Diversification is greatest when asset returns are O uncorrelated O positively correlated O high O negatively correlated 4

Which of the following is false about diversification? Select one or more: a. diversification increases Sharpe ratios  b. diversification eliminates risk c. diversification increases returns d. diversification increases alpha

The excess return required on a risky asset over that earned on a risk-free asset is called (a): O Risk premium. Return premium. O Excess return. Average return. O Variance.

Which of the following statements true? I. All else equal, an increase in storage costs, decreases the value of the forward on an asset All else equal, an increase in convenience yield, decreases the value of the forward on an asset I. A) I. and II. are true B) I. is true and II. is false C) II. is true and I. is false D) I. and II. are false Win Win

How is can CAPM, Sharpe ratio, Treynor measures and Jensen’s Alpha be used to maintain positive return on assets?

If the rates of return of two assets tends to move in the same direction, they have a negative covariance and vice-versa? (4) a.false b. true

Intepretation of Beta: Beta measures the sensitivity of the asset's return to variation in the market return.    What is meant by that it emasures the sensitiviy of asset return to variation in the market return?

Which of the following is a justification framework for the mean-variance approach? a)if trading is continuous and asset prices follow a multi-dimensional geometric Brownian motion with drift.b)If the investors’ state-specific utility is an exponential function of the assets variance. c)If investors’ preferences for risk are inter-dependent and serially correlated with asset returns.d)If the returns of all assets follow the Mandelbrot distribution.

The Capital Asset Pricing Model (CAPM) asserts that an asset’s expected return is equal to the risk-free rate plus a risk premium for:   a. Volatility   b. Systematic risk   c. Non-systematic risk   d. Diversification   e. Marginal utility of consumption

Which of the following regression outcomes indicates the asset with the greatest total risk? • large beta, small R² • small beta, large R² • small beta, small R² large beta, large R² .