投資學(xué)第7版Test Bank答案24

投資學(xué)第7版TestBank答案24投資學(xué)第7版TestBank答案24投資學(xué)第7版TestBank答案24投資學(xué)第7版TestBank答案24編制僅供參考審核批準(zhǔn)生效日期地址：電話：傳真:郵編:MultipleChoiceQuestions 1. Tradingactivitybymutualfundsjustpriortoquarterlyreportingdatesisknownas A) insidertrading. B) programtrading. C) passivesecurityselection. D) windowdressing. E) noneoftheabove.Answer:DDifficulty:Moderate Rationale:Mutualfundsmustdiscloseportfoliocompositionquarterly,andtradingactivitythatimmediatelyprecedesthereportingdateisreferredtoas"windowdressing".Thespeculationisthatwindowdressinginvolveschangesinportfoliocomposition,whichgivestheappearanceofsuccessfulstockselection. 2. Thecomparisonuniverseis__________. A) aconceptfoundonlyinastronomy B) thesetofallmutualfundsintheworld C) thesetofallmutualfundsintheU.S. D) asetofmutualfundswithsimilarriskcharacteristicstoyourmutualfund E) noneoftheaboveAnswer:DDifficulty:Easy Rationale:Amutualfundmanagerisevaluatedagainsttheperformanceofmanagersoffundsofsimilarriskcharacteristics. 3. __________didnotdevelopapopularmethodforrisk-adjustedperformanceevaluationofmutualfunds. A) EugeneFama B) MichaelJensen C) WilliamSharpe D) JackTreynor E) AandBAnswer:ADifficulty:Easy Rationale:MichaelJensen,WilliamSharpe,andJackTreynordevelopedpopularmodelsformutualfundperformanceevaluation.

4. Henriksson(1984)foundthat,onaverage,betasoffunds__________duringmarketadvances A) increasedverysignificantly B) increasedslightly C) decreasedslightly D) decreasedverysignificantly E) didnotchangeAnswer:CDifficulty:Moderate Rationale:Portfoliobetasshouldhavealargevalueifthemarketisexpectedtoperformwellandasmallvalueifthemarketisnotexpectedtoperformwell;thus,theseresultsreflectthepoortimingabilityofmutualfundmanagers. 5. Mostprofessionallymanagedequityfundsgenerally__________. A) outperformtheS&P500indexonbothrawandrisk-adjustedreturnmeasures B) underperformtheS&P500indexonbothrawandrisk-adjustedreturnmeasures C) outperformtheS&P500indexonrawreturnmeasuresandunderperformtheS&P500indexonrisk-adjustedreturnmeasures D) underperformtheS&P500indexonrawreturnmeasuresandoutperformtheS&P500indexonrisk-adjustedreturnmeasures E) matchtheperformanceoftheS&P500indexonbothrawandrisk-adjustedreturnmeasuresAnswer:BDifficulty:Moderate Rationale:Mostmutualfundsdonotconsistently,overtime,outperformtheS&P500indexonthebasisofeitherraworrisk-adjustedreturnmeasures. 6. Supposetwoportfolioshavethesameaveragereturn,thesamestandarddeviationofreturns,butportfolioAhasahigherbetathanportfolioB.AccordingtotheSharpemeasure,theperformanceofportfolioA__________. A) isbetterthantheperformanceofportfolioB B) isthesameastheperformanceofportfolioB C) ispoorerthantheperformanceofportfolioB D) cannotbemeasuredasthereisnodataonthealphaoftheportfolio E) noneoftheaboveistrue.Answer:BDifficulty:Moderate Rationale:TheSharpeindexisameasureofaverageportfolioreturns(inexcessoftheriskfreereturn)perunitoftotalrisk(asmeasuredbystandarddeviation).

