The values of beta coefficients of securities are ___________.

The values of beta coefficients of securities are ___________. 

A) always positive
B) always negative
C) always between positive 1 and negative 1
D) usually positive, but are not restricted in any particular way

Answer: D

According to Tobin's separation property, portfolio choice can be separated into two independent tasks consisting of __________ and ___________.

According to Tobin's separation property, portfolio choice can be separated into two independent tasks consisting of __________ and ___________. 

A) identifying all investor imposed constraints; identifying the set of securities that conform to the investor's constraints and offer the best risk-return tradeoffs 

B) identifying the investor's degree of risk aversion; choosing securities from industry groups that are consistent with the investor's risk profile 

C) identifying the optimal risky portfolio; constructing a complete portfolio from T-bills and the optimal risky portfolio based on the investor's degree of risk aversion 

D) None of the above answers is correct 

Answer: C

The systematic risk of a security __________.

The systematic risk of a security __________. 

A) is likely to be higher in a rising market
B) results from its own unique factors
C) depends upon market volatility
D) cannot be diversified away

Answer: D

An investor can design a risky portfolio based on two stocks, A and B. The standard deviation of return on stock A is 20% while the standard deviation on stock B is 15%. The expected return on stock A is 20% while on stock B it is 10%. The correlation coefficient between the return on A and B is 0%. The standard deviation of return on the minimum variance portfolio is __________.

An investor can design a risky portfolio based on two stocks, A and B.  The standard deviation of return on stock A is 20% while the standard deviation on stock B is 15%. The expected return on stock A is 20% while on stock B it is 10%.  The correlation coefficient between the return on A and B is 0%.  The standard deviation of return on the minimum variance portfolio is  __________. 

A) 0%
B) 6%
C) 12%
D) 17%

Answer: C

An investor can design a risky portfolio based on two stocks, A and B. The standard deviation of return on stock A is 20% while the standard deviation on stock B is 15%. The expected return on stock A is 20% while on stock B it is 10%. The correlation coefficient between the return on A and B is 0%. The expected return on the minimum variance portfolio is approximately __________.

An investor can design a risky portfolio based on two stocks, A and B.  The standard deviation of return on stock A is 20% while the standard deviation on stock B is 15%. The expected return on stock A is 20% while on stock B it is 10%.  The correlation coefficient between the return on A and B is 0%.  The expected return on the minimum variance portfolio is approximately __________.

A) 10.00%
B) 13.60%
C) 15.00%
D) 19.41%

Answer: B

An investor can design a risky portfolio based on two stocks, A and B. The standard deviation of return on stock A is 20% while the standard deviation on stock B is 15%. The correlation coefficient between the return on A and B is 0%. The expected return on stock A is 20% while on stock B it is 10%. The proportion of the minimum variance portfolio that would be invested in stock B is __________.

An investor can design a risky portfolio based on two stocks, A and B.  The standard deviation of return on stock A is 20% while the standard deviation on stock B is 15%. The correlation coefficient between the return on A and B is 0%.  The expected return on stock A is 20% while on stock B it is 10%. The proportion of the minimum variance portfolio that would be invested in stock B is __________. 

A) 6%
B) 50%
C) 64%
D) 100%

Answer: C

Consider two perfectly negatively correlated risky securities, A and B. Security A has an expected rate of return of 16% and a standard deviation of return of 20%. B has an expected rate of return 10% and a standard deviation of return of 30%. The weight of security B in the global minimum variance is __________.

Consider two perfectly negatively correlated risky securities, A and B.  Security A has an expected rate of return of 16% and a standard deviation of return of 20%.  B has an expected rate of return 10% and a standard deviation of return of 30%.  The weight of security B in the global minimum variance is __________. 

A) 10%
B) 20%
C) 40%
D) 60%

Answer: C

The optimal risky portfolio can be identified by finding _____________.

The optimal risky portfolio can be identified by finding _____________. 

A) the minimum variance point on the efficient frontier
B) the maximum return point on the efficient frontier
C) the tangency point of the capital market line and the efficient frontier
D) None of the above answers is correct

Answer: C

Rational risk-averse investors will always prefer portfolios ______________.

