内容发布更新时间 : 2024/5/4 10:35:03星期一 下面是文章的全部内容请认真阅读。

73. The optimal proportion of the risky asset in the complete portfolio is given by the equation y* =

[E(rP) - rf]/(.01A times the variance of P). For each of the variables on the right side of the equation, discuss the impact of the variable's effect on y* and why the nature of the relationship makes sense intuitively. Assume the investor is risk averse.

74. You are evaluating two investment alternatives. One is a passive market portfolio with an

expected return of 10% and a standard deviation of 16%. The other is a fund that is actively managed by your broker. This fund has an expected return of 15% and a standard deviation of 20%. The risk-free rate is currently 7%. Answer the questions below based on this information.

a. What is the slope of the capital market line?

b. What is the slope of the capital allocation line offered by your broker's fund? c. Draw the CML and the CAL on one graph.

d. What is the maximum fee your broker could charge and still leave you as well off as if you had invested in the passive market fund? (Assume that the fee would be a percentage of the investment in the broker's fund and would be deducted at the end of the year.)

e. How would it affect the graph if the broker were to charge the full amount of the fee?

Chapter 06 Capital Allocation to Risky Assets Answer Key

Multiple Choice Questions 1.

Which of the following statements regarding risk-averse investors is true?

A. They only care about the rate of return.

B. They accept investments that are fair games.

C. They only accept risky investments that offer risk premiums over the risk-free rate.

D. They are willing to accept lower returns and high risk.

E. They only care about the rate of return, and they accept investments that are fair

games.

Risk-averse investors only accept risky investments that offer risk premiums over the risk-free rate.

AACSB: Analytic Blooms: Remember Difficulty: Intermediate Topic: Risk Aversion

2.

Which of the following statements is(are) true?

I) Risk-averse investors reject investments that are fair games.

II) Risk-neutral investors judge risky investments only by the expected returns. III) Risk-averse investors judge investments only by their riskiness. IV) Risk-loving investors will not engage in fair games.

A. I only

B. II only

C. I and II only

D. II and III only

E. II, III, and IV only

Risk-averse investors consider a risky investment only if the investment offers a risk premium. Risk-neutral investors look only at expected returns when making an investment decision.

AACSB: Analytic Blooms: Remember Difficulty: Intermediate Topic: Risk Aversion

3.

Which of the following statements is(are) false?

I) Risk-averse investors reject investments that are fair games.

II) Risk-neutral investors judge risky investments only by the expected returns. III) Risk-averse investors judge investments only by their riskiness. IV) Risk-loving investors will not engage in fair games.

A. I only

B. II only

C. I and II only

D. II and III only

E. III and IV only

Risk-averse investors consider a risky investment only if the investment offers a risk premium. Risk-neutral investors look only at expected returns when making an investment decision.

AACSB: Analytic Blooms: Remember Difficulty: Intermediate Topic: Risk Aversion

4. In the mean-standard deviation graph an indifference curve has a ________ slope.

A. negative

B. zero

C. positive

D. vertical

E. cannot be determined

The risk-return trade-off is one in which greater risk is taken if greater returns can be expected, resulting in a positive slope.

AACSB: Analytic Blooms: Remember

Difficulty: Basic

Topic: Risk Tolerance

5. In the mean-standard deviation graph, which one of the following statements is true regarding the indifference curve of a risk-averse investor?

A. It is the locus of portfolios that have the same expected rates of return and different

standard deviations.

B. It is the locus of portfolios that have the same standard deviations and different rates of

return.

C. It is the locus of portfolios that offer the same utility according to returns and standard

deviations.

D. It connects portfolios that offer increasing utilities according to returns and standard

deviations.

E. None of the options

Indifference curves plot trade-off alternatives that provide equal utility to the individual (in this case, the trade-offs are the risk-return characteristics of the portfolios).

AACSB: Analytic Blooms: Remember Difficulty: Intermediate Topic: Risk Tolerance