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# Investment Strategies and Portfolio Analysis Coursera Quiz Answers

### All Weeks Investment Strategies and Portfolio Analysis Coursera Quiz Answers

## Table of Contents

#### Investment Strategies and Portfolio Analysis Week 01 Coursera Quiz Answers

#### Quiz 1: Comparing two portfolio returns

Q1. Suppose you invested $8,000 in stock index fund.

One month later, your portfolio value is $8,088. What was your one-month

return? State your answer in basis points, e.g if your answer is 0.20 percent,

write 20 basis points.

Enter answer here

Q2. Suppose you continued to hold onto the stock

index fund. Over the subsequent three months, your portfolio value first dipped

to $7,920 at the end of the second month, then increased to $8,010 at the end

of the third month, and finally climbed to $8,220 at the end of the fourth

month. What was your monthly return for each of the three months?

Q3. Compute your four-month cumulative return. Round

your final answer to two digits after the decimal point. State your answer as a

percentage, i.e. 1.23% as 1.23

Enter answer here

Q4. What was your annualized arithmetic average

return over the four-month period? State your answer as a percentage rounded

off to two digits after decimal point, i.e 1.23%. as 1.23

Enter answer here

Q5. What was your geometric average monthly return

over the four-month period? State your answer as a percentage rounded off to four digits after decimal point, i.e 1.2345%. as 1.2345

Enter answer here

Q6. What is the nominal rate of return per year that

would give an effective annual return of 8% per year if the nominal rate is

compounded quarterly? Round off your answer to four digits after the decimal

point and state your answer as a percentage rate (i.e. 1.2345% as 1.2345)

Enter answer here

Q7. What is the nominal rate of return per year that

would give an effective annual return of 10% per year if the nominal rate is

compounded monthly? Round off your answer to three digits after the decimal

point and state your answer as a percentage rate (i.e. 1.234% as 1.234)

Enter answer here

Q8. What is the effective rate of return per year if the annual rate of return is 9%, compounded continuously? Round off your answer to four digits after the decimal point and state your answer as a percentage rate (i.e. 1.2345)

Please do not include ‘%’ in your answer. Just input the numerical value.

Enter answer here

Q9. Suppose you bought three shares of RAFA on

January 1 at a price of $64 per share. You subsequently sold one share at $69 a

year later on January 1, and sold the other two shares a year after that for

$62 each. At the same time, at the end of every year on December 31, shares of

RAFA paid $3 dividend per share. What is your dollar-weighted or internal rate

of return on this two-year investment? Round off your answer to four digits

after the decimal point and state your answer as a percentage rate (i.e. 1.2345% as 1.2345)

Enter answer here

Q10. Suppose you bought three shares of RAFA on

January 1 at a price of $64 per share. You subsequently sold one share at $69 a

year later on January 1, and sold the other two shares a year after that for

$62 each. At the same time, at the end of every year on December 31, shares of

RAFA paid $3 dividend per share. What is your time-weighted return? Round off

your answer to four digits after the decimal point and state your answer as a

percentage rate (i.e. 1.2345% as 1.2345)

Enter answer here

Q11. Using the

monthly return data given above, what is the cumulative return difference

between the portfolio and the benchmark? Round off your answer to four digits

after the decimal point and state your answer as a percentage rate (i.e.

1.2345% as 1.2345)

Enter answer here

Q12. Using the monthly return data given above, what

is the arithmetic mean excess return? Round off your answer to four digits

after the decimal point and state your answer as a percentage rate (i.e.

1.2345% as 1.2345)

Enter answer here

Q13. Using the monthly return data given above, what

is the geometric mean excess return? Round off your answer to four digits after

the decimal point and state your answer as a percentage rate (i.e. 1.2345% as 1.2345)

Enter answer here

#### Quiz 2: Revisiting measures of risk

Q1. Using the monthly return data provided above, find the return volatility for portfolio P. Round of to three decimals as a percentage (i.e. 1.234%) (Hint: Use sample deviation)

Enter answer here

Q2. Using the monthly return data provided above,

compute the downside semideviation for portfolio P around its mean. Round off your answer to three digits after the decimal point. State your answer as a percentage such as 1.234.

Enter answer here

Q3. Using the monthly return data provided above,

compute the tracking error for portfolio P. Round off your final answer to three digits after the decimal point. State your answer as a percentage, such as 1.234.

Enter answer here

### Week 2

#### Quiz 1: Risk-adjusted return measures

Q1. Using the return data on portfolios A and B provided in the accompanying spreadsheet, compute the average return for portfolio B. Round off your answer to three digits after the decimal point. State your answer as a percentage point, such as 1.234.