Rational risk-averse investors will always prefer portfolios ______________. 

A) located on the efficient frontier to those located on the capital market line
B) located on the capital market line to those located on the efficient frontier
C) at or near the minimum variance point on the efficient frontier
D) Rational risk-averse investors prefer the risk-free asset to all other asset choices.

Answer: B

The slope of a capital allocation line measures the reward-to-variability ratio of ___________.

The slope of a capital allocation line measures the reward-to-variability ratio of ___________. 

A) all portfolios on the efficient frontier
B) all portfolios on the capital market line
C) the minimum variance portfolio only
D) all portfolios on the particular capital allocation line in question









Answer: D

Portfolios that lie on the portion of the efficient frontier below the minimum-variance portfolio ___________________.

Portfolios that lie on the portion of the efficient frontier below the minimum-variance portfolio ___________________. 

A) add nothing to the investment opportunity set
B) are sometimes useful in implementing sophisticated hedging techniques
C) represent opportunities for arbitrage
D) None of the above answers is correct

Answer: A

Expected return-standard deviation combinations corresponding to any individual risky asset _________________.

Expected return-standard deviation combinations corresponding to any individual risky asset _________________. 

A) will always end up on the efficient frontier
B) will always end up on the efficient frontier or within the efficient frontier, but never outside the efficient frontier
C) will always end up within the efficient frontier
D) may end up anywhere in expected return-standard deviation space

Answer: B

The term efficient frontier refers to the set of portfolios that _________________.

The term efficient frontier refers to the set of portfolios that _________________. 

A) yield the greatest return for a given level of risk
B) involve the least risk for a given level of return
C) Both a and b above
D) None of the above answers are correct

Answer: C

Consider an investment opportunity set formed with two securities that are perfectly negatively correlated. The global minimum variance portfolio has a standard deviation that is always __________.

Consider an investment opportunity set formed with two securities that are perfectly negatively correlated.  The global minimum variance portfolio has a standard deviation that is always __________. 

A) equal to the sum of the securities standard deviations
B) equal to -1
C) equal to 0
D) greater than 0

Answer: C

__________ is a true statement regarding the variance of risky portfolios.

__________ is a true statement regarding the variance of risky portfolios. 

A) The higher the coefficient of correlation between securities, the greater will be the reduction in the portfolio variance
B) There is a direct relationship between the securities coefficient of correlation and the portfolio variance
C) The degree to which the portfolio variance is reduced depends on the degree of correlation between securities
D) none of the above

Answer: C

The risk that can be diversified away is ___________.

The risk that can be diversified away is ___________. 

A) beta
B) firm specific risk
C) market risk
D) systematic risk

Answer: B

Beta is a measure of __________.

Beta is a measure of __________. 

A) firm specific risk
B) diversifiable risk
C) market risk
D) unique risk

Answer: C

Diversification is most effective when security returns are __________.

Diversification is most effective when security returns are __________. 

A) high
B) negatively correlated
C) positively correlated
D) uncorrelated

Answer: B

The _________ could be used in an index model to represent common or systematic risk factors.

The _________ could be used in an index model to represent common or systematic risk factors. 

A) firm size
B) industry
C) S&P500 index
D) capital allocation line

Answer: C

Adding additional risky assets will generally move the efficient frontier _____ and to the ___________________.

Adding additional risky assets will generally move the efficient frontier _____ and to the      ___________________.

            A)   up, right

            B)   up, left

            C)   down, right

            D)   down, left 

Answer: B

Many current and retired Enron Corp. employees had their 401k retirement accounts wiped out when Enron collapsed because ____.

Many current and retired Enron Corp. employees had their 401k retirement accounts wiped out when Enron collapsed because ____.

            A)   they had to pay huge fines for obstruction of justice

            B)   they had purchased fines for obstruction of justice

            C)   their 401k accounts were not well diversified

            D)   none of the above 

Answer: C

Risk that can be eliminated through diversification is called ______ risk.

Risk that can be eliminated through diversification is called ______ risk. 

A) unique
B) firm-specific
C) diversifiable
D) all of the above

Answer: D

The capital allocation line is also the __________.

The capital allocation line is also the __________.

