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- Question 1 of 110
##### 1. Question

An efficient set of portfolios represented through graph is classified as an

CorrectIncorrect - Question 2 of 110
##### 2. Question

Commercial mortgages, farm mortgages and home mortgages are categories of

CorrectIncorrect - Question 3 of 110
##### 3. Question

Stock market value can deviate from its fundamental value because of strong

CorrectIncorrect - Question 4 of 110
##### 4. Question

Which of the following is the most commonly used yield measure of a bond?

CorrectIncorrect - Question 5 of 110
##### 5. Question

A liquid asset may

CorrectIncorrect - Question 6 of 110
##### 6. Question

Which of the following statements regarding risk-averse investors is correct?

CorrectIncorrect - Question 7 of 110
##### 7. Question

Securities with lower default risk and having highest credit quality are assigned the rating of

CorrectIncorrect - Question 8 of 110
##### 8. Question

Default risk is measured by large traders, managers and investors with help of

CorrectIncorrect - Question 9 of 110
##### 9. Question

A saver who is capital-risk averse is worried that interest rates in the economy might

CorrectIncorrect - Question 10 of 110
##### 10. Question

Which of the following measures the reward to volatility trade-off by dividing the average portfolio excess return by the standard deviation of returns?

CorrectIncorrect - Question 11 of 110
##### 11. Question

Difference between actual return on stock and predicted return is considered as

CorrectIncorrect - Question 12 of 110
##### 12. Question

If a portfolio manager consistently obtains a high Sharpe measure, the managers forecasting ability is

CorrectIncorrect - Question 13 of 110
##### 13. Question

What is a widely used measure of growth and is used to evaluate anything that can fluctuate in value, such as assets and investments?

CorrectIncorrect - Question 14 of 110
##### 14. Question

CAGR is used when looking at investments over any period of time, but usually for a period of at least

CorrectIncorrect - Question 15 of 110
##### 15. Question

Beta is a measure of

CorrectIncorrect - Question 16 of 110
##### 16. Question

Sum of market risk and diversifiable risk are classified as total risk which is equivalent to

CorrectIncorrect - Question 17 of 110
##### 17. Question

A model which regresses return of stock against return of market is classified as

CorrectIncorrect - Question 18 of 110
##### 18. Question

Future beta is needed to calculate in most situations is classified as

CorrectIncorrect - Question 19 of 110
##### 19. Question

What is close to 1 indicates that the security will perform roughly in line with the market?

CorrectIncorrect - Question 20 of 110
##### 20. Question

Diversification Strategy is used to gain market share in

CorrectIncorrect - Question 21 of 110
##### 21. Question

Strategies such as diversification, penetration and market development are part of

CorrectIncorrect - Question 22 of 110
##### 22. Question

Which of the following is not a typical portfolio constraint?

CorrectIncorrect - Question 23 of 110
##### 23. Question

Which of the following are boundaries that investors place on their choice of investment assets?

CorrectIncorrect - Question 24 of 110
##### 24. Question

Proper diversification among common stocks can

CorrectIncorrect - Question 25 of 110
##### 25. Question

In the context of the Capital Asset Pricing Model the relevant measure of risk is

CorrectIncorrect - Question 26 of 110
##### 26. Question

If an asset’s expected return plots above the security market line, the asset is

CorrectIncorrect - Question 27 of 110
##### 27. Question

In capital markets, major suppliers of trading instruments are

CorrectIncorrect - Question 28 of 110
##### 28. Question

Which model predicts that all investors will hold the same portfolio in equilibrium?

CorrectIncorrect - Question 29 of 110
##### 29. Question

According to the single index model, the inflation risk is an example of the

CorrectIncorrect - Question 30 of 110
##### 30. Question

Which of the following pricing model provides no guidance concerning the determination of the relevant risk factors?

CorrectIncorrect - Question 31 of 110
##### 31. Question

Research from the 1970s to the 1990s found that over 90 percent of a fund’s returns over time is explained by

CorrectIncorrect - Question 32 of 110
##### 32. Question

Which of the following is the stage when investors in their early-to-middle earning years attempt to accumulate assets to satisfy near-term needs, e.g., children’s education or down payment on a home?

