Financial Management - Study Mode

[#581] A high portfolio return is subtracted from low portfolio return to calculate
Correct Answer

(A) HML portfolio

Explanation

Solution: A high portfolio return is subtracted from low portfolio return to calculate HML portfolio. HML is one of three factors in the original Fama and French's Three-Factor model, which is often used to evaluate a portfolio manager's returns.

[#582] Second step in determining efficient portfolios is to consider efficient subset from set of
Correct Answer

(A) attainable portfolios

Explanation

Solution: Second step in determining efficient portfolios is to consider efficient subset from set of attainable portfolios. The feasible, or attainable, set represents all portfolios that can be constructed from a given set of stocks. This set is only efficient for part of its combinations. An efficient portfolio is that portfolio which provides the highest expected return for any degree of risk.

[#583] If market value is greater than book value then investors for future stock are considered as
Correct Answer

(D) optimistic

Explanation

Solution: If market value is greater than book value then investors for future stock are considered as optimistic.

[#584] According to capital asset pricing model assumptions, investors will borrow unlimited amount of capital at any given
Correct Answer

(B) risk free rate of interest

Explanation

Solution: According to capital asset pricing model assumptions, investors will borrow unlimited amount of capital at any given risk free rate of interest. The risk-free interest rate is the rate of return of a hypothetical investment with no risk of financial loss, over a given period of time.

[#585] Financial Leverage measures relationship between:
Correct Answer

(B) EBIT and EPS