1 Stop-loss/sell orders often accompany short sales and are used to limit potential losses from the short position. (10points)

a. True

b. False

2) You sell short 100 shares of XYZ stock at $20 per share from your broker. If the initial margin is 60%, the amount you post on the short sale is $800. (10points)

a. True

b. False

3) Both margin trading and short sale are appropriate for speculative institutional investors, not for risk-averse retail investors. (10points)

a. True

b. False

4.Even if the markets are efficient, professional portfolio management is still important because it provides investors with low-cost diversification and a portfolio with a specified risk level (10points)

a. True

b. False

5) Passive Investment strategy is inexpensive and simple but it requires security analysis. (10points)

a. True

b. False

11) As the correlation between two stocks changes, the shape of investment opportunity set will not change. (10points)

a. True

b. False

6) CAL (Capital Allocation Line) connects the risk-free rate and a risky portfolio while CML (Capital Market Line) links the minimum-variance portfolio and the market portfolio. (10points)

a. True

b. False

7.You have $500,000 available to invest. The risk-free rate, as well as your borrowing rate, is 8%. The return on the risky portfolio is 10%. If you wish to earn a 20% return, you should borrow your money at the risk-free rate. (10points)

a. True

b. False

8. The efficient frontier represents a set of portfolios that minimize expected return for a given level of risk. (10points)

a. True

b. False