7. ConsidertheSharpeandTreynorperformancemeasures.Whenapensionfundislargeandhasmanymanagers,the__________measureisbetterforevaluatingindividualmanagerswhilethe__________measureisbetterforevaluatingthemanagerofasmallfundwithonlyonemanagerresponsibleforallinvestments. A) Sharpe,Sharpe B) Sharpe,Treynor C) Treynor,Sharpe D) Treynor,Treynor E) Bothmeasuresareequallygoodinbothcases.Answer:CDifficulty:Moderate Rationale:TheTreynormeasureisthesuperiormeasureiftheportfolioisasmallportionofmanyportfolioscombinedintoalargeinvestmentfund.TheSharpemeasureissuperioriftheportfoliorepresentstheinvestor'stotalriskyinvestmentposition. 8. Supposeyoupurchase100sharesofGMstockatthebeginningofyear1,andpurchaseanother100sharesattheendofyear1.Yousellall200sharesattheendofyear2.AssumethatthepriceofGMstockis$50atthebeginningofyear1,$55attheendofyear1,and$65attheendofyear2.AssumenodividendswerepaidonGMstock.Yourdollar-weightedreturnonthestockwillbe__________;yourtime-weightedreturnonthestock. A) higherthan B) thesameas C) lessthan D) exactlyproportionalto E) moreinformationisnecessarytoanswerthisquestionAnswer:ADifficulty:Moderate Rationale:Inthedollar-weightedreturn,thestock'sperformanceinthesecondyear,when200sharesareheld,hasagreaterinfluenceontheoveralldollar-weightedreturn.Thetime-weightedreturnignoresthenumberofsharesheld.

9. Supposetherisk-freereturnis4%.Thebetaofamanagedportfoliois,thealphais1%,andtheaveragereturnis14%.BasedonJensen'smeasureofportfolioperformance,youwouldcalculatethereturnonthemarketportfolioas A) % B) 14% C) 15% D) 16% E) noneoftheaboveAnswer:ADifficulty:Difficult Rationale:1%=14%-[4%+(x-4%)];x=%. 10. Supposetherisk-freereturnis3%.Thebetaofamanagedportfoliois,thealphais0%,andtheaveragereturnis16%.BasedonJensen'smeasureofportfolioperformance,youwouldcalculatethereturnonthemarketportfolioas A) % B) % C) % D) % E) noneoftheaboveAnswer:BDifficulty:Difficult Rationale:0%=16%-[3%+(x-3%)];x=%. 11. Supposetherisk-freereturnis6%.Thebetaofamanagedportfoliois,thealphais3%,andtheaveragereturnis18%.BasedonJensen'smeasureofportfolioperformance,youwouldcalculatethereturnonthemarketportfolioas A) 12% B) 14% C) 15% D) 16% E) noneoftheaboveAnswer:ADifficulty:Difficult Rationale:3%=18%-[6%+(x-6%)];x=12%.

12. Supposeaparticularinvestmentearnsanarithmeticreturnof10%inyear1,20%inyear2and30%inyear3.Thegeometricaveragereturnfortheyearperiodwillbe__________. A) greaterthanthearithmeticaveragereturn B) equaltothearithmeticaveragereturn C) lessthanthearithmeticaveragereturn D) equaltothemarketreturn E) cannottellfromtheinformationgivenAnswer:CDifficulty:Moderate Rationale:Thegeometricmeanwillalwaysbelessthanthearithmeticmeanunlessthereturnsinallperiodsareequal(inwhichcasethetwomeanswillbeequal). 13. Supposeyoubuy100sharesofAbolishingDividendCorporationatthebeginningofyear1for$80.AbolishingDividendCorporationpaysnodividends.Thestockpriceattheendofyear1is$100,theprice$120attheendofyear2,andthepriceis$150attheendofyear3.Thestockpricedeclinesto$100attheendofyear4,andyousellyour100shares.Forthefouryears,yourgeometricaveragereturnis A) % B) % C) % D) % E) %Answer:CDifficulty:Difficult Rationale:[]1/4-=%

14. Youwanttoevaluatethreemutualfundsusingtheinformationratiomeasureforperformanceevaluation.Therisk-freereturnduringthesampleperiodis6%,andtheaveragereturnonthemarketportfoliois19%.Theaveragereturns,residualstandarddeviations,andbetasforthethreefundsaregivenbelow. Thefundwiththehighestinformationratiomeasureis__________. A) FundA B) FundB C) FundC D) FundsAandBaretiedforhighest E) FundsAandCaretiedforhighestAnswer:BDifficulty:Difficult Rationale:Informationratio=αP/σ(eP);A:αP=20-6-.8(19-6)=;4=;B:αP=21-6-1(19-6)=;2/=;C:αP=23-6-(19-6)=;=.

