完整版投资学第7版TestBank答案08.docx
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完整版投资学第7版TestBank答案08.docx
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完整版投资学第7版TestBank答案08
MultipleChoiceQuestions
1.Asdiversificationincreases,thetotalvarianeeofaportfolioapproaches.
A)0
B)1
C)thevarianeeofthemarketportfolio
D)infinity
E)noneoftheabove
Answer:
CDifficulty:
Easy
Rationale:
Asmoreandmoresecuritiesareaddedtotheportfolio,unsystematicriskdecreasesandmostoftheremainingriskissystematic,asmeasuredbythevarianeeofthemarketportfolio.
2.Theindexmodelwasfirstsuggestedby.
A)Graham
B)Markowitz
C)Miller
D)Sharpe
E)noneoftheabove
Answer:
DDifficulty:
Easy
Rationale:
WilliamSharpe,buildingontheworkofHarryMarkowitz,developedtheindexmodel.
3.Asingle-indexmodelusesasaproxyforthesystematicriskfactor.
A)amarketindex,suchastheS&P500
B)thecurrentaccountdeficit
C)thegrowthrateinGNP
D)theunemploymentrate
E)noneoftheabove
Answer:
ADifficulty:
Easy
Rationale:
Thesingle-indexmodelusesamarketindex,suchastheS&P500,asaproxyforthemarket,andthusforsystematicrisk.
4.TheSecurityRiskEvaluationbookpublishedbyMerrillLynchreliesonthemostrecentmonthlyobservationstocalculateregressionparameters.
A)12
B)36
C)60
D)120
E)noneoftheabove
Answer:
CDifficulty:
Easy
Rationale:
Mostpublishedbetasandotherregressionparameters,includingthosepublishedbyMerrillLynch,arebasedonfiveyearsofmonthlyreturndata.
5.TheSecurityRiskEvaluationbookpublishedbyMerrillLynchusestheas
aproxyforthemarketportfolio.
A)DowJonesIndustrialAverage
B)DowJonesTransportationAverage
C)S&P500Index
D)Wilshire5000
E)noneoftheabove
Answer:
CDifficulty:
Easy
Rationale:
TheMerrillLynchdata(andmuchoftheotherpublisheddatasets)arebasedontheS&P500indexasamarketproxy.
6.Accordingtotheindexmodel,covariancesamongsecuritypairsare
A)duetotheinflueneeofasinglecommonfactorrepresentedbythemarketindexreturn
B)extremelydifficulttocalculate
C)relatedtoindustry-specificevents
D)usuallypositive
E)AandD
Answer:
EDifficulty:
Easy
Rationale:
Mostsecuritiesmovetogethermostofthetime,andmovewithamarketindex,ormarketproxy.
7.TheinterceptcalculatedbyMerrillLynchintheregressionequationsisequalto
A)aintheCAPM
B)a+f(1+B)
C)a+f(1-B)
D)1-a
E)noneoftheabove
Answer:
CDifficulty:
Moderate
Rationale:
TheinterceptthatMerrillLynchcallsalphaisreally,usingtheparametersoftheCAPM,anestimateofa+rf(1-b).Theapparentjustificationforthisprocedureisthat,onamonthlybasis,rf(1-b)issmallandisapttobeswampedbythevolatilityofactualstockreturns.
8.Analystsmayuseregressionanalysistoestimatetheindexmodelforastock.When
doingso,theslopeoftheregressionlineisanestimateof.
A)theaoftheasset
B)theBoftheasset
C)the(Toftheasset
D)theSoftheasset
E)noneoftheabove
Answer:
BDifficulty:
Moderate
Rationale:
Theslopeoftheregressionline,b,measuresthevolatilityofthestockversusthevolatilityofthemarket.
9.Inafactormodel,thereturnonastockinaparticularperiodwillberelatedto
A)firm-specificevents
B)macroeconomicevents
C)theerrorterm
D)bothAandB
E)neitherAnorB
Answer:
DDifficulty:
Moderate
Rationale:
Thereturnonastockisrelatedtobothfirm-specificandmacroeconomicevents.
