PORTFOLIO MANAGEMENT EXAMINATION QUESTIONS AND CORRECT ANSWER WITH EXPLANATION GRADED A+ STUDY GUIDE

PORTFOLIO MANAGEMENT EXAMINATION QUESTIONS
AND CORRECT ANSWER WITH EXPLANATION GRADED
A+ STUDY GUIDE SOUTHERN NEW HAMPSHIRE
UNIVERSITY
1. Portfolio management involves:
A. Managing a collection of investments
B. Manufacturing goods
C. Tax collection
D. Marketing products
Answer: A
Rationale: It focuses on investment mix management.

2. A portfolio is:
A. A group of financial assets
B. A single stock
C. A bank account only
D. A loan
Answer: A
Rationale: Combination of investments.

3. The main goal of portfolio management is to:
A. Maximize returns at acceptable risk
B. Eliminate all risk
C. Avoid investment
D. Increase taxes
Answer: A
Rationale: Balance risk and return.

4. Risk in portfolio management refers to:
A. Uncertainty of returns
B. Guaranteed profit
C. Tax rate
D. Inflation only
Answer: A
Rationale: Variability of outcomes.

,5. Return is:
A. Gain or loss from investment
B. Tax payment
C. Loan amount
D. Expense
Answer: A
Rationale: Investment outcome.

6. Diversification means:
A. Spreading investments across assets
B. Investing in one asset
C. Avoiding markets
D. Saving cash only
Answer: A
Rationale: Risk reduction strategy.

7. Systematic risk is:
A. Market-wide risk
B. Company-specific risk
C. Operational error
D. Fraud risk
Answer: A
Rationale: Cannot be diversified away.

8. Unsystematic risk is:
A. Firm-specific risk
B. Market risk
C. Inflation risk
D. Interest risk
Answer: A
Rationale: Diversifiable risk.

9. Expected return is:
A. Weighted average of possible returns
B. Guaranteed profit
C. Tax return
D. Loan interest
Answer: A
Rationale: Probabilistic average.

, 10. Standard deviation measures:
A. Portfolio risk
B. Profit only
C. Tax rate
D. Revenue
Answer: A
Rationale: Volatility indicator.

11. Variance measures:
A. Spread of returns
B. Profit
C. Cash flow
D. Debt
Answer: A
Rationale: Risk measure.

12. Correlation shows:
A. Relationship between asset returns
B. Profit level
C. Tax rate
D. Inflation
Answer: A
Rationale: Asset movement relationship.

13. Positive correlation means:
A. Assets move in same direction
B. Opposite movement
C. No relation
D. Fixed returns
Answer: A
Rationale: Same direction movement.

14. Negative correlation means:
A. Assets move opposite
B. Same movement
C. No risk
D. Fixed price
Answer: A
Rationale: Risk reduction.