Portfolio Management - Overview/Risk and Return

Which of the following institutional investors will most likely have the longest

time horizon?

• Defined benefit plan.

• University endowment.

• Life insurance company.

An analyst gathers the following information for the asset allocations of three

portfolios.

Which of the portfolios is most likely appropriate for a client who has a high

degree of risk tolerance?

• Portfolio 1.

• Portfolio 2.

• Portfolio 3.

Which of the following financial products is least likely to have a capital gain

distribution?

• Exchange traded funds.

• Open-end mutual funds.

• Closed-end mutual funds.

Which of the following pooled investments is most likely characterized by a few

large investments?

• Hedge funds.

• Buyout funds.

• Venture capital funds.

An analyst obtains the following annual rates of return for a mutual fund.

The fund’s holding period return over the three-year period is closest to:

• 0.18%.

• 0.55%.

• 0.67%.

An investor performs the following transactions on the shares of a firm.

● At t = 0, she purchases a share for $1,000.

● At t = 1, she receives a dividend of $25 and then purchases three additional shares for $1,055 each.

● At t = 2, she receives a total dividend of $100 and then sells the four shares for $1,100 each.

The money-weighted rate of return is closest to:

• 4.5%

• 6.9%

• 7.3%

An investor evaluating the returns of three recently formed exchange-traded

funds gathers the following information.

The ETF with the highest annualized rate of return is:

• ETF 1.

• ETF 2.

• ETF 3.

A portfolio manager creates the following portfolio.

If the covariance of returns between the two securities is −0.0240, the expected

standard deviation of the portfolio is closest to:

• 2.4%

• 7.5%

• 9.2%

With respect to risk-averse investors, a risk-free asset will generate a numerical

utility that is:

• the same for all individuals.

• positive for risk-averse

  investors.

• equal to zero for risk seeking investors.

• Investment 2

• Investment 3

• Investment 4