Question 1

A portfolio has a total return of 14.5%, a beta of 1.54, and a standard deviation of 17.6%. If the risk-free rate is 4.5% and the market return is 10.2%, then Treynor's measure of this portfolio's performance is

Accepted Answer

The answer of A portfolio has a total return of...

Question 2

On February 19, 2010, Angela purchased 100 shares of ABC at a total cost of $1,712.50. She received a total of $125.00 in dividends and sold the shares today, February 22, 2011. Her net proceeds from the sale are $1,892.40. Angela has a marginal tax rate of 32%. Her tax rate on both her capital gains in excess of one year and her dividend income is 18%. What is Angela's after- tax holding period return on her investment in ABC stock?

Accepted Answer

The answer of On February 19, 2010, Angela purchased 100...

Question 3

Maria purchased $5,000 of no- fee managed fund units just over a year ago. She received $136 in dividend income and $201 in long- term capital gains distributions. Today she sold her shares for $5,062. Maria is in the 25% marginal tax bracket. Capital gains with holding periods in excess of one year and dividend income are taxed at 15%. What is Maria's after- tax holding period return?

Accepted Answer

The after-tax holding period return is calculated as follows:After-tax holding period return = (Sale price - Purchase price + Dividend income + Capital gains distributions) / Purchase price * (1 - Tax rate)= (5,062 - 5,000 + 136 + 201) / 5,000 * (1 - 0.15)= 6.8%

Question 4

A share has a total return of 16.4%, a standard deviation of 14.5% and a beta of 1.63. The market rate of return is 12.4%, while the market's Treynor measure is 6.3. What is the value of the Treynor measure of this portfolio?

Accepted Answer

The answer of A share has a total return of...

Question 5

The general theory of dollar-cost averaging is

Accepted Answer

Dollar-cost averaging involves investing a fixed amount of money at regular intervals, which results in purchasing more shares when prices are low and fewer shares when prices are high.

Question 6

The Sharpe's measure for Jane Smith's investment portfolio is 0.40, while the Sharpe's measure for the market is 0.30. This information suggests that Smith's portfolio

Accepted Answer

Jane Smith's portfolio has a higher Sharpe ratio than the market, indicating it has a higher risk-adjusted return, thus exhibiting superior performance.

Question 7

If a constant- dollar plan portfolio is profitable over the long run, the in value over time.

Accepted Answer

In a constant-dollar plan, the conservative portion is increased when the aggressive portion performs well, ensuring the overall portfolio remains balanced and profitable over time.

Question 8

For a share investment, the dividend yield is calculated by

Accepted Answer

The dividend yield is calculated by dividing a share's annual cash dividend by its current price.

Question 9

On January 1, Tim's portfolio was valued at $432,098. During the year Tim received $10,563 in interest and $15,060 in dividends. He also sold shares at a net loss of $12,870 and used the proceeds to purchase another share. Tim did not contribute any more funds nor withdraw any funds during the year. On December 31 of the same year, Tim's portfolio was valued at $398,189. What is the holding period return for the year?

Accepted Answer

The answer of On January 1, Tim's portfolio was valued...

Question 10

Suppose the shares of the Chickadee Corporation traded seven times in the following sequence one day last week: 46, 45.88, 45.75, 45.50, 45.63, 46, 46.13. In this case, a limit order to sell at 46 would have been executed

Accepted Answer

The answer of Suppose the shares of the Chickadee Corporation...

Question 11

The holding period return (HPR)

Accepted Answer

The holding period return (HPR) measures the total return received from holding an asset or portfolio of assets over a period, typically less than or equal to one year, including capital gains and income.

Question 12

To form an assessment of the future performance of investments, investors should monitor

Accepted Answer

Investors should monitor economic and market activity as these factors provide insights into the broader economic environment and potential future performance of investments.

Question 13

Dollar-cost averaging is a procedure by which an investor

Accepted Answer

Dollar-cost averaging involves investing a fixed dollar amount in a security at regular intervals, regardless of its price, which can help reduce the impact of volatility over time.

Question 14

When using a constant-dollar plan?

Accepted Answer

In a constant-dollar plan, gains from the speculative portion are transferred to the safe portion to maintain a constant dollar amount in the speculative investments.

Question 15

Which one of the following statements is correct if a portfolio has a Jensen measure of return of zero?

Accepted Answer

A Jensen measure of zero indicates that the portfolio earned exactly its expected return based on its risk level, meaning it performed as expected relative to the market.

Question 16

The holding period return for managed funds should be based on

Accepted Answer

The holding period return for managed funds should consider both capital gains distributions and dividends, as these are the components that contribute to the total return of the investment.

Question 17

A stop-loss order may not protect an investor's profits if

Accepted Answer

A stop-loss order may not protect an investor's profits if an unexpected event causes the price to drop steeply when the markets are closed, as the order cannot be executed until the market reopens, potentially at a much lower price than the stop-loss level.

Question 18

The primary risk in using a GTC limit sell order rather than a market order is that

Accepted Answer

A GTC (Good-Til-Canceled) limit sell order may not be executed if the market price does not reach the specified limit price.

Question 19

On January 1, Stacy's portfolio was valued at $96,534. During the year Stacy received $3,285 in interest and $4,100 in dividends. She also sold one share at a gain of $850. The value of the portfolio on December 31 of the same year was $113,201. At the end of June, Stacy withdrew $5,000 from the portfolio. What is the holding period return for the year?

Accepted Answer

The answer of On January 1, Stacy's portfolio was valued...

Question 20

Allison's portfolio has an expected return of 14% and a beta of 1.37. Brianna's portfolio has an expected rate of return of 11% and a beta of 1. The risk- free rate is 3% and the expected rate of return on the market is 12%. According to the Jensen's measure,

Accepted Answer

The answer of Allison's portfolio has an expected return of...

Quiz 13: Managing Your Own Portfolio