15. YouwanttoevaluatethreemutualfundsusingtheSharpemeasureforperformanceevaluation.Therisk-freereturnduringthesampleperiodis6%.Theaveragereturns,standarddeviationsandbetasforthethreefundsaregivenbelow,asisthedatafortheS&P500index. ThefundwiththehighestSharpemeasureis__________. A) FundA B) FundB C) FundC D) FundsAandBaretiedforhighest E) FundsAandCaretiedforhighestAnswer:CDifficulty:Moderate Rationale:A:(24%-6%)/30%=;B:(12%-6%)/10%=;C:(22%-6%)/20%=;S&P500:(18%-6%)/16%=.

16. YouwanttoevaluatethreemutualfundsusingtheSharpemeasureforperformanceevaluation.Therisk-freereturnduringthesampleperiodis4%.Theaveragereturns,standarddeviationsandbetasforthethreefundsaregivenbelow,asisthedatafortheS&P500index. ThefundwiththehighestSharpemeasureis__________. A) FundA B) FundB C) FundC D) FundsAandBaretiedforhighest E) FundsAandCaretiedforhighestAnswer:BDifficulty:Moderate Rationale:A:(18%-4%)/38%=;B:(15%-4%)/27%=;C:(11%-4%)/24%=;S&P500:(10%-4%)/22%=. 17. YouwanttoevaluatethreemutualfundsusingtheSharpemeasureforperformanceevaluation.Therisk-freereturnduringthesampleperiodis5%.Theaveragereturns,standarddeviationsandbetasforthethreefundsaregivenbelow,asisthedatafortheS&P500index. TheinvestmentwiththehighestSharpemeasureis__________. A) FundA B) FundB C) FundC D) theindex E) FundsAandCaretiedforhighestAnswer:DDifficulty:Moderate Rationale:A:(23%-5%)/30%=;B:(20%-5%)/19%=;C:(19%-5%)/17%=;S&P500:(18%-5%)/15%=.

18. YouwanttoevaluatethreemutualfundsusingtheTreynormeasureforperformanceevaluation.Therisk-freereturnduringthesampleperiodis6%.Theaveragereturns,standarddeviations,andbetasforthethreefundsaregivenbelow,inadditiontoinformationregardingtheS&P500index. ThefundwiththehighestTreynormeasureis__________. A) FundA B) FundB C) FundC D) FundsAandBaretiedforhighest E) FundsAandCaretiedforhighestAnswer:ADifficulty:Difficult Rationale:A:(13%-6%)/=14;B:(19%-6%)/=13;C:(25%-6%)/=;S&P500:(18%-6%)/=12. 19. YouwanttoevaluatethreemutualfundsusingtheJensenmeasureforperformanceevaluation.Therisk-freereturnduringthesampleperiodis6%,andtheaveragereturnonthemarketportfoliois18%.Theaveragereturns,standarddeviations,andbetasforthethreefundsaregivenbelow. ThefundwiththehighestJensenmeasureis__________. A) FundA B) FundB C) FundC D) FundsAandBaretiedforhighest E) FundsAandCaretiedforhighestAnswer:CDifficulty:Difficult Rationale:A:%-[6%+(18%-6%)]=-%;B:%-[6%+(18%-6%)]=-;C:%-[6%+(18%-6%)]=+.

