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NEW QUESTION: 1
Which of the following statements about portfolio management is TRUE?
A. Combining the capital market line (CML) (risk-free rate and efficient frontier) with an investor's indifference curve map separates out the decision to invest from the decision of what to invest in.
B. The expected return on a 0 beta security is the expected market return.
C. As an investor diversifies away the unsystematic portion of risk, the correlation between his portfolio return and that of the market approaches negative one.
D. The security market line (SML) measures systematic and unsystematic risk versus expected return; the CML measures total risk.
Answer: A
Explanation:
Explanation/Reference:
Explanation:
Combining the CML (risk-free rate and efficient frontier) with an investor's indifference curve map separates out the decision to invest from what to invest in and is called the separation theorem. The investment selection process is thus simplified from stock picking to efficient portfolio construction through diversification.
The other statements are false. As an investor diversifies away the unsystematic portion of risk, the correlation between his portfolio return and that of the market approaches positive one. (Remember that the market portfolio has no unsystematic risk). The SML measures systematic risk, or beta risk. The expected return on a 0 beta security is the risk free rate (the market premium term has a value of 0).
NEW QUESTION: 2
HOTSPOT
Answer:
Explanation:
NEW QUESTION: 3
A. Option C
B. Option B
C. Option D
D. Option A
Answer: B
NEW QUESTION: 4
Which of the following elements of BCP process includes the areas of plan implementation, plan testing, and ongoing plan maintenance, and also involves defining and documenting the continuity strategy?
A. Business continuity plan development
B. Business impact assessment
C. Plan approval and implementation
D. Scope and plan initiation
Answer: A
Explanation:
Explanation/Reference:
Explanation: The business continuity plan development refers to the utilization of the information collected in the Business Impact Analysis (BIA) for the creation of the recovery strategy plan to support the critical business functions. The information gathered from the BIA is mapped out to make a strategy for creating a continuity plan. The business continuity plan development process includes the areas of plan implementation, plan testing, and ongoing plan maintenance. This phase also consists of defining and documenting the continuity strategy. Answer: C is incorrect. The scope and plan initiation process in BCP symbolizes the beginning of the BCP process. It emphasizes on creating the scope and the additional elements required to define the parameters of the plan. The scope and plan initiation phase embodies a check of the company's operations and support services. The scope activities include creating a detailed account of the work required, listing the resources to be used, and defining the management practices to be employed. Answer: B is incorrect. The business impact assessment is a method used to facilitate business units to understand the impact of a disruptive event. This phase includes the execution of a vulnerability assessment. This process makes out the mission-critical areas and business processes that are important for the survival of business. It is similar to the risk assessment process. The function of a business impact assessment process is to create a document, which is used to help and understand what impact a disruptive event would have on the business. Answer: D is incorrect. The plan approval and implementation process involves creating enterprise-wide awareness of the plan, getting the final senior management signoff, and implementing a maintenance procedure for updating the plan as required.
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