Questions from General Investment

Q: Why would it be challenging to properly compare the performance of an

Why would it be challenging to properly compare the performance of an equity fund to a fixed income mutual fund?

Q: Assume the return on a market index represents the common factor and

Assume the return on a market index represents the common factor and all stocks in the economy have a beta of 1. Firm-specific returns all have a standard deviation of 30%. Suppose an analyst studies...

Q: According to CAPM, the expected rate of return of a portfolio

According to CAPM, the expected rate of return of a portfolio with a beta of 1 and an alpha of 0 is: a. Between rM and rf. b. The risk-free rate, rf. c. β(rM − rf). d. The expected return on the m...

Q: Suppose you observe the investment performance of 350 portfolio managers for five

Suppose you observe the investment performance of 350 portfolio managers for five years and rank them by investment returns during each year. After five years, you find that 11 of the funds have inves...

Q: If the APT is to be a useful theory in practice,

If the APT is to be a useful theory in practice, the number of systematic factors in the economy must be small. Why?

Q: Use the following data in answering below CFA Question; /

Use the following data in answering below CFA Question; Suppose investor “satisfaction” with a portfolio increases with expected return and decreases with variance...

Q: / When plotting portfolio R on the preceding table relative to

When plotting portfolio R on the preceding table relative to the SML, portfolio R lies: a. On the SML. b. Below the SML. c. Above the SML. d. Insufficient data given.

Q: Two bonds were issued five years ago, with terms given in

Two bonds were issued five years ago, with terms given in the following table: a. Why is the price range greater for the 9% coupon bond than the floating-rate bond? b. What factors could explain why...

Q: When plotting portfolio R relative to the capital market line, portfolio

When plotting portfolio R relative to the capital market line, portfolio R lies: a. On the CML. b. Below the CML. c. Above the CML. d. Insufficient data given

Q: Suppose two factors are identified for the U.S. economy

Suppose two factors are identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 4% and IR 6%. A stock with a beta of 1 on IP and...