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0.PortfolioManagement

Q-1.

Investorsshoulduseaportfolioapproachto:

A.reducerisk.

B.monitorrisk.

C.eliminaterisk.

Q-2.

Theexecutionstepoftheportfoliomanagementprocessincludes:

A.preparingtheinvestmentpolicystatement.

B.finalizingtheassetallocation.

C.monitoringtheportfolioperformance.

Q-3.

Thetime-weightedrateofreturn:

A.resultsinalowerreturnwhencomparedwiththemoney-weightedrateofreturn.

B.isaffectedbytheamountandtimingofcashflowstoandfromaportfolio.

C.calculatesmulti-periodcashflowsmirroringaportfolio’scompoundgrowthrate.

Q-4.

Withrespecttoaninvestor’sutilityfunctionexpressedas:U=E(r)?1/2Aσ2,whichof

thefollowingvaluesforthemeasureforriskaversionhastheleastamountofrisk

aversion?

A.?4.

B.0.

C.4.

Q-5.

Whichofthefollowingstatementsisleastaccurate?Theefficientfrontieristhesetof

allattainableriskyassetswiththe:

A.highestexpectedreturnforagivenlevelofrisk.

B.lowestamountofriskforagivenlevelofreturn.

C.highestexpectedreturnrelativetotherisk-freerate.

Q-6.

Whichofthefollowingstatementsmostaccuratelydefinesthemarketportfolioin

capitalmarkettheory?Themarketportfolioconsistsofall:

A.riskyassets.

B.tradableassets.

C.investableassets.

Q-7.

Whichofthefollowingeventsismostlikelyanexampleofnonsystematicrisk?

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A.Adeclineininterestrates.

B.Theresignationofchiefexecutiveofficer.

C.AnincreaseinthevalueoftheUSdollar.

Q-8.

Inastrategicassetallocation,assetswithinaspecificassetclassareleastlikelytohave:

A.lowpairedcorrelations.

B.lowcorrelationswithotherassetclasses.

C.similarriskandreturnexpectations.

Q-9.

Ananalystcreatingadatasetcomposedlargelyofproductreviewswouldmostlikely

classifythedatasourcesasgeneratedby:

A.sensors.

B.individuals.

C.businessprocesses.

Q-10.

Therelativestrengthindexforastockstandsat75.Thisreadingisbestdescribedasan

indicationthatthestockis

A.neutral.

B.oversold.

C.overbought.

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1

0.PortfolioManagement

Q-1.

Solution:A.

Combiningassetsintoaportfolioshouldreducetheportfolio’svolatility.Specifically,“individuals

andinstitutionsshouldholdportfoliostoreducerisk.”Asillustratedinthereading,however,risk

reductionmaynotbeasgreatduringaperiodofdramaticeconomicchange.

PortfolioManagement,PortfolioManagement:AnOverview,Portfolioperspective

Q-2.

Solution:B.

Assetallocationoccursintheexecutionstep.

Aisincorrect.Preparationoftheinvestmentpolicystatementoccursintheplanningstep.

Cisincorrect.Portfoliomonitoringoccursinthefeedbackstep.

PortfolioManagement,PortfolioManagement:AnOverview,Portfoliomanagementprocess

Q-3.

Solution:C.

Time-weightedrateofreturnreflectsthecompoundrateofgrowthofoneunitofcurrency

investedoverastatedmeasurementperiod,anditremovestheeffectsoftimingandamountof

withdrawalsandadditionstotheportfolio.

Aisincorrectbecausetime-weightedrateofreturncanbethesame,higher,orlowerthan

money-weightedrateofreturn.

Bisincorrectbecausethisisinfacttheexplanationformoney-weightedreturn.

PortfolioManagement,PortfolioRiskandReturn:PartI,Riskandreturn

Q-4.

Solution:A.

Anegativevalueinthegivenutilityfunctionindicatesthattheinvestorisariskseeker.

PortfolioManagement,PortfolioRiskandReturn:PartI,ModernPortfolioTheory

Q-5.

Solution:C.

Theefficientfrontierdoesnotaccountfortherisk-freerate.Theefficientfrontieristhesetofall

attainableriskyassetswiththehighestexpectedreturnforagivenlevelofriskorthelowest

amountofriskforagivenlevelofreturn.

PortfolioManagement,PortfolioRiskandReturn:PartI,ModernPortfolioTheory

Q-6.

Solution:A.

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Themarketincludesallriskyassets,oranythingthathasvalue;however,notallassetsare

tradable,andnotalltradableassetsareinvestable.

PortfolioManagement,PortfolioRiskandReturn:PartII,CAL,CML

Q-7.

Solution:B.

Nonsystematicriskisspecifictoafirm,whereassystematicriskaffectstheentireeconomy.

PortfolioManagement,PortfolioRiskandReturn:PartII,Systematicriskandnonsystematicrisk

Q-8.

Solution:A.

Inastrategicassetallocation,assetswithinaspecificassetclasshavehighpairedcorrelations

andlowcorrelationswithotherassetclasses.

Bisincorrect.Assetswithinaspecificassetclasswillhavelowcorrelationswithassetsinother

assetclasses.

Cisincorrect.Assetswithinaspecificassetclasssharesimilarriskandreturnexpectations.

Portfoliomanagement,Investmentconstraints,assetallocation,ESG

Q-9.

Solution:B.

Productreviewswouldmostlikelycomefromindividualsources.

PortfolioManagement,FintechinInvestmentManagement,FintechinInvestmentManagement

Q-10.

Solution:C.

Therelativestrengthindex(RSI)isamomentumoscillatorandprovidesinformationonwhether

ornotanassetisoverboughtoroversold.AnRSIgreaterthan70indicatesthatastockis

overbought;anRSIlowerthan30suggeststhatastockisoversold.

Aisincorrect.Therelativestrengthindexisamomentumoscillatorandprovidesinformationon

whetherornotanassetisoverboughtoroversold.AnRSIgreaterthan70indicatesthatastockis

overbought;anRSIlowerthan30suggeststhatastockisoversold.

Bisincorrect.Therelativestrengthind