1. On a standard expected return versus standard deviation graph, investors will prefer portfolios that line to the ………of the current investment opportunity set.
a. Left and above
b. Left and below
c. Right and above
d. Right and below
e. Center
2. The optimal risky portfolio can be identified finding:
I. The minimum-variance point on the efficient frontier
II. The maximum-return point on the efficient frontier and the minimum-variance point on the efficient frontier
III. The Tangency point of the capital market line and the efficient frontier
IV. The line with the steepest slope that connects the risk-free rate to the efficient frontier.
a. I & II only
b. II & III only
c. III & IV only
d. I & IV only
3. The……Sharpe ratio is found on the……capital market line
a. Lowest; steepest
b. Lowest; flattest
c. Highest; flattest
d. Highest; steepest
4. Which of the following provides the best example of a systematic-risk event?
a. A strike by union workers hurts a firm’s quarterly earnings
b. The Federal Reserve increase interest rate 50 basis points
c. Mad Cow disease in Montana hurts local ranchers and buyers of beef
d. A senior executive at a firm embezzles $10 million and escapes to South America