1. Consider the returns of the MSCI index of developed markets equity in column C of the Excel file that goes with this quiz. Given the returns over the 1988‐2013 period, what has been the arithmetic mean annual return of these markets?

1. 4.8%
2. 6.0%
3. 7.3%
4. 8.5%
5. 9.7%

2. Consider the returns of the MSCI index of emerging markets equity in column D of the Excel file that goes with this quiz. Given the returns over the 1988‐2013 period, what has been the arithmetic mean annual return of these markets?

1. 11.8%
2. 14.2%
3. 17.6%
4. 20.1%
5. 23.3%

3. Consider the returns of the MSCI index of developed markets equity in column C of the Excel file that goes with this quiz. Given the returns over the 1988‐2013 period, what has been the geometric mean annual return of these markets?

1. 5.5%
2. 7.9%
3. 9.2%
4. 11.4%
5. 12.8%

4. Consider the returns of the MSCI index of emerging markets equity in column D of the Excel file that goes with this quiz. Given the returns over the 1988‐2013 period, what has been the geometric mean annual return of these markets?

1. 12.1%
2. 14.7%
3. 18.9%
4. 19.4%
5. 21.8%

5. Consider the returns of the MSCI index of developed markets equity in column C of the Excel file that goes with this quiz. Given the returns over the 1988‐2013 period, what has been the standard deviation of annual returns of these markets?

1. 18.0%
2. 19.4%
3. 20.9%
4. 22.1%
5. 24.2%

6. Consider the returns of the MSCI index of emerging markets equity in column D of the Excel file that goes with this quiz. Given the returns over the 1988‐2013 period, what has been the standard deviation of annual returns of these markets?

1. 29.9%
2. 34.7%
3. 37.5%
4. 40.1%
5. 44.6%

7. Consider the returns of the MSCI index of developed markets equity in column C of the Excel file that goes with this If you had invested $100 in these markets at the very beginning of 1988, how much money would you have at the end of 2013?

1. $315
2. $509
3. $640
4. $729
5. $923

8. Consider the returns of the MSCI index of emerging markets equity in column D of the Excel file that goes with this quiz. If you had invested $100 in these markets at the very beginning of 1988, how much money would you have at the end of 2013?

1. $1,014
2. $1,187
3. $1,411
4. $1,674
5. $1,956

9. Consider the returns of both the MSCI index of developed and emerging markets equity in columns C and D of the Excel file that goes with this quiz. Given the returns over the 1988‐2013 period, what has been the correlation between developed and emerging markets?

1. 0.23
2. 0.44
3. 0.67
4. 0.79
5. 0.9

10. Which one of the statements below is false?

1. The standard deviation of returns cannot be a negative number.
2. The geometric mean return can be a negative number.
3. The arithmetic mean return can be a negative number.
4. The correlation between two assets can only be a positive number.
5. The beta of an asset can be higher than 2.

11. Which one of the statements below is true?

1. When two assets with a correlation lower than 1 are combined into a portfolio, the volatility of the portfolio is higher than the weighted‐average volatility of the two assets.
2. When two assets with a correlation lower than 1 are combined into a portfolio, the volatility of the portfolio is equal to the weighted‐average volatility of the two asset
3. When two assets with a correlation lower than 1 are combined into a portfolio, the volatility of the portfolio is lower than the weighted‐average volatility of the two assets.
4. The correlation between two assets can be higher than 1.5.
5. The correlation between two assets can be lower than 1.5.

12. Of the five options below, select the one that incorrectly completes the following sentence: “Diversification can help investors…

1. to reduce risk.
2. to increase returns.
3. to reduce risk and increase returns at the same time.
4. to increase risk‐adjusted returns.
5. to always be fully exposed to the best performing asset.