Chapter 7

Pregunta 1 de 16

1

Portfolio performance is:

Selecciona una de las siguientes respuestas posibles:

  • rarely measured in absolute terms, mostly measured in relative terms

  • rarely measured in relative terms, mostly measured in absolute terms

  • only ever measured in relative terms

  • only ever measured in absolute terms

Explicación

Pregunta 2 de 16

1

Which of the following is a limitation rather than an assumption of the Capital Asset Pricing
Model?

Selecciona una de las siguientes respuestas posibles:

  • Investors are rational and risk averse

  • Investors hold a well-diversified portfolio

  • Investors make investment decisions based on mean variance analysis

  • Investors are rewarded for more than just their exposure to systemic risk

Explicación

Pregunta 3 de 16

1

An investor allowed the principle of 'regret aversion' to influence his actions. This resulted in
him:

Selecciona una de las siguientes respuestas posibles:

  • declining to buy a stock based purely on a previous bad experience

  • B buying a badly performing stock from a friend as recompense for recommending it in the
    first place

  • holding a poorly performing stock for an irrationally long period

  • only selling stock once a specified loss threshold had been reached

Explicación

Pregunta 4 de 16

1

Why is a time weighted return (TWR) preferred to a money weighted return (MWR) when
evaluating performance?

Selecciona una de las siguientes respuestas posibles:

  • TWR only requires portfolio values at the start and end of the investment period along
    with dates and size of each cash flow

  • TWR eliminates the timing effect of cash flows into and out of the fund

  • TWR measures the fund growth resulting from both the underlying performance of the
    portfolio and the size and timing of cash flows into and out of the fund

  • TWR calculates the risk adjusted return per unit of risk

Explicación

Pregunta 5 de 16

1

Four bond portfolios each hold a variety of stock. Which one of them is BEST described as
operating a barbell strategy?

Selecciona una de las siguientes respuestas posibles:

  • Portfolio A, which consists solely of bills maturing in one year plus bonds maturing in 25
    and 30 years

  • Portfolio B, which consists solely of bills maturing in six months plus bonds maturing in 5,
    10, 15 and 20 years

  • Portfolio C, which consists solely of bonds maturing in 1, 3 and 5 years

  • Portfolio D, which consists solely of bonds maturing in 20, 25 and 30 years

Explicación

Pregunta 6 de 16

1

Why do portfolios need a regular annual or periodic review?

Selecciona una de las siguientes respuestas posibles:

  • To ensure that all assets are priced on a regular basis

  • To ensure that all assets are reconciled against the market

  • To ensure that all cash balances are reconciled against the actual bank

  • To ensure the portfolio still meets the client's objectives and is positioned correctly given
    the market conditions

Explicación

Pregunta 7 de 16

1

The excess return of a portfolio or security above that of the risk adjusted benchmark is known
as:

Selecciona una de las siguientes respuestas posibles:

  • alpha

  • beta

  • duration

  • premium

Explicación

Pregunta 8 de 16

1

An investment manager believes that markets are inefficient and that he can obtain abnormal
returns after transaction charges. Which investment style is he most likely to adopt?

Selecciona una de las siguientes respuestas posibles:

  • Passive

  • Indexation

  • Active

  • Satellite

Explicación

Pregunta 9 de 16

1

An individual has been advised to invest in some shares by a friend. He wants to make sure that
he invests in companies which do not have a volatile share price. To achieve this he should
select shares which have a beta factor of:

Selecciona una de las siguientes respuestas posibles:

  • 1

  • 1.25

  • 1.5

  • 1.75

Explicación

Pregunta 10 de 16

1

Which of the following is a feature in Arbitrage Pricing Theory (APT)?

Selecciona una de las siguientes respuestas posibles:

  • APT relies on identified factors being correlated

  • The variables of APT include real economic factors

  • The principal component of APT is the return on an index of all shares

  • APT is equivalent to a single factor Capital Asset Pricing Model

Explicación

Pregunta 11 de 16

1

Based on the principles of Modern Portfolio theory, an equity fund will operate on the
'efficient frontier' if:

Selecciona una de las siguientes respuestas posibles:

  • the optimum level of systematic risk is obtained

  • the best level of diversification is achieved

  • the fund's alpha value is negative

  • the fund's beta value is one or more

Explicación

Pregunta 12 de 16

1

Bond portfolio X exclusively contains relatively long-dated stock whereas Bond portfolio Y
operates a laddering strategy. This means that Bond X is likely to:

Selecciona una de las siguientes respuestas posibles:

  • generate higher yields

  • present less of a credit risk

  • be more sensitive to interest rate changes

  • represent a more diversified approach

Explicación

Pregunta 13 de 16

1

In which country can shareholders be assured that listed companies will comply with the OECD
Principles for Corporate Governance?

Selecciona una de las siguientes respuestas posibles:

  • France

  • Germany

  • UK

  • USA

Explicación

Pregunta 14 de 16

1

An investor has a requirement for an 8% return and is considering choosing Stock X to satisfy
this need. Based on the Capital Asset Pricing Model, if the beta value of this stock is
recalibrated from 1.2 to 1.3, this would:

Selecciona una de las siguientes respuestas posibles:

  • increase the likelihood that the stock would be suitable

  • decrease the likelihood that the stock would be suitable

  • automatically trigger an increase in the investor's required rate

  • automatically trigger a decrease in the investor's required rate

Explicación

Pregunta 15 de 16

1

Using Modern Portfolio Theory to create a two stock portfolio, which of the following is TRUE?

Selecciona una de las siguientes respuestas posibles:

  • The lower the correlation of stock returns, the greater the portfolio's diversification

  • The higher the correlation of stock returns, the greater the portfolio's diversification

  • The higher the correlation of stock returns, the lower the level of total risk associated with
    any given level of expected return

  • The lower the correlation of stock returns, the higher the level of total risk associated with
    any given level of expected return

Explicación

Pregunta 16 de 16

1

Which of the following does a passive investment manager principally invest in?

Selecciona una de las siguientes respuestas posibles:

  • Equities

  • An index

  • Fixed income

  • Other institutional funds

Explicación

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