A risk-averse investor can borrow or lend at a risk-free rate of
3%. Which of the following risky portfolios would the investor
combine with the risk-free asset to maximise their utility?
a.
Portfolio C: Expected return = 6%, Standard Deviation = 10%
b.
Portfolio A: Expected return = 4%, Standard Deviation = 3%
c.
More information is required
d.
Portfolio B: Expected return = 5%, Standard Deviation = 7%
Which of the following is a benefit of diversification?
a.
Systematic risk is generally reduced as you add more stocks to
your portfolio
b.
All choices are TRUE
c.
Total risk is generally reduced as you add more stocks to your
portfolio
d.
Returns generally increase as you add more stocks to your
portfolio
Which of the following asset allocations would be most
appropriate for an investor who is 28 years old and works
full-time?
a.
Listed Equity = 50%, Fixed Income = 20%, Cash = 5%, Property =
25%
b.
Listed Equity = 10%, Fixed Income = 5%, Cash = 80%, Property =
5%
c.
Listed Equity = 100%, Fixed Income = 0%, Cash = 0%, Property =
0%
d.
Listed Equity = 20%, Fixed Income = 40%, Cash = 20%, Property =
20%
Four assets, A, B, C and D have the following risk and return.
Return(A) = 5%, Risk(A) = 5%, Return(B) = 8%, Risk(B) = 5%,
Return(C) = 5%, Risk(C) = 4%, Return(D) = 8%, Risk(D) = 6%. Which
of the following statements about preferences for a risk-averse
investor are correct?
a.
B is preferred to A, B is preferred to D, C is preferred to
A
b.
B is preferred to D, C is preferred to A, D is preferred to
C
c.
B is preferred to A, C is preferred to D, D is preferred to
A
d.
B is preferred to C, B is preferred to D, C is preferred to
A
Consider three assets, HVN, QAN and RIO. All three assets have
the same correlation with each other of 0.1. HVN has an expected
return of 5% and a standard deviation of 6%. QAN has an expected
return of 7% and a standard deviation of 8%. RIO has an expected
return of 8% and a standard deviation of 10%. Which of the
following combinations of stocks will provide the best risk-return
outcome for a risk-averse investor?
a.
RIO and HVN
b.
RIO
c.
RIO and QAN
d.
RIO, QAN and HVN