Portfolio Management MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Portfolio Management, a fundamental topic in the field of IC 89 Management Accounting. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Portfolio Management MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of Portfolio Management mcq questions that explore various aspects of Portfolio Management problems. Each MCQ is crafted to challenge your understanding of Portfolio Management principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC 89 Management Accounting tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Portfolio Management MCQs are your pathway to success in mastering this essential IC 89 Management Accounting topic.

Note: Each of the following question comes with multiple answer choices. Select the most appropriate option and test your understanding of Portfolio Management. You can click on an option to test your knowledge before viewing the solution for a MCQ. Happy learning!

So, are you ready to put your Portfolio Management knowledge to the test? Let's get started with our carefully curated MCQs!

Portfolio Management MCQs | Page 4 of 10

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Q31.
What are the three levels of market efficiency in the Efficient Market Theory?

a.

Weak-form efficiency, Strong-form efficiency, Predictive efficiency

b.

Semi-strong form efficiency, Predictive efficiency, Absolute efficiency

c.

Weak-form efficiency, Semi-strong form efficiency, Strong-form efficiency

d.

Predictive efficiency, Absolute efficiency, Inefficient market

Discuss
Answer: (c).Weak-form efficiency, Semi-strong form efficiency, Strong-form efficiency Explanation:The three levels of market efficiency in the Efficient Market Theory are Weak-form efficiency, Semi-strong form efficiency, and Strong-form efficiency.
Q32.
Who proposed the Markowitz Model of risk-return optimization in portfolio theory?

a.

Harry Markowitz

b.

John Maynard Markowitz

c.

Benjamin Markowitz

d.

Warren Markowitz

Discuss
Answer: (a).Harry Markowitz Explanation:The Markowitz Model of risk-return optimization in portfolio theory was proposed by Harry Markowitz in the 1950s.
Q33.
How is the Portfolio Expected Return (E(RP)) calculated in terms of individual securities?

a.

It is the average of the expected returns of individual securities

b.

It is the sum of the expected returns of individual securities

c.

It is the weighted average of the expected returns of individual securities

d.

It is the maximum of the expected returns of individual securities

Discuss
Answer: (c).It is the weighted average of the expected returns of individual securities Explanation:The Portfolio Expected Return is calculated as the weighted average of the expected returns of individual securities in the portfolio.
Q34.
How is Portfolio Risk measured in terms of the variance or standard deviation of its return?

a.

By the sum of variances of individual securities

b.

By the average variance of individual securities

c.

By the variance of the portfolio's expected return

d.

By the variance or standard deviation of the portfolio's return

Discuss
Answer: (d).By the variance or standard deviation of the portfolio's return Explanation:Portfolio Risk is measured by the variance or standard deviation of its return, similar to the measurement of individual security risk.
Q35.
What does the Capital Asset Pricing Model (CAPM) predict the relationship between?

a.

The risk of an asset and its dividend yield

b.

The risk of an asset and its expected return

c.

The risk of an asset and its market capitalization

d.

The risk of an asset and its book value

Discuss
Answer: (b).The risk of an asset and its expected return Explanation:The CAPM predicts the relationship between the risk of an asset and its expected return.
Q36.
What is the CAPM method primarily concerned with in terms of risk?

a.

Diversifiable risk

b.

Systematic risk

c.

Non-diversifiable risk

d.

Market risk

Discuss
Answer: (c).Non-diversifiable risk Explanation:The CAPM method is primarily concerned with non-diversifiable risk, which includes factors affecting all businesses.
Q37.
How are non-diversifiable risks assessed in the CAPM method?

a.

Through the standard deviation of individual securities

b.

Through the beta coefficient (B)

c.

Through the covariance of market returns

d.

Through the average variance of portfolios

Discuss
Answer: (b).Through the beta coefficient (B) Explanation:Non-diversifiable risks in the CAPM method are assessed through the beta coefficient (B) of a portfolio.
Q38.
What does the formula R = Rf + B (Rm - Rf) represent in the CAPM model?

a.

Portfolio Expected Return

b.

Market Rate of Return

c.

Risk-Free Rate

d.

Relationship between risk and expected return

Discuss
Answer: (d).Relationship between risk and expected return Explanation:The formula R = Rf + B (Rm - Rf) in the CAPM model represents the relationship between risk and expected return, where R is the expected return, Rf is the risk-free rate, B is the beta of a portfolio, and Rm is the market rate.
Q39.
What is one of the relevant assumptions of the Capital Asset Pricing Model (CAPM)?

a.

Investors have different time horizons

b.

There is no risk-free asset

c.

Information is not freely available to investors

d.

Investors make choices solely based on return

Discuss
Answer: (c).Information is not freely available to investors Explanation:One of the relevant assumptions of CAPM is that information is freely and simultaneously available to investors.
Q40.
What does the Security Market Line (SML) in CAPM represent?

a.

The relationship between risk and expected return

b.

The market imperfections in the financial market

c.

The inflation and money supply factors

d.

The relationship between risk and interest rate

Discuss
Answer: (a).The relationship between risk and expected return Explanation:The Security Market Line (SML) in CAPM represents the relationship between systematic risk and expected return.
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