20. SupposeyoupurchaseoneshareofthestockofVolatileEngineeringCorporationatthebeginningofyear1for$36.Attheendofyear1,youreceivea$2dividend,andbuyonemoresharefor$30.Attheendofyear2,youreceivetotaldividendsof$4.,$2foreachshare),andsellthesharesfor$each.Thetime-weightedreturnonyourinvestmentis________. A) % B) % C) % D) % E) %Answer:CDifficulty:Moderate Rationale:Year1:($30+$2-$36)/$36=-%;Year2:($+$2-$30)/$30=%;Average:%. 21. SupposeyoupurchaseoneshareofthestockofVolatileEngineeringCorporationatthebeginningofyear1for$36.Attheendofyear1,youreceivea$2dividend,andbuyonemoresharefor$30.Attheendofyear2,youreceivetotaldividendsof$4.,$2foreachshare),andsellthesharesfor$each.Thedollar-weightedreturnonyourinvestmentis_______. A) % B) % C) % D) % E) %Answer:EDifficulty:Moderate Rationale:$36+$30/(1+r)=$2/(1+r)+$4/(1+r)2+$(1+r)2;r=%. 22. SupposeyoupurchaseoneshareofthestockofCerealCorrelationCompanyatthebeginningofyear1for$50.Attheendofyear1,youreceivea$1dividend,andbuyonemoresharefor$72.Attheendofyear2,youreceivetotaldividendsof$2.,$1foreachshare),andsellthesharesfor$each.Thetime-weightedreturnonyourinvestmentis__________. A) % B) % C) % D) % E) noneoftheaboveAnswer:DDifficulty:Moderate Rationale:Year1:($72+$1-$50)/$50=46%;Year2:($+$1-$72)/$72=%;Average:%.

23. SupposeyoupurchaseoneshareofthestockofCerealCorrelationCompanyatthebeginningofyear1for$50.Attheendofyear1,youreceivea$1dividend,andbuyonemoresharefor$72.Attheendofyear2,youreceivetotaldividendsof$2.,$1foreachshare),andsellthesharesfor$each.Thedollar-weightedreturnonyourinvestmentis__________. A) % B) % C) D) % E) noneoftheaboveAnswer:BDifficulty:Moderate Rationale:$50+$72/(1+r)=$1/(1+r)+$2/(1+r)2+$(1+r)2;r=%. 24. Supposeyouowntwostocks,AandB.Inyear1,stockAearnsa2%returnandstockBearnsa9%return.Inyear2,stockAearnsan18%returnandstockBearnsan11%return.__________hasthehigherarithmeticaveragereturn. A) stockA B) stockB C) thetwostockshavethesamearithmeticaveragereturn D) atleastthreeperiodsareneededtocalculatethearithmeticaveragereturn E) noneoftheaboveAnswer:CDifficulty:Moderate Rationale:A:(2%+18%)/2=10%;B:(9%+11%)/2=10%. 25. Supposeyouowntwostocks,AandB.Inyear1,stockAearnsa2%returnandstockBearnsa9%return.Inyear2,stockAearnsan18%returnandstockBearnsan11%return.Whichstockhasthehighergeometricaveragereturn A) stockA B) stockB C) thetwostockshavethesamegeometricaveragereturn D) atleastthreeperiodsareneededtocalculatethegeometricaveragereturn. E) noneoftheaboveAnswer:BDifficulty:Moderate Rationale:A:[]1/2-1=%;B:[]1/2-1=%.

Usethefollowingtoanswerquestions26-29:ThefollowingdataareavailablerelatingtotheperformanceofSoonerStockFundandthemarketportfolio: 26. WhatistheSharpemeasureofperformanceevaluationforSoonerStockFund A) % B) % C) % D) % E) %Answer:DDifficulty:Moderate Rationale:(20%-3%)/44%=,or%. 27. WhatistheTreynormeasureofperformanceevaluationforSoonerStockFund A) % B) % C) % D) % E) %Answer:DDifficulty:Moderate Rationale:(20%-3%)/=%. 28. CalculatetheJensenmeasureofperformanceevaluationforSoonerStockFund. A) % B) % C) % D) % E) %Answer:ADifficulty:Moderate Rationale:αP=20%-[3%+(11%-3%)]=%.

29. CalculatetheinformationratioforSoonerStockFund. A) B) C) D) E) Answer:BDifficulty:Moderate Rationale:αP=20%-[3%+(11%-3%)]=%,%/%=.Usethefollowingtoanswerquestions30-33:ThefollowingdataareavailablerelatingtotheperformanceofMonarchStockFundandthemarketportfolio: 30. WhatistheinformationratiomeasureofperformanceevaluationforMonarchStockFund A) % B) % C) % D) % E) noneoftheaboveAnswer:BDifficulty:ModerateRationale:αP=16%-[4%+(12%-4%)]=%;αP/σ(eP)=%/1%=,or280%.

