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Question 1 of 10
1. Question
What is the standard measure of total risk?
Correct
The standard measure of total risk is variance; this is the measure of the dispersion of returns around the expected return. Semivariance, on the other hand, is a measure of downside risk, the dispersion of returns that occur below a certain target return.
Incorrect
The standard measure of total risk is variance; this is the measure of the dispersion of returns around the expected return. Semivariance, on the other hand, is a measure of downside risk, the dispersion of returns that occur below a certain target return.
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Question 2 of 10
2. Question
How are the risk and the standard deviation related to each other?
Correct
Standard deviation is the measure of the variability of returns of an asset compared with the mean or expected value of that asset. It is a measure of total risk: the larger the dispersion around some mean value, the greater the risk and the larger the standard deviation.
Incorrect
Standard deviation is the measure of the variability of returns of an asset compared with the mean or expected value of that asset. It is a measure of total risk: the larger the dispersion around some mean value, the greater the risk and the larger the standard deviation.
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Question 3 of 10
3. Question
The measure of the variability of returns of an asset compared with the mean or expected value of that asset is called:
Correct
Standard deviation is the measure of the variability of returns of an asset compared with the mean or expected value of that asset. It is a measure of total risk: the larger the dispersion around some mean value, the greater the risk and the larger the standard deviation.
Incorrect
Standard deviation is the measure of the variability of returns of an asset compared with the mean or expected value of that asset. It is a measure of total risk: the larger the dispersion around some mean value, the greater the risk and the larger the standard deviation.
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Question 4 of 10
4. Question
How do we calculate the standard deviation given a certain number of observations?
Correct
In order to calculate the historical standard deviation for a given security, take the difference between the individual observation and the average return, square the difference, and then sum the squared differences. For a sample with a certain number of observations, then, divide the sum by one less than the total number of observations and then take the square root.
Incorrect
In order to calculate the historical standard deviation for a given security, take the difference between the individual observation and the average return, square the difference, and then sum the squared differences. For a sample with a certain number of observations, then, divide the sum by one less than the total number of observations and then take the square root.
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Question 5 of 10
5. Question
What is a measure of relative dispersions?
Correct
The coefficient of variation is a measure of relative dispersions (unlike standard deviation, which is the measure of absolute dispersions). The coefficient of variation can be calculated by dividing the standard deviation by the mean.
Incorrect
The coefficient of variation is a measure of relative dispersions (unlike standard deviation, which is the measure of absolute dispersions). The coefficient of variation can be calculated by dividing the standard deviation by the mean.
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Question 6 of 10
6. Question
What is a measure of absolute dispersions?
Correct
The coefficient of variation is a measure of relative dispersions (unlike standard deviation, which is the measure of absolute dispersions). The coefficient of variation can be calculated by dividing the standard deviation by the mean.
Incorrect
The coefficient of variation is a measure of relative dispersions (unlike standard deviation, which is the measure of absolute dispersions). The coefficient of variation can be calculated by dividing the standard deviation by the mean.
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Question 7 of 10
7. Question
How do we calculate the coefficient of variation?
Correct
The coefficient of variation is a measure of relative dispersions (unlike standard deviation, which is the measure of absolute dispersions). The coefficient of variation can be calculated by dividing the standard deviation by the mean.
Incorrect
The coefficient of variation is a measure of relative dispersions (unlike standard deviation, which is the measure of absolute dispersions). The coefficient of variation can be calculated by dividing the standard deviation by the mean.
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Question 8 of 10
8. Question
What does the beta coefficient of 1.0 indicate?
Correct
The beta coefficient is the most common measure of systematic risk. It is generally used for analyzing a diversified portfolio. A well- diversified portfolio will only contain systematic risk, and so the beta coefficient can be described as the measure of volatility for a diversified portfolio. A beta of 1.0 indicates that the stock is moving exactly with the market; anything higher indicates that the stick is more risky than the market, and anything less indicates that the stock is less risky than the market.
Incorrect
The beta coefficient is the most common measure of systematic risk. It is generally used for analyzing a diversified portfolio. A well- diversified portfolio will only contain systematic risk, and so the beta coefficient can be described as the measure of volatility for a diversified portfolio. A beta of 1.0 indicates that the stock is moving exactly with the market; anything higher indicates that the stick is more risky than the market, and anything less indicates that the stock is less risky than the market.
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Question 9 of 10
9. Question
Identify the major composite performance measures:
I. Treynor Index
II. Sharpe Index
III. Jensen Index
IV. Jassy IndexCorrect
The major composite performance measures are the Treynor index, the Sharpe index, and the Jensen index. These indices are used to see whether a given stock actually beat the market.
Incorrect
The major composite performance measures are the Treynor index, the Sharpe index, and the Jensen index. These indices are used to see whether a given stock actually beat the market.
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Question 10 of 10
10. Question
What are the perpetuities of capitalisation?
I. Debt
II. Earnings
III. Liabilities
IV. DividendsCorrect
Capitalisation treats both earnings and dividends as perpetuities.
Incorrect
Capitalisation treats both earnings and dividends as perpetuities.