The Sharpe ratio is best used to evaluate which one of the following?

11.    The Sharpe ratio is best used to evaluate which one of the following?

 

A.     corporate bonds

B.     government bonds

C.     Treasury bills

D.     individual stocks

E.     diversified portfolios

 

12.    Which one of the following measures returns in relation to total risk?

 

A.     Treynor ratio

B.     Sharpe ratio

C.     Jensen's alpha

D.     Value at Risk

E.     beta

 

13.    Which one of the following values would be the most preferable as a Sharpe ratio?

 

A.     -1.11

B.     -0.89

C.     0.00

D.     .10

E.     1.02

 

14.    Which one of the following measures risk premium in relation to systematic risk?

 

A.     Value at Risk

B.     Jensen's alpha

C.     beta

D.     Sharpe ratio

E.     Treynor ratio

 

15.    You are comparing three securities and discover they all 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 have the same rates of return.

C.     They earn identical rewards per unit of total risk.

D.     They earn identical rewards per unit of systematic risk.

E.     They have identical Sharpe ratios also.

 

16.    You are comparing three assets which have differing Treynor ratios. Given this, which one of the following must be true?

 

A.     The assets may all be correctly priced if they have differing betas.

B.     The assets have differing rates of return.

C.     The assets have differing levels of market risk but equal amounts of total risk.

D.     The assets are all mispriced according to CAPM.

E.     The preferred investment is the asset with the highest Treynor ratio.

 

17.    You are considering the purchase of a mutual fund. You have found three funds that meet your basic criteria. Each fund has a different alpha. Which alpha indicates the preferred investment?

 

A.     the most negative alpha

B.     the least negative alpha

C.     the zero alpha

D.     the lowest positive alpha

E.     the highest positive alpha

 

18.    Which one of the following statements is correct in relation to a security that has a negative Jensen's alpha?

 

A.     The security is overpriced and will plot below the security market line.

B.     The security is overpriced and will plot above the security market line.

C.     The security is underpriced and will plot below the security market line.

D.     The security is underpriced and will plot above the security market line.

E.     The security is incorrectly priced but you cannot tell if it is underpriced or overpriced based on the information provided.

 

19.    Which one of the following is the best indication that a security is correctly priced according to the Capital Asset Pricing Model?

 

A.     beta of zero

B.     beta of 1.0

C.     alpha of zero

D.     alpha of 1.0

E.     alpha of -1.0

 

20.    Tony brags that his portfolio's rate of return is "beating the market". Which one of the following would best substantiate his claim?

 

A.     positive Sharpe ratio

B.     negative Treynor ratio

C.     positive Jensen's alpha

D.     zero Value at Risk

E.     beta greater than 1.0

 

                                        

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