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QUESTION 40 A portfolio generates an annual return of 16%, a beta of 1.2, and a standard deviation of 19%. The market index return is

QUESTION 40

  1. A portfolio generates an annual return of 16%, a beta of 1.2, and a standard deviation of 19%. The market index return is 12% and has a standard deviation of 16%. What is Jensen's alpha of the portfolio if the risk-free rate is 6%?

A.

0.017

B.

0.036

C.

0.028

D.

0.078

1.82 points

QUESTION 41

  1. The clearing corporation has a net position equal to ________.

A.

the open interest

B.

zero

C.

the open interest times 2

D.

the open interest divided by 2

1.82 points

QUESTION 42

  1. A manager is holding a $1.0 million bond portfolio with a modified duration of eight years. She would like to hedge the risk of the portfolio by short-selling Treasury bonds. The modified duration of T-bonds is 10 years. How many dollars' worth of T-bonds should she sell to minimize the risk of her position?

A.

$800,000 of T- bonds

B.

$300,000 of T- bonds

C.

$500,000 of T- bonds

D.

$100,000 of T- bonds

1.82 points

QUESTION 43

  1. The S&P 500 Index futures contract is an example of a(n) ________ delivery contract. The pork bellies contract is an example of a(n) ________ delivery contract.

A.

actual; cash

B.

cash; actual

C.

actual; actual

D.

cash; cash

1.82 points

QUESTION 44

  1. When we compare a fund with its benchmark index, the interpretation becomes more intuitive if we use M2 rather than the Sharpe ratio because ______.

A.

it shows the difference in return when portfolio variance is the same as market variance

B.

M2 uses excess return instead of average return

C.

M2 uses systematic risk instead of total risk

D.

it shows the difference in variance when portfolio return is the same as market return

1.82

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