Question 1ai)

Please choose one answer out of the four.

The asset class that is most likely to perform best when inflation is greater than expected is:

-medium-term bonds.

-equity.

-long-term bonds.

-real estate.

Question 1aii)

Please choose one answer out of the four.

Consider the following portfolios:

Portfolio	Return	Standard deviation
1	13%	24%
2	12%	18%
3	11%	19%
4	10%	16%

If the investors risk aversion coefficient is 1.50, the portfolio that would maximise her expected utility is:

-portfolio 3.

-portfolio 4.

-portfolio 2.

-portfolio 1.

Question 1aiii)

Based on mean-variance portfolio theory, the capital allocation line is the combination of the risk-free asset and a portfolio of all:

-risky assets.

-equity securities.

-feasible investments.

-fixed-income securities.

Question 1aiv)

Please choose one answer out of the four.

In defining asset classes as part of the strategic asset allocation decision, pairwise correlations within asset classes should generally be:

-lower than correlations among asset classes.

-higher than correlations among asset classes.

-equal to correlations among asset classes.

-as low as possible.

Question 1av)

Please choose one answer out of the four.

Typically, an investor with a critical need for intermediate-term, recurrent income should increase his portfolio allocation to:

-Non-investment grade bonds

-Treasury bonds

-Private equity

-Treasury bills