10.RosenbergandGuyfoundthathelpedtopredictafirm'sbeta.
A)thefirm'sfinancialcharacteristics
B)thefirm'sindustrygroup
C)firmsize
D)bothAandB
E)A,BandCallhelpedtopredictbetas.
Answer:
EDifficulty:
Moderate
Rationale:
RosenbergandGuyfoundthataftercontrollingforthefirm'sfinancialcharacteristics,thefirm'sindustrygroupwasasignificantpredictorofthefirm'sbeta.
11.Iftheindexmodelisvalid,wouldbehelpfulindeterminingthecovarianee
betweenassetsKandL.
A)矗
B)Pl
C)°M
D)alloftheabove
E)noneoftheabove
Answer:
DDifficulty:
Moderate
Rationale:
IftheindexmodelisvalidA,B,andCaredeterminantsofthecovarianeebetweenKandL.
12.RosenbergandGuyfoundthathelpedtopredictfirms'betas.
A)debt/assetratios
B)marketcapitalization
C)varianeeofearnings
D)alloftheabove
E)noneoftheabove
Answer:
DDifficulty:
Moderate
Rationale:
RosenbergandGuyfoundthatA,B,andCweredeterminantsoffirms'betas.
13.Ifafirm'sbetawascalculatedas0.6inaregressionequation,MerrillLynchwouldstatetheadjustedbetaatanumber
A)lessthan0.6butgreaterthanzero.
B)between0.6and1.0.
C)between1.0and1.6.
D)greaterthan1.6.
E)zeroorless.
Answer:
BDifficulty:
Moderate
Rationale:
Betas,onaverage,equalone;thus,betasovertimeregresstowardthemean,or1.Therefore,ifhistoricbetasarelessthan1,adjustedbetasarebetween1andthecalculatedbeta.
14.ThebetaofExxonstockhasbeenestimatedas1.2byMerrillLynchusingregressionanalysisonasampleofhistoricalreturns.TheMerrillLynchadjustedbetaofExxonstockwouldbe.
A)1.20
B)1.32
C)1.13
D)1.0
E)noneoftheabove
Answer:
CDifficulty:
Moderate
Rationale:
Adjustedbeta=2/3samplebeta+1/3
(1);=2/3(1.2)+1/3=1.13.
15.Assumethatstockmarketreturnsdonotresembleasingle-indexstructure.Aninvestmentfundanalyzes100stocksinordertoconstructamean-varianceefficientportfolioconstrainedby100investments.Theywillneedtocalculate
expectedreturnsandvariancesofreturns.
A)100,100
B)100,4950
C)4950,100
D)4950,4950
E)noneoftheabove
Answer:
ADifficulty:
Moderate
Rationale:
Theexpectedreturnsofeachofthe100securitiesmustbecalculated.Inaddition,the100variancesaroundthesereturnsmustbecalculated.
16.Assumethatstockmarketreturnsdonotresembleasingle-indexstructure.Aninvestmentfundanalyzes100stocksinordertoconstructamean-varianceefficientportfolioconstrainedby100investments.Theywillneedtocalculate
covariances.
A)45
B)100
C)4,950
D)10,000
E)noneoftheabove
Answer:
CDifficulty:
Moderate
Rationale:
(n2-n)/2=(10,000-100)/2=4,950covariancesmustbecalculated.
17.Assumethatstockmarketreturnsdofollowasingle-indexstructure.Aninvestmentfundanalyzes200stocksinordertoconstructamean-varianceefficientportfolioconstrainedby200investments.Theywillneedtocalculateestimatesof
expectedreturnsandestimatesofsensitivitycoefficientstothe
macroeconomicfactor.
A)200;19,900
B)200;200
C)19,900;200
D)19,900;19.900
E)noneoftheabove
Answer:
BDifficulty:
Moderate
Rationale:
Forasingle-indexmodel,n(200),expectedreturnsandn(200)sensitivitycoefficientstothemacroeconomicfactormustbeestimated.
