1.

Write TRUE or FALSE

I. Active investment managers do not believe that markets are efficient.
II. To determine the optimal risky portfolio in the Treynor-Black Model, macroeconomic
forecasts are used for the active portfolio and composite forecasts are used for the
passive index portfolio.
III. Line Charts are ideal for securities with no high or low price data.
IV. A rise in interest rates will push the market prices of outstanding bonds where as a fall
in interest rates will depress the market prices down.
V. Bearish actions come from a series of declining peaks and troughs.
VI. Systematic risk can be diversified.
VII. According to Burton Malkiel’s Theorem other things being equal bond price
fluctuations and bond coupon rates are inversely related.
VIII. Ideally, clients would like to invest with the portfolio manager who has the lowest
Sharpe measure.
IX. Leading Indicators are economic series that usually reach peaks or troughs before
corresponding peaks or troughs in aggregate economy activity.
X. CML estimates the return of a single security relative to its exposure to systematic risk.
2. What is meant by Portfolio Revision? Explain Treynor’s and Sharpe’s model.
3. Define Charts and explain how to interpret it.