Saturday, June 25, 2016

Basic Principles of Finance and Risk Management first week QUIZ Solution

This course is created by Yale University on the website Coursera and
Taught by:    Robert Shiller, Sterling Professor of Economics at Yale University
Economics
Here is its complete solution

Basic Principles of Finance and Risk Management
10 questions

Q#1 What has been the average real return for short term governments in the United States historically?

a) 2.8 percent per annum

Q#2  If x dollars are invested in a risky asset and 1-x dollars are invested in a riskless asset what is the expected return on this portfolio?

b) xr1 + (1-x)rf; where r1 is the return of the risky asset and rf is the return of the riskless asset

Q#3  If x dollars are invested in a risky asset and 1-x dollars are invested in a riskless asset what is the variance of this portfolio?

d) x^2var(return1); where return1 is the return of the risky asset

Q#4 What is "diversification" within an investment portfolio according to professor Markowitz?

c) The more different kinds of assets you can put in, the lower you can get the standard deviation of your return, and so the better off you are

Q#5 What is a mutual fund?

c) investment company aimed at retail investors

Q#6 What does the mutual fund theory imply?

b) market portfolio equals the tangency portfolio

Q#7 What is the fundamental equation of the CAPM model?

d) ri = rf + βi(rm-rf)

Q#8 Which of the following statements are true of the Sharpe ratio?

d) it is constant along the tangency line

Q#9 According to Hank Greenberg, which of the following were factors that led to the last financial crisis?

b) huge amounts of leverage taken by investments banks

Q#10  What is Moral Hazard?

an expression that refers to undesired effects of insurance on people’s behavior




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