            A)   investment opportunity set formed with a risky  asset and a risk-free asset

            B)   investment opportunity set formed with two risky assets

            C)   line on which lie all portfolios that offer the same utility to a particular investor

            D)   line on which lie all portfolios with the same expected rate of return and different standard deviations 

Answer: A

The reward/variability ratio is given by __________.

The reward/variability ratio is given by __________. 

A) the slope of the capital allocation line
B) the second derivative of the capital allocation line
C) the point at which the second derivative of the investor's indifference curve reaches zero
D) none of the above

Answer: A

The ______ average ignores compounding.

The ______ average ignores compounding. 

A) geometric
B) arithmetic
C) both a and b above
D) none of the above

Answer: B

For economists, the word "utility" means:

For economists, the word "utility" means: 

 A) versatility and flexibility.
B) rationality.
C) pleasure and satisfaction.
D) purposefulness.



Answer: C

Of the following statements about protected areas that have been established to preserve biodiversity, which one is not correct?

Of the following statements about protected areas that have been established to preserve biodiversity, which one is not correct? 

A) About 25% of Earth's land area is now protected.
B) National parks are one of many types of protected areas.
C) Most protected areas are too small to protect species.
D) Management of a protected area should be coordinated with management of the land surrounding the area.
E) It is especially important to protect biodiversity hot spots.






Answer: A

Which of the following strategies would most rapidly increase the genetic diversity of a population in an extinction vortex?

Which of the following strategies would most rapidly increase the genetic diversity of a population in an extinction vortex? 

A) Capture all remaining individuals in the population for captive breeding followed by reintroduction to the wild.
B) Establish a reserve that protects the population's habitat.
C) Introduce new individuals transported from other populations of the same species.
D) Sterilize the least fit individuals in the population.
E) Control populations of the endangered population's predators and competitors.






Answer: C

Which of the following is a consequence of biological magnification?

Which of the following is a consequence of biological magnification? 

A) Toxic chemicals in the environment pose greater risk to top-level predators than to primary consumers.
B) Populations of top-level predators are generally smaller than populations of primary consumers.
C) The biomass of producers in an ecosystem is generally higher than the biomass of primary consumers.
D) Only a small portion of the energy captured by producers is transferred to consumers.
E) The amount of biomass in the producer level of an ecosystem decreases if the producer turnover time increases.





Answer: A

What is the single greatest threat to biodiversity?

What is the single greatest threat to biodiversity? 

A) overharvesting of commercially important species
B) introduced species that compete with native species
C) pollution of Earth's air, water, and soil
D) disruption of trophic relationships as more and more prey species become extinct
E) habitat alteration, fragmentation, and destruction





Answer: E

The main cause of the increase in the amount of CO2 in Earth's atmosphere over the past 150 years is

The main cause of the increase in the amount of CO2 in Earth's atmosphere over the past 150 years is 

A) increased worldwide primary production.
B) increased worldwide standing crop.
C) an increase in the amount of infrared radiation absorbed by the atmosphere.
D) the burning of larger amounts of wood and fossil fuels.
E) additional respiration by the rapidly growing human population.





Answer: D

One characteristic that distinguishes a population in an extinction vortex from most other populations is that

One characteristic that distinguishes a population in an extinction vortex from most other populations is that 

A) its habitat is fragmented.
B) it is a rare, top-level predator.
C) its effective population size is much lower than its total population size.
D) its genetic diversity is very low.
E) it is not well adapted to edge conditions.




Answer: D

Your friend is wary of environmentalists' claims that global warming could lead to major biological change on Earth. Which of the following statements can you use in response to your friend's suspicions?

Your friend is wary of environmentalists' claims that global warming could lead to major biological change on Earth. Which of the following statements can you use in response to your friend's suspicions? 

A) We know that atmospheric carbon dioxide has increased over the past 150 years.
B) Through measurements and observations, we know that CO2 levels and temperature fluctuations are directly correlated, even in prehistoric times.
C) Global warming could have significant effects on agriculture in the United States.
D) Sea levels will likely rise, displacing as much as 50% of the world's human population.
E) All statements listed could be used.






