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(Solved) FINC 340: INVESTMENTS UNIT #7A WEEKLY QUIZ QUESTION SHEET DIRECTIONS: Here is the Unit #7 Weekly Quiz Question Sheet that you should submit to your...


Please assist with questions 1-12. Thanks in advance.

FINC 340: INVESTMENTS
UNIT #7A WEEKLY QUIZ QUESTION SHEET DIRECTIONS: Here is the Unit #7 Weekly Quiz Question Sheet that you should submit to your Unit
#7 Homework Assignment Folder.
Please submit your Unit #7 Quiz Answer Sheet in MS Word format with the following file name:
LastNameFirstInitial_Unit 07_QuizAnswerSheet.docx. For example, if you name is John Smith, the
file name of your Answertion Sheet should be SmithJ_Unit07_QuizAnswerSheet.docx.
If you have any questions or comments, please do not hesitate to contact me.
NAME: _____________________________________
Question
Number
1 2 Question
Which of the following statements concerning the Markowitz efficient frontier is
correct?
A. A portfolio that offers the highest rate of return with the lowest degree of
risk is on the efficient frontier.
B. A portfolio that offers the lowest rate of return for a higher degree of risk is
on the efficient frontier.
C. A portfolio that offers the lowest degree of risk for a given rate of return is
above the efficient frontier.
D. A portfolio that offers the highest rate of return for a given degree of risk is
on the efficient frontier.
The goal of asset alloction is to reduce risk through diversification by having
exposure to a variety of investments that perform differently during different
market conditions. According to Schwab, in recent years the following has
changed:
I.
Assets are more correlated
II.
Less external shocks
III.
Bond yields are low
IV.
Expected stock retruns are lower
A.
B.
C.
D. I, II, III
I, III, IV
I, II, IV
II, III, IV 1 3 Which of the following statements concerning beta coefficients is (are) correct?
I.
Investors who tend to be risk averse should have portfolio made up
mostly of high-beta coefficient securities
II.
Beta coefficients of particular securities change over time.
III.
Beta coefficients are constructed based on past data.
A.
B.
C.
D. 4 List three advantages of asset allocation
I.
Smooths out the ups and downs of the market
II.
Shows that is pays to have your eggs in one baseket
III.
Allows for diversification
IV.
Helps to mitigate downside risk
A.
B.
C.
D. 5 6 (I) only
(I) and (III) only
(I) and (II) only
(II) and (III) only (I), (II), (III)
(I), (III), (IV)
(II), (III), (IV)
(I), (II), (IV) Which of the following is not likely to be found in the portfolio of a typical money
market mutual fund?
A. Collateralized mortgage obligations (CMOs)
B. U.S. Treasury bills
C. Negotiable certificates of deposit
D. Commercial paper
According to Harry Markowitz, the only “free lunch in finance” is:
A. When assets move in harmony, then a diversified portfolio will have less
risk.
B. A diversified portfolio cannot deliver more than the sum of its parts.
C. Perfectly correlated individuals assets provide this “free lunch”.
D. Diversification can deliver benefits over time at no additional cost . 2 7 Which of the following statements concerning the standard deviation of a stock’s
rate of return is (are) correct?
(1) The standard deviation of a stock’s rate of return reflects both the
systematic and unsystematic risks associated with the stock.
(2) Approximately 68% of the rates of return on the stock will fall within plus or
minus one standard deviation of the average rate of return
A.
B.
C.
D. 8 (1) only
(2) only
Both (1) and (2)
Neither (1) nor (2) Once a strategic asset allocation is in place, an investor can make “tactical”
adjustments to take advantage of market opportunities or to avoid risks. Which of
the following is not an example of tactical shifts:
A. Time the market in the short-term
B. Overweigh certain asset classes
C. Underweight certain asset classes
D. Buy or sell due to tax considerations
Questions #9 and #10 are based on the following facts:
Assume a four-stock portfolio of stocks with following characterisitcs:
Stock
K
L
M
N Percentage of Total
20%
25%
30%
25% Beta
0.9
1.2
1.4
1.5 Rate of Return
-3.6%
7.0%
9.0%
-2.2% 9 Which of the following is the weighted average beta for the above portfolio?
A. 1.275
B. 1.750
C. 1.800
D. 2.250 10 What is the standard deviation of the above portfolio?
A. 3.11
B. 6.37
C. 6.92
D. Answer cannot be determined from the information given 3 11 According to Schwab, a “goal driven” modernized asset allocation model for
individual investors includes the following:
I.
Absolute return
II.
Inflation hedge
III.
Achievement of a specific target
IV.
Risk reduction
A.
B.
C.
D. 12 I, II, III
I, III, IV
I, II, IV
II, III, IV According to Schwab, in reponse to changing economic conditions, asset
allocation has evolved from the typical stocks, bonds and cash blends popular
during the 1990s. Modern asset allocation now encompasses non-traditional
asset classes, such as commodities.
A. True
B. False 4

 


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