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.
Options & FuturesFutures have a number of advantages over options such as fixed upfront trading costs, lack of time decay and liquidity.
Products and InvestmentsThe 10 steps outlined here are essential to the creation of a new financial product.
ProfessionalsHere's an inside look at the workdays of two experienced CPAs, to give you an idea of what it might be like to pursue a career as a public accountant.
ProfessionalsThere’s no typical day in the life of a public accountant, but one accountant’s experience may shed some light on what the career entails.
Saving and SpendingRetirees who don't want to deplete their nest eggs during a bear market should make sure to do the following.
Mutual Funds & ETFsGet a brief overview of Fidelity's seven target risk funds, with a description of each fund's asset allocation and expense ratio.
Investing NewsWarning signs have started to emerge that point to a potentially dismal 2016 for the U.S. economy.
MarketsAlgorithmic HFT has a number of risks, and it also can amplify systemic risk because of its propensity to intensify market volatility.
Mutual Funds & ETFsExplore analyses of the top three Invesco mutual funds for retirement diversification in 2016, and learn about the characteristics of these target-date funds.
Investing BasicsHedging risk is always a good idea. Here is how sophisticated investors go about it.
A modification of the Sharpe ratio that differentiates harmful ...
The excess return that investing in the stock market provides ...
The amount of risk that an insurance company retains after subtracting ...
Coverage that provides financial protection to investors, financial ...
The maximum loss from a peak to a trough of a portfolio, before ...
The absolute level of a fund's investments.
Different types of orders allow you to be more specific about how you'd like your broker to fulfill your trades. When you ... Read Full Answer >>
Secured loans are better for the borrower than unsecured loans because the loan terms are more agreeable. Often, the interest ... Read Full Answer >>
Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
Like all securities, mutual funds are subject to market, or systematic, risk. This is because there is no way to predict ... Read Full Answer >>
Mutual funds have become an incredibly popular option for a wide variety of investors. This is primarily due to the automatic ... Read Full Answer >>
While your auto insurance company cannot pull your full motor vehicle report, or MVR, it does pull a record summary that ... Read Full Answer >>