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20 Cards in this Set
- Front
- Back
Which one of the following assess the ability of a money manager to balance high returns with an acceptable level of risk?
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performance evaluation
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The unadjusted total percentage return on security that has not been compared to any benchmark is referred to as which one of the following?
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raw return
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The risk premium of a portfolio divided by the portfolio's standard deviation defines which one of the following performance measures?
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Sharpe ratio
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Which one of the following is computed by dividing a portfolio's risk premium by the portfolio beta?
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Treynor ratio
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Which one of the following measures a portfolio's raw return against the expected return based on the Capital Asset Pricing Model?
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Jensen's alpha
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Which one of the following concerns a money manager's control over investment risks, particularly potential short-run losses?
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Investment risk management
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Which one of the following assesses risk by stating the probability of a loss a portfolio might incur within a stated time period given a specific probability?
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Value-at-Risk
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Which one of the following is a statistical model, defined by its mean and standard deviation, that is used to assess probabilities?
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normal distribution
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Which one of the following measures a security's return in relation to the total risk associated with that security?
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Sharpe ratio
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The Sharpe ratio measures a security's return relative to which one of the following?
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Total risk
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The Sharpe ratio is best used to evaluate which one of the following?
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diversified portfolios
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Which one of the following measures returns in relation to total risk?
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Sharpe ratio
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Which one of the following values would be the most preferable as a Sharpe ratio?
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1.02
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Which one of the following measures risk premium in relation to systematic risk?
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Treynor ratio
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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?
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They earn identical rewards per unit of systematic risk.
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You are comparing three assets which have differing Treynor ratios. Given this, which one of the following must be true?
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The preferred investment is the asset with the highest Treynor ratio.
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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?
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the highest positive alpha
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Which one of the following statements is correct in relation to a security that has a negative Jensen's alpha?
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The security is overpriced and will plot below the security market line.
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Which one of the following is the best indication that a security is correctly priced according to the Capital Asset Pricing Model?
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alpha of zero
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Tony brags that his portfolio's rate of return is "beating the market". Which one of the following would best substantiate his claim?
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positive Jensen's alpha
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