Question 1

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

Accepted Answer

A)   the market price may exceed the limit price when the order is placed.
B)   the limit order may not be executed.
C)   the limit order may be executed at a price above the market price.
D)   the limit order expires at the end of the day and may not be executed.E) A) and B)
F) None of the above

Question 2

Which of the following are reasons why a person may want to warehouse liquidity?
I.protect against total loss
II.ability to exploit future opportunities
III.capitalize on the high rates of return available on cash
IV.protect against the need to disturb the existing portfolio

Accepted Answer

A)   I and II only
B)   I, II and IV only
C)   II, III and IV only
D)   I, II, III and IVE) B) and C)
F) A) and C)

Question 3

The formula plan that requires maintaining a target dollar investment in the speculative portion of an investor's portfolio is the

Accepted Answer

A)   most passive of all the formula plans.
B)   target return plan.
C)   constant ratio plan.
D)   constant dollar plan.E) C) and D)
F) B) and D)

Question 4

Late in the calendar year, Jessica must choose between selling stock that was purchased 2 years ago for $10,000 and has fallen to $7,000 or a different stock that was purchased 1 year ago for $5,000 and has risen to $7,000.If the investor has no other capital gains, which stock should she sell?

Accepted Answer

The tax laws allow investors to deduct up to $3,000 of long-term capital losses from ordinary income.If Jessica is in the 25% marginal tax bracket, selling the losing stock will save her $3,000 × .25 or $750 in taxes.If she sells the winning stock, she will pay a capital gains tax of 15% ($2,000 × .15 = $300), so she will be better off by $1.050 if she sells the losing stock and keeps the winner.

Question 5

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%.According to the Treynor measure,

Accepted Answer

A)   Allison has the better portfolio.
B)   Brianna has the better portfolio.
C)   The portfolio's are equally desirable.
D)   The answer depends on Allsison and Brianna's risk tolerance.E) A) and B)
F) A) and C) C

Question 6

Phil has a portfolio with a 13.2% total return.The beta of the portfolio is 1.48 and the standard deviation is 13%.Currently, the risk-free rate of return is 4% and the overall market has a total return of 11%.What is the value of Treynor's measure for Phil's portfolio?

Accepted Answer

A)   2.1%
B)   6.2%
C)   7.1%
D)   8.9%E) A) and B)
F) A) and C)

Question 7

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

Accepted Answer

A)   conservative portion will increase
B)   conservative portion will remain constant
C)   aggressive portion will decrease
D)   entire portfolio will remain constantE) B) and D)
F) B) and C)

Question 8

The formula plan which requires the greatest management attention and is also the most aggressive is called the ________ plan.

Accepted Answer

A)   dollar cost averaging
B)   constant dollar
C)   constant ratio
D)   variable ratioE) A) and C)
F) All of the above

Question 9

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

Accepted Answer

A)   the price drops even slightly below the stop price before the order can be executed.
B)   the price enters a prolonged period of gradual decline.
C)   an unexpected event cause the price to drop steeply when the markets are closed
D)   the stop loss price is never reachedE) A) and B)
F) B) and D)

Question 10

Which of the following statements about Jensen's measure are correct?
I.Through its use of the capital asset pricing model, Jensen's measure automatically adjusts for market return.
II.In general, the higher the Jensen's measure, the better a portfolio has performed.
III.Jensen's measure is referred to as alpha.
IV.A positive Jensen's measure indicates an investment has underperformed the market on a risk-adjusted basis.

Accepted Answer

A)   I and IV only
B)   I, II and III only
C)   II and III only
D)   I, III and IV onlyE) A) and B)
F) A) and C)

Question 11

An moderate asset allocation alternative might include
I.bonds.
II.common stocks.
III.foreign securities.
IV.options and commodities futures.

Accepted Answer

A)   I & II only
B)   I, III and IV only
C)   I, II, and III only
D)   I, II, III and IVE) A) and B)
F) All of the above

Question 12

An investor in the 25% marginal tax bracket purchased a bond for $983, received $85 in interest, and then sold the bond for $955 after holding it for six months.The tax rate for capital gains with holding periods in excess of one year is 15%.What are the pre-tax and post-tax holding period returns?

Accepted Answer

A)   5.8%; 4.3%
B)   6.0%; 4.5%
C)   5.8%; 4.5%
D)   6.0%; 4.3%E) A) and B)
F) All of the above A

Question 13

When using a constant dollar plan?

Accepted Answer

A)   gains from the speculative portion of the portfolio are transferred to the safe portion of the portfolio.
B)   the amount of money in the speculative portion of the portfolio should decline over time.
C)   the percentage of funds in the speculative portion of the portfolio should increase over time.
D)   the ratio of safe funds to speculative funds remains constant over time.E) C) and D)
F) All of the above

Question 14

Sharpe measures total risk while Treynor and Jensen measure only systematic risk.

Accepted Answer

A) True 
 B)False

Question 15

Asset allocation should focus on

Accepted Answer

A)   the investor's financial and family situation.
B)   selection of individual securities within an asset class.
C)   maximization of current income.
D)   maximization of short-term profits.E) A) and B)
F) B) and C)

Question 16

The Dow Jones Industrial Average (DJIA)includes 500 of the largest companies traded on U.S.exchanges.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)   The S&P 500 Index.
B)   The Value Line Index.
C)   The Dow Jones Industrial Average.
D)   economic and market activityE) None of the above
F) A) and B)

Question 18

A stock 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

A)   2.5%
B)   6.3%
C)   18.4%
D)   27.6%E) All of the above
F) B) and C)

Question 19

Explain the use of limit orders and stop-loss orders in rebalancing an investor's stock portfolio.What are the principal risks in using these orders?

