A portfolio with the highest expected return for a given level of risk is called: a) Risk-free portfoliob) Efficient portfolioc) Diversified portfoliod) Arbitrage portfolio
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A portfolio with the highest expected return for a given level of risk is called:
a) Risk-free portfolio
b) Efficient portfolio
c) Diversified portfolio
d) Arbitrage portfolio
Step by step
Solved in 2 steps
- An efficient portfolio is one that: Select one: a. maximises return for a given level of risk. b. maximises risk for a given level of return. c. minimises risk for a given rate of return. d. Both A and C. are efficient portfolios.AnswerThe efficient frontier represents: a) The set of investments with the lowest risk b) The set of investments with the highest return c) The set of portfolios offering the highest return for a given level of risk d) The set of portfolios offering the lowest return for a given level of risk
- Assess how the Modern Portfolio Theory (MPT) may be used by investors to classify, estimate, and control expected risk to maximize portfolio expected return for a given investment.A well-diversified portfolio is designed to: a) Minimize risk b) Eliminate risk c) Maximize profit d) Guarantee returnsThe expected return of a portfolio is simply the weighted average of the expected returns for the individual assets within the portfolio. Group of answer choices True False
- The security market line describes the expected return for O The efficient portfolio O The inefficient portfolio O All portfolios and assets O The efficient and inefficient portfoliosThe security market line depicts: a. Expected return as a function of systematic risk (indicated by beta) b. The market portfolio as the optimal portfolio of risky assets c. The relationship between a security’s return and the return on the index d. Portfolio combinations of the market portfolio and the risk-free asset e. Expected return as a function of volatilityWhich of the following measures reflects the excess return earned on a portfolio per unit of its systematic risk a. Treynor’s measure b. Sharpe’s measure c. Jensen’s measure d. Total measure
- The measure of risk for a security held in a diversified portfolio is: Specific risk. Standard deviation of returns. Reinvestment risk. Covariance.It is a risk adjusted performance measure that represents the average return on a portfolio. a. sharpe ratio b. Treynor indexConsider the following performance data for a portfolio manager: Benchmark Portfolio Index Portfolio Weight Weight Return Return Stocks 0.65 0.7 0.11 0.12 Bonds 0.3 0.25 0.07 0.08 Cash 0.05 0.05 0.03 0.025 a.Calculate the percentage return that can be attributed to the asset allocation decision. b.Calculate the percentage return that can be attributed to the security selection decision.
