Portfolio Management 2023

Diversification eliminates risk if returns are:

• Not perfectly positively correlated
• Perfectly positively correlated
• Perfectly negatively correlated
• All the above

If the return on a security is negatively correlated with the market return, its beta is:

• Less than zero
• Less than one but more than zero
• More than one
• Independent of the market return

In respect of an efficient portfolio:

• There is no alternative with the same expected return and a lower risk
• There is no alternative with the same risk and a higher
• There is no alternative with a higher expected return and a lower risk
• All the above

Expected return is always :

• Higher than the fair return
• Higher than the average return
• Equal to the required return
• None of the above

The Markowitz model requires

• 3 n + 2 estimates
• n (n + 1) /2 estimates
• n (n – 1) /2 estimates
• n (n + 3) /2 estimates

Perfect co-movement between two securities is indicated when the coefficient of correlation between them is:

• 1
• -1
• Zero.
• Either 1 or -1

What is the expected return of a zero-beta security?

• Market return
• Risk-free rate of return
• Market return- Risk- free return
• Market return + Risk-free return

In portfolio theory, the emergence of a new competitor for a firm is considered:

• Unsystematic risk
• Market risk
• Systematic risk
• Both Market and Systemetic risk

A defensive stock is characterized by:

• Negative beta
• Positive beta less than one
• Positive beta more than one
• Beta equal to one

Underpriced securities plot:

• Above the Security Market Line
• Below the Security Market Line
• Randomly above or below the Security Market Line
• Any of the above