©BRAINBARTER 2024/2025
Investments Chapter 13 Exam Questions
With Verified Answers.
Which one of the following assesses the ability of a money manager to balance high returns with
an acceptable level of risk? - answer✔D. Performance evalutation
The unadjusted total percentage return on a security that has not been compared to any
benchmark is referred to as which one of the following? - answer✔A. raw return
The risk premium of a portfolio divided by the portfolio's standard deviation defines which one
of the following performance measures? - answer✔D. Sharpe ratio
Which one of the following is computed by dividing a portfolio's risk premium by the portfolio
beta? - answer✔E. Treynor ratio
Which one of the following measures a portfolio's raw return against the expected return based
on the Capital Asset Pricing Model? - answer✔C. Jensen's alpha
Which one of the following concerns a money manager's control over investment risks,
particularly potential short-run losses? - answer✔C. Investment risk management
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? - answer✔E. Value-at-Risk
Which one of the following is a statistical model, defined by its mean and standard deviation,
that is used to assess probabilities? - answer✔B. normal distribution
Which one of the following measures a security's return in relation to the total risk associated
with that security? - answer✔C. Sharpe ratio
The Sharpe ratio measures a security's return relative to which one of the following? -
answer✔A. total risk
The Sharpe ratio is best used to evaluate which one of the following? - answer✔E. diversified
portfolios
Which one of the following measures returns in relation to total risk? - answer✔B. Sharpe ratio
, ©BRAINBARTER 2024/2025
Which one of the following values would be the most preferable as a Sharpe ratio? - answer✔E.
1.02
Which one of the following measures risk premium in relation to systematic risk? - answer✔E.
Treynor ratio
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? -
answer✔D. They earn identical rewards per unit of systematic risk.
You are comparing three assets which have differing Treynor ratios. Given this, which one of the
following must be true? - answer✔E. The preferred investment is the asset with the highest
Treynor ratio.
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? -
answer✔E. the highest positive alpha
Which one of the following statements is correct in relation to a security that has a negative
Jensen's alpha? - answer✔A. The security is overpriced and will plot below the security market
line.
Which one of the following is the best indication that a security is correctly priced according to
the Capital Asset Pricing Model? - answer✔C. alpha of zero
Tony brags that his portfolio's rate of return is "beating the market". Which one of the following
would best substantiate his claim? - answer✔C. positive Jensen's alpha
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 - answer✔A. I only
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 - answer✔D. II and III only
Investments Chapter 13 Exam Questions
With Verified Answers.
Which one of the following assesses the ability of a money manager to balance high returns with
an acceptable level of risk? - answer✔D. Performance evalutation
The unadjusted total percentage return on a security that has not been compared to any
benchmark is referred to as which one of the following? - answer✔A. raw return
The risk premium of a portfolio divided by the portfolio's standard deviation defines which one
of the following performance measures? - answer✔D. Sharpe ratio
Which one of the following is computed by dividing a portfolio's risk premium by the portfolio
beta? - answer✔E. Treynor ratio
Which one of the following measures a portfolio's raw return against the expected return based
on the Capital Asset Pricing Model? - answer✔C. Jensen's alpha
Which one of the following concerns a money manager's control over investment risks,
particularly potential short-run losses? - answer✔C. Investment risk management
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? - answer✔E. Value-at-Risk
Which one of the following is a statistical model, defined by its mean and standard deviation,
that is used to assess probabilities? - answer✔B. normal distribution
Which one of the following measures a security's return in relation to the total risk associated
with that security? - answer✔C. Sharpe ratio
The Sharpe ratio measures a security's return relative to which one of the following? -
answer✔A. total risk
The Sharpe ratio is best used to evaluate which one of the following? - answer✔E. diversified
portfolios
Which one of the following measures returns in relation to total risk? - answer✔B. Sharpe ratio
, ©BRAINBARTER 2024/2025
Which one of the following values would be the most preferable as a Sharpe ratio? - answer✔E.
1.02
Which one of the following measures risk premium in relation to systematic risk? - answer✔E.
Treynor ratio
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? -
answer✔D. They earn identical rewards per unit of systematic risk.
You are comparing three assets which have differing Treynor ratios. Given this, which one of the
following must be true? - answer✔E. The preferred investment is the asset with the highest
Treynor ratio.
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? -
answer✔E. the highest positive alpha
Which one of the following statements is correct in relation to a security that has a negative
Jensen's alpha? - answer✔A. The security is overpriced and will plot below the security market
line.
Which one of the following is the best indication that a security is correctly priced according to
the Capital Asset Pricing Model? - answer✔C. alpha of zero
Tony brags that his portfolio's rate of return is "beating the market". Which one of the following
would best substantiate his claim? - answer✔C. positive Jensen's alpha
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 - answer✔A. I only
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 - answer✔D. II and III only