CorrectIncorrect - Question 33 of 110
##### 33. Question

A portfolio that has an expected outcome of $115 is formed by

CorrectIncorrect - Question 34 of 110
##### 34. Question

A reward-to-volatility ratio is useful in

CorrectIncorrect - Question 35 of 110
##### 35. Question

An amount of company retain earnings, return on equity and inflation are factors which effect

CorrectIncorrect - Question 36 of 110
##### 36. Question

Historically, P/E ratios have tended to be

CorrectIncorrect - Question 37 of 110
##### 37. Question

What focuses on outperforming the market in comparison to a specific benchmark such as the Standard & Poor’s 500 Index?

CorrectIncorrect - Question 38 of 110
##### 38. Question

What mimics the investment holdings of a particular index in order to achieve similar results?

CorrectIncorrect - Question 39 of 110
##### 39. Question

What strive for superior returns but take greater risks and entail larger fees?

CorrectIncorrect - Question 40 of 110
##### 40. Question

When interest rates increase, the duration of a 15-year bond selling at a discount will be

CorrectIncorrect - Question 41 of 110
##### 41. Question

If a bond manager swaps a bond for another bond with a higher yield to maturity and a longer duration, the swap is

CorrectIncorrect - Question 42 of 110
##### 42. Question

Which of the following is a course objective of Portfolio Strategy?

CorrectIncorrect - Question 43 of 110
##### 43. Question

The sponsor of a defined contribution pension plan is required

CorrectIncorrect - Question 44 of 110
##### 44. Question

An investor will take as large a position as possible when an equilibrium price relationship is violated. This is an example of

CorrectIncorrect - Question 45 of 110
##### 45. Question

Which refer to strategies aimed at attaining the established rate of return requirements while meeting expressed risk tolerance and applicable constraints?

CorrectIncorrect - Question 46 of 110
##### 46. Question

The optimal portfolio on the efficient frontier for a given investor depends on

CorrectIncorrect - Question 47 of 110
##### 47. Question

The optimal portfolio on the efficient frontier for a given investor does not depend on

CorrectIncorrect - Question 48 of 110
##### 48. Question

Which of the following is NOT part of the portfolio management process, as described by Maginn, Tuttle, McLeavy, and Pinto (2007)?

CorrectIncorrect - Question 49 of 110
##### 49. Question

Which type of asset/liability management does NOT require the ability to forecast future interest rate levels?

CorrectIncorrect - Question 50 of 110
##### 50. Question

If the yield curve were upward sloping, the bank could accept some interest rate risk and earn a positive interest rate spread by

CorrectIncorrect - Question 51 of 110
##### 51. Question

An increase in cash reserve ratio will cause yield curve to

CorrectIncorrect - Question 52 of 110
##### 52. Question

VaR is not enough to assess market risk of a portfolio. Stress testing is desirable because

CorrectIncorrect - Question 53 of 110
##### 53. Question

The Treynor-Black model is a model that shows how an investment manager can use security analysis and statistics to construct

CorrectIncorrect - Question 54 of 110
##### 54. Question

What is the value of a call on the expiration date, if on that date the price of the stock is $25 and the exercise price is $26?

CorrectIncorrect - Question 55 of 110
##### 55. Question

If you were confident that the price of stock X would drop dramatically within two months, which of the following investment transactions would yield the highest return on your investment?

CorrectIncorrect - Question 56 of 110
##### 56. Question

An investor who wishes to form a portfolio that lies to the right of the optimal risky portfolio on the Capital Allocation Line must

CorrectIncorrect - Question 57 of 110
##### 57. Question

Suppose you buy a portfolio of long-dated bonds at a price of Rs.200 each. Shortly afterwards, interest rates rise by 1.5% and the market value of your bonds falls to Rs.190. This is an example of

CorrectIncorrect - Question 58 of 110
##### 58. Question

According to the Treynor-Black model, the weight of a security in the active portfolio depends on the ratio of __________ to __________.

CorrectIncorrect - Question 59 of 110
##### 59. Question

If the risk-free return is 3%. The beta of a managed portfolio is 1.75, the alpha is 0% and the average return is 16%. Based on Jensens measure of portfolio performance, Calculate the return on the market portfolio?