31. CalculateSharpe'smeasureofperformanceforMonarchStockFund. A) % B) % C) % D) % E) noneoftheaboveAnswer:BDifficulty:Moderate Rationale:(16-4)/26=.46 32. CalculateTreynor'smeasureofperformanceforMonarchStockFund. A) % B) % C) % D) % E) noneoftheaboveAnswer:ADifficulty:Moderate Rationale:(16-4)/= 33. CalculateJensen'smeasureofperformanceforMonarchStockFund. A) % B) % C) % D) % E) noneoftheaboveAnswer:BDifficulty:Moderate Rationale:16-[4+(12-4)]=%Usethefollowingtoanswerquestions34-37:ThefollowingdataareavailablerelatingtotheperformanceofSeminoleFundandthemarketportfolio:

34. IfyouwantedtoevaluatetheSeminoleFundusingtheM2measure,whatpercentoftheadjustedportfoliowouldneedtobeinvestedinT-Bills A) -36%(borrow) B) 50% C) 8% D) 36% E) 73%Answer:EDifficulty:Moderate Rationale:22/30=.7333 35. CalculatetheM2measurefortheSeminoleFund. A) % B) % C) % D) % E) %Answer:DDifficulty:Moderate Rationale:22/30=.7333;1-.7333=.2667;M2=[.7333(18)+.2667(6)]-14=%. 36. IftheSeminoleFundisactivelymanaged,fairlypriced,andwillbemixedwiththemarketindexportfolio,calculatethevalueofthemeasurethatshouldbeusedforevaluation. A) % B) % C) % D) % E) 40%Answer:EDifficulty:Difficult Rationale:TheSharperatioisthecorrectmeasuretouseinthiscase.(18-6)/30=40%

37. IftheSeminoleFundisactivelymanagedandwillbemixedwiththemarketindexportfolio,butyoususpectitmaybemispriced,calculatethevalueofthemeasurethatshouldbeusedforevaluation. A) % B) % C) % D) % E) 40%Answer:BDifficulty:Difficult Rationale:Theinformationratioisthecorrectmeasuretouseinthiscase.AP=18%-[6%+*(14%-6%)]=%,InformationRatio=%/%=.20=20%Usethefollowingtoanswerquestions38-41:ThefollowingdataareavailablerelatingtotheperformanceofWildcatFundandthemarketportfolio: 38. WhatistheinformationratiomeasureofperformanceevaluationforWildcatFund A) % B) % C) % D) % E) noneoftheaboveAnswer:DDifficulty:Moderate Rationale:αP=18%-[7%+(15%-7%)]=1%;αP/σ(eP)=1%/2%=,or%.

39. CalculateSharpe'smeasureofperformanceforWildcatFund. A) % B) % C) % D) % E) noneoftheaboveAnswer:CDifficulty:Moderate Rationale:(18-7)/25=.44 40. CalculateTreynor'smeasureofperformanceforWildcatFund. A) % B) % C) % D) % E) noneoftheaboveAnswer:BDifficulty:Moderate Rationale:(18-7)/= 41. CalculateJensen'smeasureofperformanceforWildcatFund. A) % B) % C) % D) % E) noneoftheaboveAnswer:ADifficulty:Moderate Rationale:18-[7+(15-7)]=%Usethefollowingtoanswerquestions42-45:ThefollowingdataareavailablerelatingtotheperformanceofLongHornStockFundandthemarketportfolio:

42. WhatistheSharpemeasureofperformanceevaluationforLongHornStockFund A) % B) % C) % D) % E) %Answer:EDifficulty:Moderate Rationale:(19%-6%)/35%=,or%. 43. WhatistheTreynormeasureofperformanceevaluationforLongHornStockFund A) % B) % C) % D) % E) %Answer:CDifficulty:Moderate Rationale:(19%-6%)/=%. 44. CalculatetheJensenmeasureofperformanceevaluationforLongHornStockFund. A) % B) % C) % D) % E) %Answer:BDifficulty:ModerateRationale:αP=19%-[6%+(12%-6%)]=%. 45. CalculatetheinformationratioforLongHornStockFund. A) B) C) D) E) Answer:ADifficulty:Moderate Rationale:αP=19%-[6%+(12%-6%)]=%,%/%=.

