Which of the following should generally only be used to evaluate relatively diversified portfolios rather than individual securities?

21.    Which of the following should generally only be used to evaluate relatively diversified portfolios rather than individual securities?

I. Sharpe ratio

II. Treynor ratio

III. Jensen's alpha

 

A.     I only

B.     II only

C.     III only

D.     I and II only

E.     I, II, and III

 

22.    Which of the following measures are dependent upon the accuracy of a security's beta?

I. Sharpe ratio

II. Treynor ratio

III. Jensen's alpha

 

A.     I only

B.     II only

C.     I and II only

D.     II and III only

E.     I, II, and III

 

23.    Which one of the following is probably the best measure of the performance of a well-diversified portfolio?

 

A.     Jensen's alpha

B.     Value at Risk

C.     Jensen-Treynor alpha

D.     Sharpe ratio

E.     Treynor ratio

 

24.    Which of the following measures should be used to determine if a security should be included in a master portfolio?

I. Sharpe ratio

II. Treynor ratio

III. Jensen's alpha

 

A.     I only

B.     II only

C.     III only

D.     I and II only

E.     II and III only

 

25.    The Jensen-Treynor alpha is equal to:

 

A.     the Treynor ratio divided by Jensen's alpha.

B.     the Treynor ratio multiplied by Jensen's alpha.

C.     Jensen's alpha divided by beta.

D.     Jensen's alpha divided by the standard deviation.

E.     Jensen's alpha divided by the Treynor ratio.

 

26.    Which one of the following is measured by the Jensen-Treynor alpha?

 

A.     total return relative to systematic risk

B.     risk premium relative to systematic

C.     risk premium relative to total risk

D.     excess return relative to systematic risk

E.     excess return relative to total risk

 

27.    The Sharpe-optimal portfolio will be the investment opportunity set which lies on a straight line that has which of the following characteristics?

 

A.     the flattest slope when the line intersects the vertical axis at the risk-free rate

B.     the steepest slope when the line intersects the vertical axis at the risk-free rate

C.     the steepest slope when the line intersects the vertical axis at the origin

D.     the flattest slope when the line intersects the vertical axis at the market rate

E.     the steepest slope when the line intersects the vertical axis at the market rate

 

28.    A Sharpe-optimal portfolio provides which one of the following for a given set of securities?

 

A.     Jensen's Alpha

B.     highest possible level of risk

C.     highest level of return for a market-equivalent level of risk

D.     highest excess return per unit of systematic risk

E.     highest risk premium per unit of total risk

 

29.    You want to create the best portfolio that can be derived from two assets. Which one of the following will help you identify that portfolio?

 

A.     highest portfolio beta

B.     market equivalent level of risk

C.     highest possible rate of return

D.     Treynor-minimal portfolio

E.     Sharpe-optimal portfolio

 

30.    Which measure would you use to know whether alpha is truly significant or just the result of random chance?

 

A.     Jensen's alpha

B.     Information ratio

C.     Jensen-Treynor alpha

D.     Sharpe ratio

E.     Treynor ratio

                                        

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