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70) A portfolio consists of the following two funds.
Fund A
Fund B
$ Invested
$
12,000
$
8,000
Weight
60
%
40
%
Exp Return
15
%
12
%
Std Dev
24
%
14
%
Beta
1.92
1.27
Corr(A,B)
0.43
Riskfree rate
3.60
What is the Sharpe ratio of the portfolio?
A) 0.422
B) 0.547
C) 0.645
D) 0.721
E) 0.798
71) A portfolio consists of the following two funds.
Fund A
Fund B
Expected Return
?
9
%
Standard deviation
21
%
11
%
Portfolio market value
$
27,000
$
33,000
Correlation (RA,RB)
0.21
Risk-free rate
2.5
%
Portfolio Sharpe ratio
0.7771104
What is the expected return on fund A?
A) 12.0 percent
B) 13.3 percent
C) 13.7 percent
D) 14.5 percent
E) 15.7 percent
72) A fund has an alpha of 0.73 percent and a tracking error of 4.9 percent. What is the fund's
information ratio?
A) 0.112
B) 0.135
C) 0.149
D) 0.208
E) 0.229
73) The Miller Fund's correlation with the market is 0.648. What percentage of the fund's
movement can be explained by movements in the overall market?
A) 35 percent
B) 42 percent
C) 51 percent
D) 65 percent
E) 71 percent
74) A portfolio has an average return of 14.2 percent and a standard deviation of 12.85 percent.
Given this, you should expect to lose at least ________ percent on an annual basis once every
century.
Probability of loss
"z" value
1.0
%
2.326
2.5
1.960
5.0
1.645
A) −19.53
B) −17.24
C) −15.69
D) −1.710
E) −1.550
75) A portfolio has a standard deviation of 15.8 percent and an average return of 14.2 percent.
What loss is associated with a 2.5 percent probability?
Probability of loss
"z" value
1.0
%
2.326
2.5
1.960
5.0
1.645
A) −12.03 percent
B) −14.87 percent
C) −16.77 percent
D) −17.38 percent
E) −19.36 percent
76) Your portfolio has a standard deviation of 12.3 percent and an average return of 9.6 percent.
You have a 5 percent probability of losing ________ percent or more in any given year.
Probability of loss
"z" value
1.0
%
2.326
2.5
1.960
5.0
1.645
A) −33.79
B) −31.54
C) −12.59
D) −10.63
E) −3.34
77) Lester has a portfolio with an average return of 13.5 percent and a standard deviation of 14.5
percent. He has a one percent probability of losing ________ percent or more in any given year.
Probability of loss
"z" value
1.0
%
2.326
2.5
1.960
5.0
1.645
A) −33.97
B) −38.87
C) −20.23
D) −5.04
E) −8.37
78) You have a portfolio which has an average return of 10.3 percent. In any given year, you
have a 2.5 percent probability of earning either a zero or a negative annual return. What is the
approximate standard deviation of your portfolio?
Probability of loss
"z" value
1.0
%
2.326
2.5
1.960
5.0
1.645
A) 5.26 percent
B) 6.43 percent
C) 6.94 percent
D) 7.60 percent
E) 8.14 percent
79) Your portfolio has an expected annual return of 11.6 percent. What is the two-year expected
return?
A) 11.60 percent
B) 14.65 percent
C) 16.40 percent
D) 21.60 percent
E) 23.20 percent
80) Angie owns a portfolio which has an expected annual return of 9.76 percent. What is the
two-year expected return on her portfolio?
A) 13.80 percent
B) 19.52 percent
C) 23.40 percent
D) 27.60 percent
E) 29.10 percent
81) Mike's portfolio has a two-year expected return of 21.70 percent. What is the expected return
for one year?
A) 10.85 percent
B) 12.50 percent
C) 13.33 percent
D) 14.22 percent
E) 15.34 percent
82) The one-year standard deviation of your portfolio is 14.8 percent. What is the two-year
standard deviation?
A) 16.47 percent
B) 18.23 percent
C) 20.93 percent
D) 25.41 percent
E) 27.20 percent
83) Your portfolio has a standard deviation of 11.7 percent. What is the two-year standard
deviation?
