CPFM Investment Portfolio Management 2

Question 1

What does the Sharpe ratio measure in a portfolio?

Accepted Answer

Risk-adjusted excess return per unit of total risk

Answer

Total return only

Answer

Dividend yield

Answer

Portfolio turnover

Question 2

Diversification primarily reduces which type of risk?

Accepted Answer

Unsystematic (specific) risk

Answer

Systematic (market) risk

Answer

Inflation risk

Answer

Interest rate risk

Question 3

In the Capital Asset Pricing Model, beta measures a security's:

Accepted Answer

Sensitivity to market movements

Answer

Total volatility

Answer

Dividend payout

Answer

Liquidity

Question 4

What is the main goal of strategic asset allocation?

Accepted Answer

Setting long-term target weights based on objectives and risk tolerance

Answer

Timing short-term market swings

Answer

Maximizing trading frequency

Answer

Avoiding all equities

Question 5

An efficient portfolio on the efficient frontier offers:

Accepted Answer

The highest expected return for a given level of risk

Answer

The lowest possible return

Answer

Zero risk

Answer

Maximum turnover

Question 6

Rebalancing a portfolio involves:

Accepted Answer

Realigning weights back to target allocations

Answer

Selling all holdings annually

Answer

Buying only the best performer

Answer

Eliminating bonds

Question 7

Which metric measures return per unit of systematic risk?

Accepted Answer

Treynor ratio

Answer

Sharpe ratio

Answer

Standard deviation

Answer

Current ratio