1. The Security Market Line shows the relationship between: (DEC 2019)

(a) Expected rate of return and beta

(b) Expected rate of return and diversifiable risk

(c) Required rate of return and unsystematic risk

(d) Realized rate of return and beta

2. Diversification can eliminate risk,if the securities of a portfolio are: (DEC 2019)

(a) Perfectly positively correlated

(b) Perfectly negatively correlated

(c) Weakly positively correlated

(d) Weakly negatively correlated

3. As you increase the number of stocks in a portfolio,the systematic risk is likely to: (DEC 2019)

(a) Remain constant

(b) Increase at a decreasing rate

(c) Decrease at a decreasing rate

(d) Decrease at an increasing rate

4. Mr. A is planning to buy a security and is in a dilemma regarding price to be paid. For this he is relying on the required rate of return on the security. Help him out to calculate the aforesaid rate (%),if you are informed that security’s standard deviation is 6%,correlation coefficient of the security with the market is 0.6,and market standard deviation is 5%. You may assume that return from risk-free security in the market is 8%,and return on market portfolio is 12%. (DEC 2019)

(a) 10.68%

(b) 10.88%

(c) 10.58%

(d) 10.78%

5. Consider a graph with standard deviation on the horizontal axis and expected return on the vertical axis. The line that connects the risk-free rate and the optimal risky portfolio is called: (DEC 2020)

(a) The indifference curve

(b) The security market line

(c) The capital market line

(d) The characteristic line

6. If the standard deviation of a portfolio return is 15% and risk tolerance level for the investor is 40. What will be the risk penalty for the investor? (DEC 2020)

(a) 4.5%

(b) 2.67%

(c) 6.32%

(d) 5.625%

7. Which of the following is the equation of the Security Market Line (SML)? (DEC 2020)

(a) 𝑅𝑖 + 𝑅𝐹(𝑅𝑚 − 𝑅𝐹)

(b) 𝑅𝑖 = 𝑅𝐹(𝑅𝑚 − 𝑅𝐹)

(c) 𝑅𝑖 = 𝑅𝐹 + 𝛽𝑖(𝑅𝑚 − 𝑅𝐹)

(d) 𝑹𝒊 = 𝑹𝑭 + 𝖰𝒊(𝑹𝒎 − 𝑹𝑭)

8. Capital Asset Pricing Model (CAPM) Account for ……………… . (DEC 2020)

(a) Unsystematic risk

(b) Systematic risk

(c) Both (a) and (b)

(d) Not used for risk analysis

9. When a portfolio comprises investment in three shares (Share A – 40%,Share B –25% and Share C – 35%) whose beta factors are 1.3,1.6 and 1.2,respectively,the portfolio beta is: (DEC 2020)

(a) 1.34

(b) 1.43

(c) 1.24

(d) 1.42

10.If the risk free rate of interest is 11% and expected return on market portfolio is 18%,ascertain expected return of the portfolio if 𝛽 of portfolio is 0.90. (DEC 2020)

(a) 17.1%

(b) 17.2%

(c) 17.3%

(d) 18.1%

11.The unsystematic risk is explained: (DEC 2020)

(a) By variance of the index

(b) By unexplained variance of the index

(c) By explained variance of the index

(d) Not affected by variance

12.The Sharpe index assigns the high value to funds that have: (DEC 2020)

(a) Low standard deviations

(b) Higher returns

(c) Higher risk adjusted returns

(d) Higher risk premium

13.ABC Ltd. has capital investment of ₹400 crores. After tax operating income is `45 crore and company has a cost of capital of 10% Determine the “Economic Value” Added of the firm: (AUG 2021)

(A) ₹2 Crore

(B) ₹3 Crore

(C) ₹4 Crore

(D) ₹5 Crore

14.The intercept of Security Market Line (SML) on the Y Axis is (AUG 2021)

(A) Risk Free Return

(B) Risk Premium

(C) Market Return

(D) Beta ()

15.Beta of the Market portfolio generally is: (AUG 2021)

(A) Zero

(B) 1

(C) 2

(D) Negative

16.The main aim of portfolio is to reduce by diversification (AUG 2021)

(A) Risk

(B) Profit

(C) Cash flow

(D) Borrowing Fund

17. Suppose two portfolios have the same average return,the same standard deviation of returns,but portfolio A has a higher beta than portfolio B. According to the Sharpemeasure,the performance of portfolio A. (AUG 2021)

(A) Is the same as the performance of portfolio B

(B) Is better than the performance of portfolio B

(C) Is poorer than the performance of portfolio B

(D) Cannot be measured

18. Anubhav is planning to purchase a share that has a beta coefficient of 0.95 He estimates the expected market return to be 12% while T-Bills yield 7% What rate should he expect and require on the Stock according to be SML. (SecurityMarket Line)? (AUG 2021)

(A) 11.33%

(B) 12.67%

(C) 12.33%

(D) 11.75%

20.If the stocks are independent of each other,the correlation coefficient would be: (DEC 2021)

(A) Zero

(B) + 1

(C) – 1

(D) 0.50

21. Utility of the portfolio can be measured through: (DEC 2021)

(A) Risk squared/Risk tolerance

(B) Risk tolerance/Risk squared

(C) Expected return – Risk penalty

(D) Risk penalty – Expected return

22.If the risk penalty is 4.50% and portfolio’s expected return is 13%,what will be the utility of the portfolio? (DEC 2021)

(A) 8.5%

(B) 2.89%

(C) 0.35%

(D) – 8.5%

23. Which of the following is not an assumption of CAPM? (DEC 2021)

(A) Diversified Portfolio

(B) Single-period transaction horizon

(C) Investor can borrow and lend at the risk-free rate of return

(D) Capital market is not perfect

24.From the following information,calculate the expected rate of return of a portfolio:Risk free rate of interest 10% Expected return of market portfolio 16%Standard deviation of an asset2.8% Market standard deviation 2.3%Correlation co-efficient of portfolio with market0.8% (DEC 2021)

(A) 15.82%

(B) 13.94%

(C) 10.00%

(D) 16.00%