Usethefollowingtoanswerquestions46-48:Inaparticularyear,RazorbackMutualFundearnedareturnof1%bymakingthefollowinginvestmentsinassetclasses: 46. ThetotalexcessreturnontheRazorbackFund'smanagedportfoliowas__________. A) % B) % C) % D) % E) noneoftheaboveAnswer:BDifficulty:Moderate Rationale:1%-2%=-1%. 47. ThecontributionofassetallocationacrossmarketstotheRazorbackFund'stotalexcessreturnwas__________. A) % B) % C) % D) % E) noneoftheaboveAnswer:ADifficulty:Difficult Rationale:Seetablebelow.

48. ThecontributionofselectionwithinmarketstotheRazorbackFund'stotalexcessreturnwas__________. A) % B) % C) % D) % E) noneoftheaboveAnswer:CDifficulty:Difficult Rationale:Seetablebelow. Usethefollowingtoanswerquestions49-51:Inaparticularyear,AggieMutualFundearnedareturnof15%bymakingthefollowinginvestmentsinthefollowingassetclasses 49. ThetotalexcessreturnontheAggiemanagedportfoliowas__________. A) 1% B) 3% C) 4% D) 5% E) noneoftheaboveAnswer:DDifficulty:Easy Rationale:15%-10%=5%.

50. Thecontributionofassetallocationacrossmarketstothetotalexcessreturnwas A) 1% B) 3% C) 4% D) 5% E) noneoftheaboveAnswer:CDifficulty:Difficult Rationale:Seetablebelow. 51. Thecontributionofselectionwithinmarketstototalexcessreturnwas A) 1% B) 3% C) 4% D) 5% E) noneoftheaboveAnswer:ADifficulty:Difficult Rationale:Seetablebelow.

52. Inmeasuringthecomparativeperformanceofdifferentfundmanagers,thepreferredmethodofcalculatingrateofreturnis__________. A) internalrateofreturn B) arithmeticaverage C) dollar-weighted D) time-weighted E) noneoftheaboveAnswer:DDifficulty:Easy Rationale:Fortheinvestor,theinternalrateofreturn(ordollar-weightedrateofreturn)isthepreferredmeasurebecauseiftheinvestorchoosestoinvestheavilyinoneinvestmentvehiclethatperformsextremelywell,anincreasedreturnresults,whichisreflectedinA(orC).However,themutualfundmanagerdoesnotusuallymakethedecisionastotheamounttoinvestinaparticularvehicle;therefore,thetime-weightedrateofreturnisusuallyusedtoevaluatethesemanagers.Arithmeticaverageisagoodmeasureforestimatingfuturereturns(ifexpectationsareunchanged). 53. The__________measurestherewardtovolatilitytrade-offbydividingtheaverageportfolioexcessreturnbythestandarddeviationofreturns. A) Sharpemeasure B) Treynormeasure C) Jensenmeasure D) informationratio E) noneoftheaboveAnswer:ADifficulty:Easy Rationale:TheSharpemeasureisameasureofexcessaverageportfolioreturnsovertimeperunitoftotalriskoftheportfolioreturns(standarddeviation). 54. Apensionfundthatbeginswith$500,000earns15%thefirstyearand10%thesecondyear.Atthebeginningofthesecondyear,thesponsorcontributesanother$300,000.Thedollar-weightedandtime-weightedratesofreturn,respectively,were A) %and% B) %and% C) %and% D) %and% E) noneoftheaboveAnswer:BDifficulty:Moderate Rationale:$500,000+$300,000/(1+r)=$75,000/(1+r)+$880,000/(1+r)2;r=%;(15+10)/2=%

