Foundation of risk Management

ranjangarg2005
Posts: 1
Joined: Mon Feb 13, 2017 3:27 am

Foundation of risk Management

Postby ranjangarg2005 » Wed May 03, 2017 1:41 am

Please explain in detail why the specific answers are correct

1.When there are risky assets and a risk-free asset available, investors can achieve the best combinations of risk and return by holding:
Choose one answer.
a. The market portfolio. Incorrect
b. Some combination of the risk-free asset and the market portfolio of risky assets. Correct
c. Some combination of the efficient portfolios of risky assets. Incorrect
d. Some combination of the risk-free asset and any of the efficient portfolios of risky assets. Incorrect

2.The estimated annual after-tax cash flows from a petroleum project is:
Year 1: $1.2 mn
Year 2: $1.7 mn
Year 3 to year 10: $1.9 mn
After-tax scrap value of oil extractors at the end of year 20 is $120,000
The initial cost of the investment is $ 10mn, and the required rate of return is 12%. The net present value (NPV) of the project is closest to:

Choose one answer.
a. -10, 378 Correct
b. 500,378 Incorrect
c. 531,687 Incorrect
d. -49,015 Incorrect

3. An investor owns the following three-stock portfolio. Calculate the portfolio return(Foundation Quiz 1- Question 12 for table)

Choose one answer.
a. 14% Incorrect
b. 11.79% Incorrect
c. 11.02% Correct
d. 15% Incorrect

An investor calculates the following statistics on his two-stock (Delta and Gamma) portfolio.(Foundation Quiz 1- Question 13 for table)

The portfolio's standard deviation is closest to:
Choose one answer.
a. 0.412% Incorrect
b. 4.12% Incorrect
c. 6.42% Correct
d. 5.49% Incorrect

A portfolio to the right of the market portfolio on the CML represents
Choose one answer.
a. Lending portfolio Incorrect
b. Borrowing portfolio Correct
c. 100% investment in the risk-free asset Incorrect
d. None of the above Incorrect

Return to “FRM Part I”



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