Investment Jobs Portfolio Analysis Test 2

Question 1

Which risk measure estimates the maximum potential loss in a portfolio over a given time period at a specified confidence level?

Accepted Answer

Value at Risk (VaR)

Answer

Standard deviation

Answer

Beta

Answer

Treynor ratio

Question 2

In the Capital Asset Pricing Model (CAPM), what does the security market line (SML) represent?

Accepted Answer

The relationship between systematic risk (beta) and expected return

Answer

The efficient frontier of risky assets

Answer

The correlation between two securities

Answer

The optimal portfolio combining the market and risk-free asset

Question 3

Which type of risk can be eliminated through diversification?

Accepted Answer

Unsystematic (idiosyncratic) risk

Answer

Systematic risk

Answer

Market risk

Answer

Interest rate risk

Question 4

A portfolio manager uses the Treynor ratio to evaluate performance. What risk measure does this ratio use?

Accepted Answer

Beta

Answer

Standard deviation

Answer

Semi-variance

Answer

Duration

Question 5

What is the primary purpose of portfolio rebalancing?

Accepted Answer

To restore the portfolio to its target asset allocation

Answer

To maximize short-term returns

Answer

To minimize transaction costs

Answer

To eliminate all risk from the portfolio

Question 6

Which analytical framework divides portfolio returns into asset allocation, security selection, and interaction effects?

Accepted Answer

Brinson-Hood-Beebower performance attribution

Answer

Markowitz mean-variance analysis

Answer

Black-Litterman model

Answer

Factor analysis