55. TheValueLineIndexisanequallyweightedgeometricaverageofthereturnsofabout1,700firms.Thevalueofanindexbasedonthegeometricaveragereturnsof3stockswherethereturnsonthe3stocksduringagivenperiodwere32%,5%,and-10%,respectively,is__________. A) % B) % C) % D) % E) %Answer:BDifficulty:Moderate Rationale:[]1/3-=%. 56. Risk-adjustedmutualfundperformancemeasureshavedecreasedinpopularitybecause A) innearlyefficientmarketsitisextremelydifficultforportfoliomanagerstooutperformthemarket. B) themeasuresusuallyresultinnegativeperformanceresultsfortheportfoliomanagers. C) thehighratesofreturnearnedbythemutualfundsinrecentyearshavemadethemeasuresuseless. D) AandB. E) noneoftheabove.Answer:DDifficulty:Moderate Rationale:Cisnottruebecausetheoverallmarkethasperformedextremelywellintherecentyearsofmutualfundgrowthandpositiveperformance.Infact,thefundshavegrownandperformedwellbecauseofthesustainedmarketrally,andstilldonotshowsuperiorperformancewhencomparedtothemarket. 57. TheSharpe,Treynor,andJensenportfolioperformancemeasuresarederivedfromtheCAPM, A) therefore,itdoesnotmatterwhichmeasureisusedtoevaluateaportfoliomanager. B) however,theSharpeandTreynormeasuresusedifferentriskmeasures,thereforethemeasuresvaryastowhetherornottheyareappropriate,dependingontheinvestmentscenario. C) therefore,allmeasurethesameattributes. D) AandB. E) noneoftheabove.Answer:BDifficulty:Moderate Rationale:TheSharpemeasureusesstandarddeviation,ortotalrisk,astheriskmeasure;theTreynormeasureusesbeta,orsystematicrisk,astheriskmeasure.

58. TheJensenportfolioevaluationmeasure A) isameasureofreturnperunitofrisk,asmeasuredbystandarddeviation. B) isanabsolutemeasureofreturnoverandabovethatpredictedbytheCAPM. C) isameasureofreturnperunitofrisk,asmeasuredbybeta. D) AandB. E) BandC.Answer:BDifficulty:Moderate Rationale:AistheSharpemeasure,CistheTreynormeasure. 59. TheM-squaredmeasure A) considersonlythereturnwhenevaluatingmutualfunds. B) considerstherisk-adjustedreturnwhenevaluatingmutualfunds. C) considersonlythetotalriskwhenevaluatingmutualfunds. D) considersonlythemarketriskwhenevaluatingmutualfunds. E) noneoftheabove.Answer:BDifficulty:Moderate Rationale:TheM-squaredmeasureadjuststhefundbyhypotheticallyborrowingorlendinguntilthetotalportfoliomatchestherisklevelofanindex,thenranksthefundonthebasisofthisrisk-adjustedreturn.. 60. Thedollar-weightedreturnonaportfolioisequivalentto A) thetime-weightedreturn. B) thegeometricaveragereturn. C) thearithmeticaveragereturn. D) theportfolio'sinternalrateofreturn. E) noneoftheabove.Answer:DDifficulty:Easy Rationale:Thedollar-weightedreturnonaportfolioisequivalenttofindingtheinternalrateofreturnonthecashflowstotheportfolio.

61. Aportfoliomanager'srankingwithinacomparisonuniversemaynotprovideagoodmeasureofperformancebecause A) portfolioreturnsmaynotbecalculatedinthesameway. B) portfoliodurationscanvaryacrossmanagers. C) ifmanagersfollowaparticularstyleorsubgroup,portfoliosmaynotbecomparable. D) bothBandC. E) alloftheabove.Answer:DDifficulty:Moderate Rationale:Returnsaretypicallytime-weightedforallportfoliosandbroadriskclassesorstylesaregroupedtogether,butparticularsubgroupsanddifferencesindurationaretypicallynotconsidered. 62. Thegeometricaveragerateofreturnisbasedon A) themarket'svolatility. B) theconceptofexpectedreturn. C) thestandarddeviationofreturns. D) theCAPM E) theprincipleofcompounding.Answer:EDifficulty:Easy Rationale:Thegeometricaverageistheratethatwouldgivethesameresultifappliedoverann-yearperiodastheindividualyears’returns.Thepresentvaluecanbecompoundedbyr1,r2,…,rnorcompoundedbyrGfornperiodstoyieldthesamefuturevalue. 63. TheM2measurewasdevelopedby A) MertonandMiller. B) MillerandMiller. C) ModiglianiandMiller. D) ModiglianiandModigliani. E) theM&MMarsCompany.Answer:DDifficulty:Easy Rationale:ThemodelwasdevelopedbyLeahModig