27. To maximize her expected utility, which one of the following investment
alternatives would she choose?
A) A portfolio that pays 10 percent with a 60 percent probability or 5 percent
with 40 percent probability.
B) A portfolio that pays 10 percent with 40 percent probability or 5 percent
with a 60 percent probability.
C) A portfolio that pays 12 percent with 60 percent probability or 5 percent
with 40 percent probability.
D) A portfolio that pays 12 percent with 40 percent probability or 5 percent
with 60 percent probability.
E) none of the above.
28. A portfolio has an expected rate of return of 0.15 and a standard deviation of
0.15. The risk-free rate is 6 percent. An investor has the following utility
function: $U = E(r) - (A/2)\sigma^2$. Which value of A makes this investor
indifferent between the risky portfolio and the risk-free asset?
A) 5
B) 6
C) 7
D) 8
E) none of the above
29.Proponents of the EMH think technical analysts
A) should focus on relative strength.
B) should focus on resistance levels.
C) should focus on support levels.
D) should focus on financial statements.
E) are wasting their time.
30.A common strategy for passive management is ________
A) creating an index fund
B) creating a small firm fund
C) creating an investment club
D) A and C
E) B and C
31.A market decline of 23% on a day when there is no significant macroeconomic
consistent with the EMH because ________
event
A) would be, it was a clear response to macroeconomic news.
B) would be, it was not a clear response to macroeconomic news.
C) would not be, it was a clear response to macroeconomic news.
D) would not be, it was not a clear response to macroeconomic news.
E) none of the above.
