Test Banks for Portfolio Construction, Management, & Prtection

Chapter One

The Process of Portfolio Management

B 1. Classical security analysis is sometimes called

a. ABC analysis

b. EIC analysis

c. GBY analysis

d. CPI analysis

C 2. The modern trend in investments is to ______ security analysis and ______ portfolio management.

a. emphasize, emphasize

b. emphasize, de-emphasize

c. de-emphasize, emphasize

d. de-emphasize, de-emphasize

B 3. Portfolio management is primarily concerned with

a. increasing return

b. reducing risk

c. predicting the future

d. explaining the past

D 4. Most of the academic literature of the past two decades has supported the

a. arbitrage pricing theory

b. benefits of high PE stocks

c. usefulness of stock charts

d. efficient markets paradigm

A 5. “The lower the dispersion in returns, the greater the accumulated value of otherwise equal investments.” This statement is

a. true

b. false

c. true for the short run, but not necessarily true for the long run

d. true for the long run, but not necessarily true for the short run

D 6. ______ is cheap in the investment business.

a. Risk

b. Return

c. Time

d. Talk

A 7. Which of the following is a key concept in finance?

a. A dollar today is worth more than a dollar tomorrow

b. Regardless of anything else, the higher the stock price, the better

c. Regardless of anything else, the lower the risk, the better

d. Risk averse people will not take a risk

B 8. Understanding ______ is essential to bond portfolio management.

a. convexity

b. duration

c. semi-variance

d. bond betas

C 9. According to the book, the first step in portfolio management is...