A) 14.87 percent
B) 15.83 percent
C) 16.55 percent
D) 23.48 percent
E) 24.15 percent
84) A portfolio has a 3-year standard deviation of 18.1 percent. What is the one-year standard
deviation?
A) 6.39 percent
B) 8.69 percent
C) 10.45 percent
D) 11.80 percent
E) 12.33 percent
85) A stock has an annual standard deviation of 14.1 percent and an expected annual return of
11.5 percent. What is the smallest expected loss for the next 6 months given a probability of 2.5
percent?
A) −8.90 percent
B) −13.79 percent
C) −14.57 percent
D) −15.38 percent
E) −16.67 percent
86) Trailer Co. stock has an expected return of 12.2 percent and a standard deviation of 11.8
percent. What is the smallest expected loss over the next month given a probability of 5 percent?
A) −4.59 percent
B) −6.09 percent
C) −7.27 percent
D) −11.49 percent
E) −13.77 percent
87) A portfolio has an expected annual return of 15.7 percent and a standard deviation of 19.6
percent. What is the smallest expected loss over the next calendar quarter given a probability of 1
percent?
A) −15.11 percent
B) −16.23 percent
C) −16.49 percent
D) −18.08 percent
E) −18.87 percent
88) High Mountain Homes has an expected annual return of 16.1 percent and a standard
deviation of 20.3 percent. What is the smallest expected loss over the next month given a
probability of 2.5 percent?
A) −6.64 percent
B) −8.67 percent
C) −10.14 percent
D) −12.12 percent
E) −15.13 percent
89) A portfolio has a 4.0 percent chance of losing 15 percent or more according to the VaR when
T = 1. This can be interpreted to mean that the portfolio is expected to have an annual loss of 15
percent or more once in every how many years?
A) 1.0
B) 2.0
C) 25
D) 50
E) 100
90) A portfolio has a Sharpe ratio of 0.74, a standard deviation of 18.0 percent, and an expected
return of 15.9 percent. What is the risk-free rate?
A) 1.98 percent
B) 2.36 percent
C) 2.58 percent
D) 3.09 percent
E) 3.15 percent
91) A portfolio has a variance of 0.04050, a beta of 1.60, and an expected return of 14.3 percent.
What is the Treynor ratio if the expected risk-free rate is 5.5 percent?
A) 0.055
B) 0.063
C) 0.367
D) 0.498
E) 0.512
92) A portfolio has a beta of 1.25 and an actual return of 13.0 percent. The risk-free rate is 4.50
percent and the market risk premium is 8.2 percent. What is the value of Jensen's alpha?
A) −0.86
B) −1.01
C) −1.14
D) −1.25
E) −1.34
93) What is the Treynor ratio of a portfolio comprised of 40 percent portfolio A, 25 percent
portfolio B, and The risk-free rate is 2.5 percent and the market risk premium is 8.4 percent.
Asset Weight Avg Return Std Dev Beta
A 40% 15.30% 17.20% 1.25
B 25% 10.50% 9.80% 1.3
C 35% 13.30% 14.10% 0.95
A) 0.057
B) 0.063
C) 0.076
D) 0.081
E) 0.094
94) A portfolio consists of the following two funds.
Fund A
Fund B
$ Invested
$
10,000
$
15,000
Weight
40
%
60
%
Exp Return
14
%
12
%
Std Dev
25
%
15
%
Beta
1.92
1.27
Corr(A,B)
0.28
Riskfree rate
2.95
%
What is the Sharpe ratio of the portfolio?
A) 0.422
B) 0.547
C) 0.648
D) 0.721
E) 0.798
95) Lester has a portfolio with an average return of 13.5 percent and a standard deviation of 22.5
percent. He has a one percent probability of losing ________ percent or more in any given year.
Probability of loss
"z" value
1.0
%
2.326
2.5
1.960
5.0
1.645
A) −33.97
B) −38.94
C) −20.23
D) −5.04
E) −8.37
96) Your portfolio has a standard deviation of 24.1 percent. What is the two-year standard
deviation?
A) 31.87 percent
B) 34.08 percent
C) 36.55 percent
D) 39.48 percent
E) 41.15 percent
