Risk and Return Measures - Sample Questions 11 - 15
- Your client, Geoffrey Harrow, inquires about the appropriateness of a municipal bond for his portfolio. You would tell him that:
- The inclusion of a municipal bond would make little sense for a taxpayer in a high marginal tax bracket.
- Municipal bonds are typically exempt from all manner of income tax.
- A revenue bond's debt is serviced by an income generating facility and bears less risk than a general obligation bond.
- Municipal bonds contain implicit federal backing.
- Calculate the after-tax yield for an investor in the 35% marginal tax bracket. The investment yielded 17.3% with 14% coming from capital appreciation and the remaining 3.3% coming from dividends.
- Between 15% and 17.3%
- Both b & c.
- The difference between beta and alpha is:
- Beta measures systematic risk, whereas alpha measure total risk.
- Beta measures total risk, where as alpha measures excess over market risk.
- Alpha measures the incremental return that a manager adds over the benchmark, while beta measures risk in the market for a portfolio of securities.
- Beta measures market risk, whereas alpha measures excess return.
- Measures of central tendency include all of the following, EXCEPT:
- Time-weighted return.
- Dollar-weighted return.
- Standard deviation.
- Coefficient of variation.
- Semivariance may be defined as:
- A simplified version of standard deviation.
- A measure of skew.
- The average squared deviation below the mean.
- A measure of value at risk.
Investing BasicsAn in-depth look at what alpha and beta are and what they measure.
TermAlpha and beta are risk ratios that investors use to calculate, compare and predict returns.
Options & FuturesIncrease your returns by creating the right balance of both these risk measures.
Active Trading FundamentalsRisk is inseparable from return. Learn more about these measures and how to balance them.
Fundamental AnalysisFInancial advisors and wealth management firms use a variety of tools based in Modern portfolio theory to quantify investment risk.
Personal FinanceThese key stats will reveal whether your advisor is a league leader or a benchwarmer.
Mutual Funds & ETFsThis strategy is not as complex as some investment gurus would like you to believe.
ForexBeta is a measure of volatility. Find out what this means and how it affects your portfolio.
Mutual Funds & ETFsExamine the risk metric of the T. Rowe Price Health Sciences Fund. Analyze beta, capture ratios and standard deviation to assess volatility and systematic risk.
Investing BasicsThe Jensen measure is another tool investors use to include risk when measuring portfolio performance.
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