Questions from General Investment

Q: The change from a straight to a kinked capital allocation line is

The change from a straight to a kinked capital allocation line is a result of the: a. Reward-to-volatility (Sharpe) ratio increasing. b. Borrowing rate exceeding the lending rate. c. Investor’s risk t...

Q: What is the reward-to-volatility (Sharpe) ratio

What is the reward-to-volatility (Sharpe) ratio for the equity fund in CFA Problem 8?

Q: Which one of the following portfolios cannot lie on the efficient frontier

Which one of the following portfolios cannot lie on the efficient frontier as described by Markowitz?

Q: Which statement about portfolio diversification is correct? a. Efficient

Which statement about portfolio diversification is correct? a. Efficient diversification can reduce or eliminate systematic risk. b. Diversification reduces the portfolio’s expected return because it...

Q: The measure of risk for a security held in a diversified portfolio

The measure of risk for a security held in a diversified portfolio is: a. Specific risk. b. Standard deviation of returns. c. Reinvestment risk. d. Covariance.

Q: Portfolio theory as described by Markowitz is most concerned with:

Portfolio theory as described by Markowitz is most concerned with: a. The elimination of systematic risk. b. The effect of diversification on portfolio risk. c. The identification of unsystematic risk...

Q: Assume that a risk-averse investor owning stock in Miller Corporation

Assume that a risk-averse investor owning stock in Miller Corporation decides to add the stock of either Mac or Green Corporation to her portfolio. All three stocks offer the same expected return and...

Q: Identify and briefly discuss three criticisms of beta as used in the

Identify and briefly discuss three criticisms of beta as used in the capital asset pricing model.

Q: Stocks A, B, and C have the same expected return

Stocks A, B, and C have the same expected return and standard deviation. The following table shows the correlations between the returns on these stocks. Given these correlations, the portfolio constru...

Q: Assume the correlation coefficient between Baker Fund and the market index is

Assume the correlation coefficient between Baker Fund and the market index is .70. What percentage of Baker Fund’s total risk is specific (i.e., nonsystematic)?