Financial Management - Study Mode
[#1001] A curve which shows attitude towards risk just way reflected in return trade-off function is classified as
Correct Answer
(B) indifference curve
Explanation
Solution: A curve which shows attitude towards risk just way reflected in return trade-off function is classified as indifference curve. An indifference curve is a graph that shows a combination of two goods that give a consumer equal satisfaction and utility, thereby making the consumer indifferent.
[#1002] In capital market line, risk of efficient portfolio is measured by its
Correct Answer
(A) standard deviation
Explanation
Solution: In capital market line, risk of efficient portfolio is measured by its standard deviation. The standard deviation is a statistic that measures the dispersion of a dataset relative to its mean and is calculated as the square root of the variance.
[#1003] Formula written as 0.67(Historical Beta) + 0.35(1.0) is used to calculate
Correct Answer
(B) adjusted betas
Explanation
Solution: Formula written as 0.67(Historical Beta) + 0.35(1.0) is used to calculate adjusted betas. The Adjusted Beta is an estimate of a security's future Beta. Adjusted Beta is initially derived from historical data, but modified by the assumption that a security's true Beta will move towards the market average, of 1, over time.
[#1004] A model which regresses return of stock against return of market is classified as
Correct Answer
(B) market model
Explanation
Solution: A model which regresses return of stock against return of market is classified as market mode.
[#1005] According to capital asset pricing model assumptions, quantities of all assets are
Correct Answer
(A) given and fixed
Explanation
Solution: According to capital asset pricing model assumptions, quantities of all assets are given and fixed. The Capital Asset Pricing Model (CAPM) measures the risk of a security in relation to the portfolio. It considers the required rate of return of a security in the light of its contribution to total portfolio risk.