Answer: E

Suppose you attend a town meeting at which some experts tell the audience that they have performed a cost-benefit analysis of a proposed transit system that would probably reduce overall air pollution and fossil fuel consumption. The analysis, however, reveals that ticket prices will not cover the cost of operating the system when fuel, wages, and equipment are taken into account. As a biologist, you know that if ecosystem services had been included in the analysis the experts might have arrived at a different answer. Why are ecosystem services rarely included in economic analyses?

Suppose you attend a town meeting at which some experts tell the audience that they have performed a cost-benefit analysis of a proposed transit system that would probably reduce overall air pollution and fossil fuel consumption. The analysis, however, reveals that ticket prices will not cover the cost of operating the system when fuel, wages, and equipment are taken into account. As a biologist, you know that if ecosystem services had been included in the analysis the experts might have arrived at a different answer. Why are ecosystem services rarely included in economic analyses? 

A) Their cost is difficult to estimate and people take them for granted.
B) They are not worth much and are usually not considered.
C) There are no laws that require investigation of ecosystem services in environmental planning.
D) There are too many variables to ecosystem services, making their calculation impossible.
E) Ecosystem services only take into account abiotic factors that affect local environments.






Answer: A

Which of the following nations has become a world leader in the establishment of zoned reserves?

Which of the following nations has become a world leader in the establishment of zoned reserves? 

A) Costa Rica
B) Canada
C) China
D) United States
E) Mexico







Answer: A

The biggest challenge that Costa Rica will likely face in its dedication to conservation and restoration in the future is

The biggest challenge that Costa Rica will likely face in its dedication to conservation and restoration in the future is 

A) the pressures of its growing population.
B) its small size (as a country), which may not be able to maintain large enough reserves.
C) the potential for disturbance of sensitive species in reserves by ecotourists.
D) spread of disease and parasites via corridors from neighboring countries.
E) the large number of Costa Rican species already in the extinction vortex.





Answer: A

This causes extremely high levels of toxic chemicals in fish-eating birds.

This causes extremely high levels of toxic chemicals in fish-eating birds. 

A) depletion of ozone layer
B) acid precipitation
C) biological magnification
D) greenhouse effect
E) eutrophication






Answer: C

This is caused by excessive nutrient runoff into aquatic ecosystems.

This is caused by excessive nutrient runoff into aquatic ecosystems. 

A) depletion of ozone layer
B) acid precipitation
C) biological magnification
D) greenhouse effect
E) eutrophication







Answer: E

This term refers to the reflecting and absorption of infrared radiation by atmospheric methane, carbon dioxide, and water.

This term refers to the reflecting and absorption of infrared radiation by atmospheric methane, carbon dioxide, and water. 

A) depletion of ozone layer
B) acid precipitation
C) biological magnification
D) greenhouse effect
E) eutrophication





Answer: D

This causes an increase in the intensity of UV radiation reaching Earth.

This causes an increase in the intensity of UV radiation reaching Earth. 

A) depletion of ozone layer
B) acid precipitation
C) biological magnification
D) greenhouse effect
E) eutrophication






Answer: A

Burning fossil fuels releases oxides of sulfur and nitrogen. These air pollutants can be responsible for

Burning fossil fuels releases oxides of sulfur and nitrogen. These air pollutants can be responsible for 

A) the death of fish in lakes.
B) precipitation with a pH as low as 3.0.
C) calcium deficiency in soils.
D) direct damage to plants by leaching nutrients from the leaves.
E) All of the options are correct.







Answer: E

Agricultural lands frequently require nutrient augmentation because

Agricultural lands frequently require nutrient augmentation because 

A) nitrogen-fixing bacteria are not as plentiful in agricultural soils because of the use of pesticides.
B) the nutrients that become the biomass of plants are not cycled back to the soil on lands where they are harvested.
C) land that is available for agriculture tends to be nutrient-poor.
D) grains raised for feeding livestock must be fortified, and thus require additional nutrients.
E) cultivation of agricultural land inhibits the decomposition of organic matter.






Answer: B

The use of DDT as an insecticide in the United States has been outlawed since 1971, yet is still a problem for certain top-level carnivores in the United States. Which of the following choices best explains this apparent incongruity?

