : Perfectly negatively correlated assets have a correlation
coefficient of plus one.
Student
Answer: True
False

Question
10. Question : A portfolio with a beta of .5 will be 50% more volatile than the
market portfolio.
Student
Answer: True
False

Question
11. Question : The Dow Jones Industrial Average of thirty stocks is a suitable
proxy for market returns in the CAPM.
Student
Answer: True
False

Question
12. Question : Standard deviation is a measure that indicates how the price of
an individual security responds to market forces.
Student
Answer: True
False

Question
13. Question : Aggressive investors tend to prefer investing solely in negative
beta stocks in a bull market.
Student
Answer: True
False

Question
14. Question : Both the efficient frontier and beta are important aspects of
MPT.
Student
Answer: True
False

Question
15. Question : Correlation is a measure of the relationship between two series
of numbers.
Student
Answer: True
False

Question
16. Question : A coefficient of determination of 0.6 means that 40% of the
variation in a security’s return is related to factors other than the
security’s relationship to the market.
Student
Answer: True
False

Question
17. Question : Systematic risks
Student
Answer: can be eliminated by investing in a variety of economic sectors.
are
forces that affect all investment categories.
result
from random firm-specific events.
are
unique to certain investment vehicles.

Question
18. Question : Historical betas are always reliable predictors of future return
fluctuations.
Student
Answer: True
False

Question
19. Question : Beta measures diversifiable risk while standard deviation
measures systematic risk.
Student
Answer: True
False

Question
20. Question : Betas must be positive numbers.
Student
Answer: True
False

Question
21. Question : The best stock to own when the stock market is at a peak and is
expected to decline in value is one with a beta of
Student
Answer: +1.5.
+1.0.
-1.0.
-0.5.

Question
22. Question : Arbitrage pricing theory suggests that there are a number of
factors that affect the risk premium of a security.
Student
Answer: True
False