Risk & Return - MCQs with answers

Risk & Return - MCQs with answers


1. Risk of two securities with different expected return can be compared with:

a) Coefficient of variation
b) Standard deviation of securities
c) Variance of Securities
d) None of the above

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ANSWER: a) Coefficient of variation



2. A portfolio having two risky securities can be turned risk less if

a) The securities are completely positively correlated
b) If the correlation ranges between zero and one
c) The securities are completely negatively correlated
d) None of the above.

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ANSWER: c) The securities are completely negatively correlated



3. Efficient frontier comprises of

a) Portfolios that have negatively correlated securities
b) Portfolios that have positively correlated securities
c) Inefficient portfolios
d) Efficient portfolios

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ANSWER: d) Efficient portfolios



4. Efficient portfolios can be defined as those portfolios which for a given level of risk provides

a) Maximum return
b) Average return
c) Minimum return
d) None of the above

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ANSWER: a) Maximum return



5. Capital market line is:

a) Capital allocation line of a market portfolio
b) Capital allocation line of a risk free asset
c) Both a and b
d) None of the above

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ANSWER: c) Both a and b



6. CAPM accounts for:

a) Unsystematic risk
b) Systematic risk
c) Both a and b
d) None of the above

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ANSWER: b) Systematic risk



7. The point of tangency between risk return indifferences curves and efficient frontier highlights:

a) Optimal portfolio
b) Efficient portfolio
c) Sub-optimal portfolio
d) None of the above

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ANSWER: a) Optimal portfolio



8. A portfolio comprises two securities and the expected return on them is 12% and 16% respectively. Determine return of portfolio if first security constitutes 40% of total portfolio.

a) 12.4%
b) 13.4%
c) 14.4%
d) 15.4%

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ANSWER: c) 14.4%



9. A risk free security has zero variance.

a) True
b) False

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ANSWER:



10. Return on any financial asset consists of capital yield and current yield.

a) True
b) False

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ANSWER: a) True



11. There is no difference between the capital market line and security market line as both the terms are same.

a) True
b) False

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ANSWER: b) False


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