2) Which of the following does Kurtosis measure?

A) Average (mean) of the return distribution

B) Average dispersion of the return distribution

C) Asymmetry of the return distribution

D) Fatness of the return distribution.

3. What are the values of skew and regular kurtosis of the actual historical stock return distribution, respectively?

A) Skew <0 ; kurtosis> 3

B) Skew =0 ; Kurtosis <= 3

C) Skew = 0 ; Kurtosis >3

D) Skew >0 ; Kurtosis <= 3

10. The optimal risky portfolio can be identified by finding

I. the minimum-variance point on the efficient frontier

II. The maximum-return point on the efficient frontier and the minimum-variance point on the efficient frontier.

III. The tangency point of the capital market line and the efficient frontier.

IV. The line with the steepest slope that connects the risk-free rate to the efficient frontier.

A) I and II only

B) II and III only

C) III and IV only

D) I and IV only

11. The _____ Sharpe ratio is found on the ____ capital market line.

A) lowest;steepest

B) lowest; flattest

C) Highest ; flattest

D) Highest ; Steepest

12. Which of the following provides the best example of a systematic -risk event?

A) a strike by union workers hurts a firm's quarterly earnings.

B) The Federal Reserve increases interest rates $0 basis points

C) Mad Cow disease in Montana hurts local ranchers and buyers of beef.

D) A senior executive at a firm embezzles $10 million and escapes to South Africa