Question

Assume you buy five futures contracts on the ASX200 index at an index value of 4050. Each contract is $10 x the index, and the margin requirement per contract is $2,000. If the index is at 4090 after one month, what is the percentage gain/loss on the five contracts? a + 2% b. - 2% c. - 20% d. + 20% e. + 100%

A portfolio is considered to be efficient if: a. no other portfolio offers higher expected returns with the same risk. b. no other portfolio offers lower risk with lower expected return. c. there is no portfolio with a higher return. d. there is no portfolio with a lower risk. e. there is no portfolio with a higher beta.

Choose the portfolio from the following set that CANNOT be on the efficient frontier. a. expected return of 8 percent; standard deviation of 6 percent. b. expected return of 13 percent; standard deviation of 10 percent. c. expected return of 25 percent; standard deviation of 21 percent. d. expected return of 10 percent; standard deviation of 8 percent. e. expected return of 13 percent; standard deviation of 12 percent.

Which one of the following statements concerning asset allocation is correct? a. Because there is an ideal mix, all investors should use the same asset allocation for their portfolios. b. There is an ideal asset allocation between stocks and bonds given a specified level of risk. c. Asset allocation affects the expected return but not the risk level of a portfolio. d. The minimum variance portfolio will have a 50/50 asset allocation between stocks and bonds. e. Asset allocation should play a minor role in portfolio construction.

Which of the following statements about portfolio performance is incorrect? a. The Dow Jones Industrial Average is a widely recognised benchmark for evaluating US stock market performance. b. To assess portfolio performance properly, one needs to evaluate it on a risk-adjusted basis. c. To assess a fund manager’s performance properly, one should use a time-weighted return. d. Total risk of a portfolio is measured by calculating its standard deviation. e. An IRR for a portfolio measures the actual return earned on an initial portfolio and any net contributions made during the period.

An investor compares three securities and discover they have identical Treynor ratios. Given this information, which one of the following must be true regarding these three securities? a. They have identical betas. b. They also have identical Sharpe ratios. c. They have the same rates of return. d. They earn identical rewards per unit of total risk. e. They earn identical rewards per unit of systematic risk

A portfolio is comprised of three index funds: an equity index comprising 40% of the total portfolio, a bond index comprising 30% of the total portfolio and an international index comprising 30% of the total portfolio. After each quarter the portfolio manager buys and sells some of each sector so as to preserve the original weights for each sector. This is an example of: a. a passively managed core with an actively managed component. b. a totally passively managed fund. c. passive asset allocation with active security selection. d. active asset allocation with passive security selection. e. an exchange traded fund.

Answer 1

1.
Option D
=index multiplier*(final value-initial value)/margin
=10*(4090-4050)/2000=20.00%

2.
Option A
Efficient portfolio gives a) lowest risk for a particular return and b) highest return for a particular risk

no other portfolio offers higher expected returns with the same risk

3.
Option E
Efficient portfolio gives a) lowest risk for a particular return and b) highest return for a particular risk
Hence, we see between portfolio b and e, portfolio b offers same return for lower risk hence portfolio e is not on the efficient frontier

4.
b. There is an ideal asset allocation between stocks and bonds given a specified level of risk.