The use of DDT as an insecticide in the United States has been outlawed since 1971, yet is still a problem for certain top-level carnivores in the United States. Which of the following choices best explains this apparent incongruity? 

A) DDT is still used for mosquito control in tropical countries, and certain migratory predators can be affected by a seasonal biomagnification.
B) DDT is persistent in the environment and all of the pre-1971 DDT is still available in toxic form to poison top-level carnivores.
C) Pre-1971 DDT has been deposited in certain habitats, particularly wetlands and estuaries, so predators in these ecosystems are vulnerable to biomagnifications of DDT.
D) Whereas most DDT-susceptible species have become resistant to persistent DDT, others are still vulnerable.
E) All of the options are correct.





Answer: A

What is a critical load?

What is a critical load? 

A) the amount of nutrient augmentation necessary to bring a depleted habitat back to its former level
B) the level of a given toxin in an ecosystem that is lethal to 50% of the species present
C) the maximum abundance level of a particular species, beyond which additional numbers will degrade a habitat
D) the amount of added nutrient that can be absorbed by plants without damaging ecosystem integrity
E) the number of predators an ecosystem can support that effectively culls prey populations to healthy levels






Answer: D

Which of the following is true about "hot spots"?

Which of the following is true about "hot spots"? 

A) One-third of all species on Earth occupy less than 1.5% of Earth's land area (hot spots).
B) All of the plants and animals containing genes that may be useful to humankind are located in Earth's hot spots.
C) Around 75% of all of the undiscovered species of organisms live in ecological hot spots.
D) As conservation measures improve over the next ten years, hot spots will likely disappear.
E) The hot spots that are in most dire need of remediation are located in the tundra.





Answer: A

What is the biggest problem with selecting a site for a preserve?

What is the biggest problem with selecting a site for a preserve? 

A) There is always a conflict about use of land set aside for preservation.
B) Making a proper selection is difficult because currently the environmental conditions of almost any site change so quickly.
C) Keystone species are difficult to identify in potential preserve sites.
D) Only lands that are not useful to human activities are available for preserves.
E) Most of the best sites are inaccessible by land transportation, so making roads to them is often prohibitively expensive.






Answer: B

Biodiversity hot spots are not necessarily the best choice for nature preserves because

Biodiversity hot spots are not necessarily the best choice for nature preserves because 

A) hot spots are situated in remote areas not accessible to wildlife viewers.
B) their ecological importance makes land purchase very expensive.
C) a hot spot for one group of organisms may not be a hot spot for another group.
D) hot spots are designated by abiotic factors present, not biotic factors.
E) designated hot spots change on a daily basis.





Answer: C

How are movement corridors potentially harmful to certain species?

How are movement corridors potentially harmful to certain species? 

A) They increase inbreeding.
B) They promote dispersion.
C) They spread disease and parasites.
D) They increase genetic diversity.
E) They allow seasonal migration.





Answer: C

Which of the following is consistent with forest fragmentation research?

Which of the following is consistent with forest fragmentation research? 

A) Productivity is the same in both fragmented forests and forest interiors.
B) Edge communities consistently have low species diversity.
C) Forest-interior species show declines in small patch communities.
D) New-edge species that migrate in do not seem to compete with forest species and often increase biodiversity in fragmented forests.
E) Species diversity is always lower in fragmented forests when compared to forest interiors in the same region.





Answer: C

Cowbirds utilize fragmented forests effectively by

Cowbirds utilize fragmented forests effectively by 

A) feeding on the fruits of shrubs that tend to grow at the forest/open-field interface.
B) parasitizing the nests of forest birds, and feeding on open-field insects.
C) roosting in forest trees, and nesting in grassy fields.
D) outcompeting other songbird species in fragmented communities.
E) using forest cover to escape from predators in their normal grassland habitat.




Answer: B

How is habitat fragmentation related to biodiversity loss?

How is habitat fragmentation related to biodiversity loss? 

A) Less carbon dioxide is absorbed by plants in fragmented habitats.
B) In fragmented habitats, more soil erosion takes place.
C) Populations of organisms in fragments are smaller and, thus, more susceptible to extinction.
D) Animals are forced out of smaller habitat fragments.
E) Fragments generate silt that negatively affects sensitive river and stream organisms.






Answer: C