Enter answer here

Q2. Using the return data on portfolios A and B provided in the accompanying spreadsheet, compute the return volatility for portfolio A. Round off your answer to three digits after the decimal point. State your answer as a percentage point, such as 1.234.

Enter answer here

Q3. What is the Sharpe ratio for portfolio A? Round off your answer to three digits after the decimal point, as in 1.234.

Enter answer here

Q4. What is portfolio B’s CAPM alpha? Use portfolio M as the market portfolio proxy. Round off your answer to three digits after the decimal points. State your answer as a percentage point as 1.234.

Enter answer here

Q5. What is portfolio B’s CAPM beta based on your analysis? Round off your answer to three digits after the decimal points. State your answer as a percentage point as 1.234.

Enter answer here

Q6. Compute the Treynor measure for portfolio B. Round off your answer to three digits after the decimal point. State your answer as 1.234

Enter answer here

Q7. What is the R-squared for your CAPM model for portfolio A? State your answer as a percentage point such as 10.1

Enter answer here

Q8. Compute the residual risk measure for portfolio A. Round off your final answer to three digits after the decimal point.

Enter answer here

- Compute the appraisal ratio for portfolio B. Round off your final answer to three digits after the decimal point.

Enter answer here

Q10. Compute the information ratio for portfolio B. Round off your answer to three digits after the decimal point.

Enter answer here

Q11. Which portfolio is considered more aggressive?

- Portfolio A
**Portfolio B**

Q12. Which portfolio is more diversified? In other words, which portfolio has less idiosyncratic risk?

**Portfolio A**- Portfolio B

Q13. Which portfolio outperforms the market?

- Only portfolio A
- Only portfolio B
**Both**- Neither

Q14. If you were to choose one single portfolio to invest all of your wealth in, which one would you choose?

**Portfolio A**- Portfolio B

Q15. Suppose you are already holding a passive index fund, and you are choosing between A and B to add to your portfolio. Which portfolio is more attractive?

**Portfolio A**- Portfolio B

#### Quiz 2: Active vs. passive investing: Risk-adjusted return measures

Q1. Using the return data on portfolios A and B

provided in the accompanying spreadsheet, compute the average return for

portfolio B. Round off your answer to three digits after the decimal point.

State your answer as a percentage point, such as 1.234.

Enter answer here

Q2. Using the return data on portfolios A and B

provided in the accompanying spreadsheet, compute the return volatility for

portfolio A. Round off your answer to three digits after the decimal point.

State your answer as a percentage point, such as 1.234.

Enter answer here

Q3. What is the Sharpe ratio for portfolio A? Round off your answer to three digits after the decimal point, as in 1.234.

Enter answer here

Q4. What is portfolio B’s CAPM alpha? Use portfolio M as the market portfolio proxy. Round off your answer to three digits after the decimal points. State your answer as a percentage point as 1.234.

Enter answer here

Q5. What is portfolio A’s CAPM beta based on your analysis? Round off your answer to three digits after the decimal points. State your answer as a percentage point as 1.234.

Enter answer here

Q6. Compute the Treynor measure for portfolio B. Round off your answer to three digits after the decimal point. State your answer as 1.234

Enter answer here

Q7. What is the R-squared for your CAPM model for

portfolio A? State your answer as a percentage point such as 10.1

Enter answer here

Q8. Compute the residual risk measure for portfolio A. Round off your final answer to three digits after the decimal point.

Enter answer here

Q9. Compute the appraisal ratio for portfolio A. Round off your final answer to three digits after the decimal point.

Enter answer here

Q10. Compute the information ratio for portfolio A. Round off your answer to three digits after the decimal point.

Enter answer here

Q11. Which portfolio is considered more aggressive?

- Portfolio A
- Portfolio B

Q12. Which portfolio is more diversified? In other words, which portfolio has less idiosyncratic risk?

- Portfolio A
- Portfolio B

Q13. Which portfolio outperforms the market?

- Only portfolio A
- Only portfolio B
- Both
- Neither

Q14. If you were to choose one single portfolio to invest all of your wealth in, which one would you choose?

- Portfolio A
- Portfolio B

Q15. Suppose you are already holding a passive index fund, and you are choosing between A and B to add to your portfolio. Which portfolio is more attractive?

- Portfolio A
- Portfolio B

### Week 3

#### Quiz 1: Style Analysis

Q1. Using the Excel spreadsheet provided for you accompanying the ‘Style Analysis’ lecture, conduct a style analysis of the LMVTX fund. Which style benchmark index has the highest loading?