18.Assumethatstockmarketreturnsdofollowasingle-indexstructure.Aninvestmentfundanalyzes500stocksinordertoconstructamean-varianceefficientportfolioconstrainedby500investments.Theywillneedtocalculateestimatesof
firm-specificvariancesandestimatesforthevarianceofthemacroeconomic
factor.
A)500;1
B)500;500
C)124,750;1
D)124,750;500
E)250,000;500
Answer:
ADifficulty:
Moderate
Rationale:
Forthesingle-indexmodel,n(500)estimatesoffirm-specificvariancesmustbecalculatedand1estimateforthevarianceofthecommonmacroeconomicfactor.
19.Considerthesingle-indexmodel.Thealphaofastockis0%.Thereturnonthemarketindexis16%.Therisk-freerateofreturnis5%.Thestockearnsareturnthatexceeds
therisk-freerateby11%andtherearenofirm-specificeventsaffectingthestockperformanee.TheBofthestockis.
A)0.67
B)0.75
C)1.0
D)1.33
E)1.50
Answer:
CDifficulty:
Moderate
Rationale:
11%=0%+b(11%);b=1.0.
20.Supposeyouheldawell-diversifiedportfoliowithaverylargenumberofsecurities,
andthatthesingleindexmodelholds.Iftheofyourportfolio3was0.20andMwaso0.16,theofBtheportfoliowouldbeapproximately.
A)0.64
B)0.80
C)1.25
D)1.56
E)noneoftheabove
Answer:
CDifficulty:
Difficult
Rationale:
s2p/s2m=b2;(0.2)2/(0.16)2=1.56;b=1.25.
21.SupposethefollowingequationbestdescribestheevolutionoBfovertime:
Btobeint
Bt=0.25+0.75t-1B
IfastockhadaBof0.6lastyear,youwouldforecasttheyear.
A)0.45
B)0.60
C)0.70
D)0.75
E)noneoftheabove
Answer:
CDifficulty:
Easy
Rationale:
0.25+0.75(0.6)=0.70.
22.MerrillLynchestimatestheindexmodelforastockusingregressionanalysisinvolving
totalreturns.Theyestimatedtheinterceptintheregressionequationat6%andthat
0.5.Therisk-freerateofreturnis12%.Thetruehofthestockis.
A)0%
B)3%
C)6%
D)9%
E)noneoftheabove
Answer:
ADifficulty:
Difficult
Rationale:
6%=a+12%(1-0.5);a=0%.
23.TheindexmodelforstockAhasbeenestimatedwiththefollowingresult:
RA=0.01+0.9RM+eA
Ifmt=0.25andRA=0.25,thestandarddeviationofreturnofstockAis
A)0.2025
B)0.2500
C)0.4500
D)0.8100
E)noneoftheabove
Answer:
CDifficulty:
Difficult
Rationale:
R2=b2s2M/s2;0.25=[(0.81)(0.25)2]/s2;s=0.4500.
24.TheindexmodelforstockBhasbeenestimatedwiththefollowingresult:
RB=0.01+1.1RM+eB
Ifw=0.20andR2B=0.50,thestandarddeviationofthereturnonstockBis
A)0.1111
B)0.2111
C)0.3111
D)0.4111
E)noneoftheabove
Answer:
CDifficulty:
Difficult
Rationale:
R2=b2s2M/s2;0.5=[(1.1)2(0.2)2]/s2;s=0.3111.
25.Supposeyouforecastthatthemarketindexwillearnareturnof15%inthecomingyear.
Treasurybillsareyielding6%.TheunadjustedBofMobilstockis1.30.Areasonab
forecastofthereturnonMobilstockforthecomingyearisifyouuse
MerrillLynchadjustedbetas.
A)15.0%
B)15.5%
C)16.0%
D)16.8%
E)noneoftheabove
Answer:
DDiff
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