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Question

71. When a distribution is positively skewed, ____________.

A. standard deviation overestimates risk

B. standard deviation correctly estimates risk

C. standard deviation underestimates risk

D. the tails are fatter than in a normal distribution

E. the tails are skinnier than in a normal distribution

72. When a distribution is negatively skewed, ____________.

A. standard deviation overestimates risk

B. standard deviation correctly estimates risk

C. standard deviation underestimates risk

D. the tails are fatter than in a normal distribution

E. the tails are skinnier than in a normal distribution

73. If a distribution has "fat tails" it exhibits

A. positive skewness

B. negative skewness

C. a kurtosis of zero

D. kurtosis

E. positive skewness and kurtosis

74. If a portfolio had a return of 8%, the risk free asset return was 3%, and the standard deviation of the portfolio's excess returns was 20%, the Sharpe measure would be _____.

A. 0.08

B. 0.03

C. 0.20

D. 0.11

E. 0.25

75. If a portfolio had a return of 12%, the risk free asset return was 4%, and the standard deviation of the portfolio's excess returns was 25%, the Sharpe measure would be _____.

A. 0.12

B. 0.04

C. 0.32

D. 0.16

E. 0.25

76. If a portfolio had a return of 15%, the risk free asset return was 5%, and the standard deviation of the portfolio's excess returns was 30%, the Sharpe measure would be _____.

A. 0.20

B. 0.35

C. 0.45

D. 0.33

E. 0.25

77. If a portfolio had a return of 12%, the risk free asset return was 4%, and the standard deviation of the portfolio's excess returns was 25%, the risk premium would be _____.

A. 8%

B. 16%

C. 37%

D. 21%

E. 29%

12-4 = 8%.

78. ________ is/are a risk measure that indicate(s) vulnerability to extreme negative returns.

A. Value at risk

B. Lower partial standard deviation

C. Standard deviation

D. Variance

E. Value at risk and lower partial standard deviation

79. ________ is/are a risk measure(s) that indicates vulnerability to extreme negative returns.

A. Value at risk

B. Lower partial standard deviation

C. Expected shortfall

D. Variance

E. Value at risk, lower partial standard deviation, and expected shortfall

80. The most common measure of loss associated with extremely negative returns is ________.

A. lower partial standard deviation

B. value at risk

C. expected shortfall

D. standard deviation

E. Variance

81. Practitioners often use a ________ % VaR, meaning that ________ % of returns will exceed the VaR, and ________ % will be worse.

A. 25, 75, 25

B. 75, 25, 75

C. 5, 95, 5

D. 95, 5, 95

E. 80, 80, 20

82. When assessing tail risk by looking at the 5% worst-case scenario, the VaR is the ________.

A. most realistic as it is the most complete measure of risk

B. most pessimistic as it is the most complete measure of risk

C. most optimistic as it is the most complete measure of risk

D. most optimistic as it takes the highest return (smallest loss) of all the cases

E. most unrealistic as it is the least complete measure of risk

83. When assessing tail risk by looking at the 5% worst-case scenario, the most realistic view of downside exposure would be ________.

A. expected shortfall

B. value at risk

C. conditional tail expectation

D. expected shortfall and value at risk

E. expected shortfall and conditional tail expectation

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