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Investment Theory and Portfolio Development - Review Questions 13 - 18

  1. One may describe the information ratio as follows:
    1. It measures risk adjusted performance of a manager using beta as the adjustment for risk.
    2. It is used to ascertain the ability of an investment manager to add risk-adjusted return.
    3. It is designed to measure a manager's performance adjusted for total risk.
    4. Either a or c.
  2. An investor's purchase of municipal bonds would be prudent when:
    1. The investor seeks tax-free income.
    2. The investor's marginal tax rate is high.
    3. The investor is looking to avoid the intangibles tax.
    4. The investor wants to increase income.
  3. Contrarian indicators include all of the following, except:
    1. CBOE Put/Call Ratio.
    2. Odd Lot Short Sales Theory.
    3. Mutual fund cash position.
    4. Relative strength.
  4. Challenges to technical analysis exclude all of the following, except:
    1. Pure expectations hypothesis.
    2. The Laffer Curve.
    3. Supply side economics.
    4. The Efficient Market Hypothesis (EMH).
  5. Profitability Ratios include all of the following, except:
    1. Dividend payout ratio.
    2. Inventory turnover.
    3. Return on equity.
    4. Return on assets.
  6. Elements of fiscal policy designed to tighten money supply exclude all of the following, except:
    1. Purchase government securities.
    2. Raise taxes.
    3. Increase deficit spending.
    4. Raise the discount rate.
Review Answers

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