EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Question
Chapter 24, Problem 13CP
A
Summary Introduction
To think critically about: Unbiased nature of the median benchmark over the period of time.
Introduction: After a period of time benchmark becomes biased in nature to measure the performance of managers.
B
Summary Introduction
To think critically about: Unambiguous nature of the benchmark to adopt a passive approach.
Introduction: The median manager is ambiguous in nature. It gives identification after the performance evaluation.
C
Summary Introduction
To think critically about: Appropriateness of the benchmark in all circumstances.
Introduction: Benchmarks are not appropriate in all conditions. They are steady in nature while giving the manager’s style.
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For researchers to consider an investment strategy to have delivered abnormal returns, it must have exceeded the return on its benchmark plus:
the return on the risk-free asset.
transaction costs and the highest marginal income tax rate.
transaction costs and information acquisition costs.
All of the above answers are correct.
None of the above answers are correct.
The following is a disadvantage of ARR investment appraisal method (select one):
A.
multiple or no solutions
B.
does not take into account time value of money
C.
easy to explain
D.
management performance is rarely evaluated based on ARR
Which of the following statements is TRUE about risk-free investment?
a. Return in risk-free investment is high, but the investment manager charges a fee for the guarantee.
b. It always provides inconsistent return as consistent return requires higher risk
c. It provides lower returns as higher return requires higher risk.
Chapter 24 Solutions
EBK INVESTMENTS
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