Check quiz ch 25

With the aid of relevant examples, contrast value investing with growth investing and show how these are applicable to the portfolio management process. Discuss which type of shares are most suitable to be assessed with the Piotrowski framework?          3. Critically discuss any recent news article of your choice within the context of the Efficient Market Hypothesis.                4. What are the key differences between the Arbitrage Pricing Theory (APT) and the Capital Asset Pricing Model (CAPM) as they relate to portfolio management?

1) Please indicate whether the following statements are true or false. In case of a false statement, briefly specify why the statement is false. 1. A real asset is different from a financial asset because a real asset must take a physical form. 2. In the financial market, an investor buys financial securities from dealers at the ask price and sells financial securities to dealers at the bid price. 3. Mankowitz portfolio theory assumes average investors have a utility function as an increasing and concave function of future portfolio return. 4. According to CAPM, all well-diversified portfolios on the capital market line have the same Sharpe ratio. 5. The Markowitz portfolio theory assumes that investors hold homogenous expectations about risk and returns of financial securities.

Which of the following businesses are most exposed to interest rate risk? *       A. A company with a high equity to debt ratio       B. A company with a large amount of floating rate debt       C. An al-equity company       D. An investment company with an investment portfolio that matches its investment horizon.

What are the principles of responsible investment and why is ESG important for generating higher investor returns? How will ESG impact bond rating? Is the yield to maturity on a bond the same thing as the required return?

2. Which of the following statements is/are correct: Beta accounts for the risk of the securities portfolio for a diversified investor Market rate of return accounts for the risk of the securities portfolio for a marginal investor Equity risk premium is the incremental return expected by a marginal investor from a specific equity instrument to be added into his/her portfolio of securities. Risk-free rate used in CAPM can be a short-term or long-term rate depending on the tenor of the equity instrument Group of answer choices Statements 2 and 3 are correct Statement 2 only Statements 1, 2 and 3 are correct All statements are correct

A member of a firm’s investment committee is very interested in learning about the management of fixed-income portfolios. He would like to know how fixed-income managers position portfolios to capitalize on their expectations concerning three factors which influence interest rates:a. Changes in the level of interest rates.b. Changes in yield spreads across/between sectors.c. Changes in yield spreads as to a particular instrument.Formulate and describe a fixed-income portfolio management strategy for each of these factors that could be used to exploit a portfolio manager’s expectations about that factor. (Note: Three strategies are required, one for each of the listed factors.)

According to the capital asset pricing model (CAPM), fairly priced securities should have __________.    Select one: a. A fair return based on the level of systematic risk. b. A beta of 1. c. A return equal to the market return. d. A fair return based on the level of unsystematic risk.

Portfolio management requires the knowledge of knowing the correct combination of stocks, bonds, cash, or alternative investments. With this is mind, how does ‘diversification reduce risk’. Make sure you include details on what portfolio management is.

A fundamental analyst uses the discounted cashflow method to value firms, and has a short-term perspective on purchasing stocks and bonds.  True or false?

1) You want to invest your money in the safest way possible (i.e., your only objective is minimizing the likelihood of losses). Which instrument of the ones listed below should you choose for your investment? (Choose just one.) a) AAA-rated corporate bond b) BBB-rated corporate bond c) Treasury bill d) Convertible bond e) Broad-based market index f) Stock in a low-volatility firm g) Well-diversified portfolio consisting of stocks, bonds, and real estate h) Cook county bond Focus MacBook Pro

6. Which of the following is NOT an assumption used in deriving the Capital Asset Pricing Model (CAPM)? A) Investors have homogeneous expectations regarding the volatilities, correlation, and expected returns of securities. B) Investors have homogeneous risk-averse preferences toward taking on risk. C) Investors hold only efficient portfolios of traded securities, that is portfolios that yield the maximum expected return for the given level of volatility. D) Investors can buy and sell all securities at competitive market prices without incurring taxes or transactions cost and can borrow and lend at the risk-free interest rate.

Investment bankers perform which of the following role(s)? A. Provide advice to the firms as to market conditions, price, etc. B. Design securities with desirable properties C. Market new stock and bond issues for firms D. All of the options E. None of the options

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Which statement is not true regarding the market portfolio? Group of answer choices a. It includes all publicly-traded financial assets. b. It lies on the efficient frontier. c. All securities in the market portfolio are held in proportion to their market values. d. It is the tangency point between the capital market line and the indifference curve.