Accepted Answer

Limit orders can be used to buy or sell ...

Question 20

The general theory of dollar cost averaging is

Accepted Answer

A)   to time the market to take advantage of low stock prices.
B)   to buy more stock when prices are low and less when prices are high.
C)   to equal the performance of market averages at the lowest dollar cost.
D)   to sell as markets decline and buy as they begin to rise.E) A) and B)
F) A) and C)

Exam 13: Managing Your Own Portfolios

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

Correct Answer
verified

Which of the following are reasons why a person may want to warehouse liquidity? I.protect against total loss II.ability to exploit future opportunities III.capitalize on the high rates of return available on cash IV.protect against the need to disturb the existing portfolio

Correct Answer
verified

The formula plan that requires maintaining a target dollar investment in the speculative portion of an investor's portfolio is the

Correct Answer
verified

Late in the calendar year, Jessica must choose between selling stock that was purchased 2 years ago for $10,000 and has fallen to $7,000 or a different stock that was purchased 1 year ago for $5,000 and has risen to $7,000.If the investor has no other capital gains, which stock should she sell?

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%.According to the Treynor measure,

Correct Answer
verified
C

Phil has a portfolio with a 13.2% total return.The beta of the portfolio is 1.48 and the standard deviation is 13%.Currently, the risk-free rate of return is 4% and the overall market has a total return of 11%.What is the value of Treynor's measure for Phil's portfolio?

Correct Answer
verified

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

Correct Answer
verified

The formula plan which requires the greatest management attention and is also the most aggressive is called the ________ plan.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

An moderate asset allocation alternative might include I.bonds. II.common stocks. III.foreign securities. IV.options and commodities futures.

Correct Answer
verified

An investor in the 25% marginal tax bracket purchased a bond for $983, received $85 in interest, and then sold the bond for $955 after holding it for six months.The tax rate for capital gains with holding periods in excess of one year is 15%.What are the pre-tax and post-tax holding period returns?

Correct Answer
verified
A

When using a constant dollar plan?

Correct Answer
verified

Sharpe measures total risk while Treynor and Jensen measure only systematic risk.

Correct Answer
verified

Asset allocation should focus on

Correct Answer
verified

The Dow Jones Industrial Average (DJIA)includes 500 of the largest companies traded on U.S.exchanges.

Correct Answer
verified

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

Correct Answer
verified

A stock 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?

Correct Answer
verified

Explain the use of limit orders and stop-loss orders in rebalancing an investor's stock portfolio.What are the principal risks in using these orders?

Correct Answer
verified
Limit orders can be used to buy or sell ...
View Answer

The general theory of dollar cost averaging is

Correct Answer
verified

Exam 13: Managing Your Own Portfolios

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

Correct AnswerverifiedShow Answer

Which of the following are reasons why a person may want to warehouse liquidity? I.protect against total loss II.ability to exploit future opportunities III.capitalize on the high rates of return available on cash IV.protect against the need to disturb the existing portfolio

Correct AnswerverifiedShow Answer

The formula plan that requires maintaining a target dollar investment in the speculative portion of an investor's portfolio is the

Correct AnswerverifiedShow Answer

Late in the calendar year, Jessica must choose between selling stock that was purchased 2 years ago for $10,000 and has fallen to $7,000 or a different stock that was purchased 1 year ago for $5,000 and has risen to $7,000.If the investor has no other capital gains, which stock should she sell?

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%.According to the Treynor measure,

Correct AnswerverifiedC

Phil has a portfolio with a 13.2% total return.The beta of the portfolio is 1.48 and the standard deviation is 13%.Currently, the risk-free rate of return is 4% and the overall market has a total return of 11%.What is the value of Treynor's measure for Phil's portfolio?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The formula plan which requires the greatest management attention and is also the most aggressive is called the ________ plan.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An moderate asset allocation alternative might include I.bonds. II.common stocks. III.foreign securities. IV.options and commodities futures.

Correct AnswerverifiedShow Answer

An investor in the 25% marginal tax bracket purchased a bond for $983, received $85 in interest, and then sold the bond for $955 after holding it for six months.The tax rate for capital gains with holding periods in excess of one year is 15%.What are the pre-tax and post-tax holding period returns?

Correct AnswerverifiedA

When using a constant dollar plan?

Correct AnswerverifiedShow Answer

Sharpe measures total risk while Treynor and Jensen measure only systematic risk.

Correct AnswerverifiedShow Answer

Asset allocation should focus on

Correct AnswerverifiedShow Answer

The Dow Jones Industrial Average (DJIA)includes 500 of the largest companies traded on U.S.exchanges.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A stock 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?

Correct AnswerverifiedShow Answer

Explain the use of limit orders and stop-loss orders in rebalancing an investor's stock portfolio.What are the principal risks in using these orders?

Correct AnswerverifiedLimit orders can be used to buy or sell ...View AnswerShow Answer

The general theory of dollar cost averaging is

Correct AnswerverifiedShow Answer

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C

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A

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Limit orders can be used to buy or sell ...
View Answer

Correct Answer
verified