MAF 603 TEST 1 & 2 (Qn A) - MAF 603 TEST Question and Answer PDF

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TEST 1SECTION AAnswer : DAnswer : CAnswer : BAnswer : AAnswer : AAnswer : CAnswer : CSECTION BQUESTION 1According to the efficient market hypothesis (EMH), in a perfect market, the security prices reflect the true and fair value of all the underlying securities’ assets at any time. On the contrary, ...

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TEST 1 SECTION A

Answer : D

Answer : C

Answer : B

Answer : A

Answer : A

Answer : C

Answer : C

Answer : A

Answer : B

Answer : C

SECTION B QUESTION 1 According to the efficient market hypothesis (EMH), in a perfect market, the security prices reflect the true and fair value of all the underlying securities’ assets at any time. On the contrary, an inefficient market is a market whose security price at any time does not entirely reflect the value of its assets. In this form of market, traders can beat the market because they can employ strategies like arbitrage and speculation. Explain with example, the price reactions towards the bad news that indicate market is inefficient. (5 marks) Answer:

QUESTION 2 Tests of market efficiency indicates weather specific investment strategies able to earn excess returns or otherwise. When there is evidence of excess returns in a test of market efficiency, it can indicate that markets are inefficient. There are several different ways of testing for market efficiency in weak, semi-strong and strong forms of efficiency. Interpret the results of serial correlations and record of mutual fund’s tests that indicate market is efficient and inefficient together with the logical reason behind the result. (4 marks) Answer:

QUESTION 3A A. “Diversification and correlations are two important aspect of creating an efficient portfolio” Describe the concepts of correlation and diversification and their relationship to portfolio risk and return for effective portfolio planning. (5 marks) Answer:

QUESTION 3 B a

Answer:

QUESTION 3 B b

Answer:

QUESTION 3 B c Besides Angsana and Melati, you are also interested to invest in Cemara, a risk free assets that has an expected return of 8%. If you decide to combine the Angsana and Cemara at ratio 70%:30% as your investment portfolio, determine the standard deviation portfolio for Angsana and Cemara. (3 marks) Answer:

Answer:

TEST 2

Answer : C

Answer : B

Answer : D

Answer : A

Answer : C

Answer : B

Answer : A

Answer : C

Answer : B

Answer : D

Answer : D

Answer : A

Answer : B

Answer : D

Answer : C

Answer : A

Answer : C

Answer : C

Answer : B

Answer : B

Answer : C

Answer : D

Answer : C

Answer : D

Answer : B

Answer : A

Answer : B

Answer : D

Answer : A

Answer : B...