Portfolio Management Quiz

What is an appropriate objective for investors who want their portfolio to grow in real terms, i.e., exceed the rate of inflation?

• Portfolio growth

• Capital preservation

• Capital appreciation

• Value additivity

An asset is liquid if it can be...... converted to cash at a price close to...... market value.

• quickly, lower

• quickly, fair

• slowly, lower

• slowly, fair

A 20-year-old investor tends to:

• Invest in treasury bill

• Invest in treasury bond

• Use high leverage

• Invest in derivatives contracts

The most of customers using personal wealth management services belong to:

• Individual stock investors

• High-income class

• Low-income class

• Middle-income class

Undiversifiable risk is:

• Systematic risk

• Default risk

• Unsystematic risk

• Specific risk

Your personal opinion is that a stock has an expected rate of return of 0.11. It has a beta of 1.5. The risk-free rate is 0.05 and the market expected rate of return is 0.09. According to the Capital Asset Pricing Model, this security is:

• underpriced

• overpriced

• fairly priced

• Cannot be determined from data provided

The risk-free rate is 5%. The expected market rate of return is 15%. If you expect a stock with a beta of 1.2 to offer a rate of return of 20%, you should:

• sell the stock because it is underpriced.

• buy the stock because it is overpriced.

• sell the stock because it is overpriced.

• buy the stock because it is underpriced.

If you believe in the......... form of the efficient market hypotheses, you believe that stock prices reflect all relevant information, including historical stock prices and current public information about the firm, but not information that is available only to insiders.

• very weak

• semistrong

• strong

• weak

The evidence of random-walk in stock price is the evidence:

• of all forms of the Efficient Market Hypothesis

• of the strong-form efficiency of the Efficient Market Hypothesis

• against the weak-form efficiency of the Efficient Market Hypothesis

• against the semistrong-form efficiency of the Efficient Market Hypothesis

A substitution swap is an exchange of bonds undertaken to:

• profit from apparent mispricing between two bonds.

• change the credit risk of a portfolio.

• reduce the duration of a portfolio.

• extend the duration of a portfolio.