Question

5. If the benchmark is consistent with a manager's investment style, this would be known as:

1. unambiguous.
2. investible.
3. appropriate.
4. measurable.

            6. Ross's APT is known as which one of the following?

a. single factor model

b. multi-factor model

c.    zero-beta model

d. index factor model

            7. Time-Weighted Rate of Return is synonymous with which of the following?

a. Internal Rate of Return

b. Money-Weighted Rate of Return

c.    Sub-Period Rate of Return

d. Geometric Rate of Return

            8. Within its structure, the Jensen Index uses which of the following after the random error variable has been accounted for?

a. CAPM

b. APT

c.    CML

d. TWRR

Answer 1

5. (c) appropriate is the answer

This is because in the definitive list of bailey and tierney (1998) it is clearly stated in the properties of a valid benchmark.

6(b) Multi factor asset pricing model

This is because unlike CAPM, APT uses more than one factor which include macro economic factors like inflation, gross national product, gross domestic products and exchange rates and other unavoidable systematic risk factors are considered. therefore ross's APT is called multi factor pricing model.

7.Time wieghted rate of return is also called answer (d) geometric rate of return

this is because, returns of every single sub periods are multiplied with each other which bring little more complexity to the formula.

8. The answer is (a) CAPM

this is because, average return on portfolio is measured using predicted CAPM by looking whesther it is above or below.