FIN 320 Quiz 7

FIN 320 Quiz 7
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FIN 320 Quiz 7
This quiz consist of 30 multiple choice questions. The first 15 questions cover the material in Chapter 17. The
second 15 questions cover the material in Chapter 18.
1. A company that mines bauxite, an aluminum ore, decides to short aluminum futures. This is
anexample of __________ to limit its risk.
2. A person with a long position in a commodity futures contract wants the price of the commodity to
______.
3. _____________ are likely to close their positions before the expiration date, while ____________ are
likely to make or take delivery.
4. The ________ and the _______ have the lowest correlations with the large-cap indexes.
5. The volume of interest rate swaps increased from almost zero in 1980 to over __________ today.
6. An established value below which a trader's margin may not fall is called the ________.
7. The _________ contract dominates trading in stock-index futures.
8. is an agreement to buy or sell a specified amount of an asset at a predetermined price on the
expiration date of the contract
9. Margin must be posted by ________.
10. You take a long position in a futures contract of one maturity and a short position in a contract
of a different maturity, both on the same commodity. This is called a __________.
11. The fact that the exchange is the counterparty to every futures contract issued is important
because it eliminates _________ risk.
12. A wheat farmer should __________ in order to reduce his exposure to risk associated with
fluctuations in wheat prices.
13. Which one of the following refers to the daily settlement of obligations on future positions?
14. In the futures market the short position's loss is ___________ the long position's gain.
15. At contract maturity the basis should equal ___________.
16. In the Treynor-Black model, security analysts __________.
17. What is the term for the process used to assess portfolio manager performance?
18. The Treynor-Black model is a model that shows how an investment manager can use security
analysis and statistics to construct __________.
19. Which one of the following is largely based on forecasts of macroeconomic factors?
20. The portfolio that contains the benchmark asset allocation against which a manager will be
measured is often called _____________.
21. What phrase might be used as a substitute for the Treynor-Black model developed in 1973?
22. The __________ calculates the reward to risk trade-off by dividing the average portfolio
excess return by the portfolio beta.
23. In the Treynor-Black model, the active portfolio will contain stocks with __________.
24. The theory of efficient frontiers has __________.

25. Perfect-timing ability is equivalent to having __________ on the market portfolio.
26. Which one of the following averaging methods is the preferred method of constructing returns
series for use in evaluating portfolio performance?
27. The comparison universe is __________.
28. Which one of the following performance measures is the Sharpe ratio?
29. The M2 measure of portfolio performance was developed by ______________.
30. Empirical tests to date show ______________.