Which metric measures how volatile a fund's returns are relative to its benchmark?

31.    Which metric measures how volatile a fund's returns are relative to its benchmark?

 

A.     Jensen's alpha

B.     Information ratio

C.     Tracking error

D.     Sharpe ratio

E.     Treynor ratio

 

32.    Which metric describes the percentage of a fund's movement which can be explained by movements in the market?

 

A.     Jensen's alpha

B.     Information ratio

C.     Tracking error

D.     R Squared

E.     Treynor ratio

 

33.    Which one of the following is the primary purpose of the Value-at-Risk computation?

 

A.     determine the 99 percent probability range given an abnormal distribution

B.     evaluate the risk-return tradeoff for a given mix of securities

C.     evaluate the probability of a significant loss

D.     determine the portfolio that maximizes the risk premium per unit of total risk

E.     determine the portfolio that maximizes the excess return per unit of systematic risk

 

34.    Which one of the following is the best interpretation of this VaR statistic: Prob (Rp ≤ -.15) = 37%?

 

A.     If your portfolio declines by 15 percent or more, that decline is expected to be followed by a 37 percent increase in value.

B.     Your portfolio is expected to lose at least 15 percent, but not more than 37 percent in any given year.

C.     There is a 37 percent chance that your portfolio will decline in value by at least 15 percent over the next year.

D.     Sometime in the future, your portfolio is expected to lose 15 percent or more in a single year, but have an overall average rate of return of 37 percent.

E.     There is a 37 percent chance that your portfolio will lose at least 15 percent of its value over the next 10 years.

 

35.    The Value-at-Risk measure assumes which one of the following?

 

A.     returns are normally distributed

B.     portfolios lie on the efficient frontier

C.     all portfolios are fully diversified

D.     returns tend to follow repetitive patterns

E.     the risk premium is constant over time

 

36.    Which one of the following Value-at-Risk measures would be most appropriate for a portfolio designed for a very risk-adverse investor?

 

A.     Prob (Rp ≤ - .20) = 100%

B.     Prob (Rp ≤ - .15) = 50%

C.     Prob (Rp ≤ - .10) = 25%

D.     Prob (Rp ≤ - .10) = 10%

E.     Prob (Rp ≤ - .05) = 1%

 

37.    Which one of the following statements is true concerning VaR?

 

A.     VaR ignores time.

B.     VaR only applies to time periods of one year.

C.     VaR applies only to time periods equal to or greater than one year.

D.     VaR values can be computed for monthly time periods.

E.     VaR is accurate only for time periods less than one year.

 

38.    Which of the following are related to VaR analysis?

I. beta

II. standard deviation

III. expected return

IV. time

 

A.     I and III only

B.     II and IV only

C.     I, III, and IV only

D.     II, III, and IV only

E.     I, II, III, and IV

 

39.    You have computed the expected return using VaR with a 2.5 percent probability for a one-year period of time. How would this expected return be expressed on a normal distribution curve?

 

A.     lower tail starting at the point that is 2.5 standard deviations below the mean

B.     lower tail of a 95 percent probability range

C.     the point that corresponds to 2.5 standard deviations below the mean

D.     the point that represents the lower end of the 90 percent probability range

E.     the negative range that lies within 2.5 standard deviations of the mean

 

40.    Which one of the following correctly states the VaR for a 3-year period with a 2.5 percent probability?

 

A.     Prob[Rp,T ≤ E(Rp) × 3 - 1.645 × σp √3]

B.     Prob[Rp,T ≤ E(Rp) × √3 - 1.645 × σp 3]

C.     Prob[Rp,T ≤ E(Rp) × √3 - 1.645 × σp √3]

D.     Prob[Rp,T ≤ E(Rp) × 3 - 1.960 × σp √3]

E.     Prob[Rp,T ≤ E(Rp) × √3 - 1.960 × σp 3]

                                        

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