- Small cap
- Mid cap
**Large cap**- Growth
- MidBM
- Value

Q2. Based on your analysis above, what is the alpha of the LMVTX fund?

- 0.05
- 0.04
**0.06**- 0.08

Q3. Based on your analysis, what percentage of the variation in returns of the LMVTX fund is due to style?

- 12.2%
**79.2%**- 58.5%
- 43.3%

Q4. Based on your analysis, how would you characterize the LMTVX fund?

**Large cap/Value**- Small cap/Value
- Large cap/Growth
- Small cap/Growth

Q5. What percentage of the variation in returns of the LMTVX fund is due to selection?

- 11%
- 79%
- 57%
**21%**

#### Quiz 2: Performance attribution

Q1. Consider the following portfolio P that invests in equities, fixed-income securities, and money market securities.

Based on the data given in the table, what is the portfolio’s return? Round off your answer to two digits after the decimal point. State your answer as a percentage, i.e. 1.23

Enter answer here

Q2. Based on the data in the table in question 1, what is the return on the benchmark portfolio?

Enter answer here

Q3. Which of the following statements is correct?

- Portfolio P has underperformed its benchmark.
- Portfolio P has underweighted its equity allocation relative its benchmark.
**Portfolio P has underweighted its fixed income allocation relative to the benchmark.**- Portfolio P has overweighted its money market allocation relative to the benchmark.

Q4. What is contribution of asset allocation to relative performance? Round off your answer to two digits after the decimal point. State your answer as a percentage, such as 1.23.

Enter answer here

Q5. Which of the following statements is incorrect?

- The equity security selection of portfolio P has outperformed that of the benchmark.
- The fixed income security selection of portfolio P has outperformed that of the benchmark.
**The money market selection of portfolio P has outperformed that of the benchmark.**- The return of the fixed income securities in portfolio P is 1.98%

Q6. What is the contribution of security selection to the relative performance of portfolio P? Round off your answer to two digits after the decimal. State your answer as a percentage, such as 1.23.

Enter answer here

#### Quiz 3: Performance evaluation: Style analysis and performance attribution

Q1. Using the Excel spreadsheet provided for you accompanying the ‘Style Analysis’ lecture, conduct a style analysis of the PCBAX fund. Which style benchmark index has the highest loading?

- Small cap
- Mid cap
- Large cap
- Growth
- Mid BM
- Value

Q2. Based on your analysis above, what is the alpha of the PCBAX fund?

- 0.00
- 0.14
- 0.05
- 0.03

Q3. Based on your analysis, what percentage of the variation in returns of the PCBAX fund is due to style?

- 14.4%
- 88%
- 43.3%
- 58.75%

Q4. Based on your analysis, how would you characterize the PCBAX fund?

- Large cap/Value
- Medium cap/Value
- Small cap/Value
- Large cap/Growth
- Medium cap/Growth
- Small cap/Growth

Q5. What percentage of the variation in returns of the PCBAX fund is due to selection?

- 11%
- 58.75%
- 41.25%
- 5%

Q6. You are a global equity manager assigned to select stocks from a universe of large stocks throughout the world. You will be evaluated by comparing your returns to the return on the MSCI World Market Portfolio. You are free to hold stocks from various countries in whatever proportions you deem fit. The following table gives the results of your performance and the MSCI index:

What is your total portfolio return? Round off your answer to two digits after the decimal point. State your answer as a percentage, i.e. 1.23

Enter answer here

Q7. Based on the data in the table in the previous question, what is the return on the benchmark portfolio?

Enter answer here

Q8. What was the return difference between your portfolio and the MSCI World Market portfolio?

- 2.25%
- 2.5%
- 2.75%
- -0.25%

Q9. Which of the following statements is correct?

- You have underweighted UK in your portfolio.
- You have underweighted Germany in your portfolio.
- You have underweighted the US in your portfolio.
- You have overweighted Japan in your portfolio.

Q10. What is the contribution of asset (country) allocation to your relative performanc? Round off your answer to two digits after the decimal point. State your answer as a percentage, such as 1.23.

Enter answer here

Q11. Which of the following statements is incorrect?

- Your security selection in UK has underperformed that of the benchmark.
- Your security selection in Germany has underperformed that of the benchmark.
- Your security selection in the US has outperformed that of the benchmark.
- Your security selection in Japan has outperformed that of the benchmark.

Q12. What is the contribution of security selection to your relative performance? Round off your answer to two digits after the decimal. State your answer as a percentage, such as 1.23.

Enter answer here

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