CorrectIncorrect - Question 60 of 110
##### 60. Question

Standard deviation of an asset is 2.5%. Market standard deviation is 2%. Risk free rate of return is 13%. Expected return on market portfolio is 15% and Correlation coefficient of portfolio with market is 0.8. Calculate the expected rate of return of the portfolio.

CorrectIncorrect - Question 61 of 110
##### 61. Question

A growth oriented non dividend paying share is bought for Rs.265 and sold for Rs.390 after 4 years. The compounded annual growth rate is

CorrectIncorrect - Question 62 of 110
##### 62. Question

When a portfolio consists of only a risky asset and a risk-free asset, increasing the fraction of the overall portfolio invested in the risky asset will

CorrectIncorrect - Question 63 of 110
##### 63. Question

What is a statistical measurement of dispersion around an average, which, for an investment, depicts how widely the returns varied over a certain period?

CorrectIncorrect - Question 64 of 110
##### 64. Question

When an investment opportunity set is formed with two securities that are perfectly negatively correlated, the global minimum variance portfolio has a standard deviation that is always

CorrectIncorrect - Question 65 of 110
##### 65. Question

Suppose two portfolios have the same average return, the same standard deviation of returns, but portfolio X has a higher beta than portfolio Y. According to the Sharpe measure, the performance of portfolio X

CorrectIncorrect - Question 66 of 110
##### 66. Question

Stock A has an expected return of 25% and a beta of 2.0. Stock B has an expected return of 18% and a beta of 1.5. The market risk premium is 8%. If the risk free rate is 7%, then

CorrectIncorrect - Question 67 of 110
##### 67. Question

The risk free return of security A is 7%. In addition to it, you expect that the return on market would be 12%.The expected return of security A with Beta 0.60 is

CorrectIncorrect - Question 68 of 110
##### 68. Question

Consider a graph with standard deviation on the horizontal axis and expected return on the vertical axis. The line that connects the risk-free rate and the optimal risky portfolio is called

CorrectIncorrect - Question 69 of 110
##### 69. Question

The market risk premium is 15% and the risk-free rate is 5%. The beta of Asset D is 0.2. What is Asset D’s expected return under the CAPM?

CorrectIncorrect - Question 70 of 110
##### 70. Question

The asset allocation which seeks to take advantage of short term movements and opportunities in investment markets is called

CorrectIncorrect - Question 71 of 110
##### 71. Question

Which of the following refer to strategies aimed at attaining the established rate of return requirements while meeting expressed risk tolerance and applicable constraints?

CorrectIncorrect - Question 72 of 110
##### 72. Question

What percentages of your money must be invested in the risky asset and the risk-free asset, respectively, to form a portfolio with an expected return of 0.09?

CorrectIncorrect - Question 73 of 110
##### 73. Question

What percentages of your money must be invested in the risk-free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 0.06?

CorrectIncorrect - Question 74 of 110
##### 74. Question

The slope of the Capital Allocation Line formed with the risky asset and the risk-free asset is equal to

CorrectIncorrect - Question 75 of 110
##### 75. Question

Security A has expected return of 10% and standard deviation of 22%. Security B has expected return of 12% and standard deviation of 29%. If the two securities have a correlation coefficient of 0.6, what is their covariance?

CorrectIncorrect - Question 76 of 110
##### 76. Question

XYZ company has an expected ROE of 10%. The dividend growth rate will be __________ if the firm follows a policy of paying 20% of earnings in the form of dividends.

CorrectIncorrect - Question 77 of 110
##### 77. Question

A passive strategy does not have a management team making investment decisions and can be structured as

CorrectIncorrect - Question 78 of 110
##### 78. Question

If a bond manager swaps a bond for one that is identical in terms of coupon rate, maturity and credit quality, but offers a higher yield to maturity, the swap is called

CorrectIncorrect - Question 79 of 110
##### 79. Question

The interest rate on a 20 year bond with face value of Rs.1000 is 8%. The expected yield to maturity is 9%. If interest received on a half yearly basis. What is the current market price of the bond?

CorrectIncorrect - Question 80 of 110
##### 80. Question

A bond Rs.1000 with coupon of 8.5%p.a. payable semi-annually with a tenure of 20 years is currently selling at Rs.1150. What is the bond’s current yield?

CorrectIncorrect - Question 81 of 110
##### 81. Question

Mr. Narayan invested in tradable bonds of a corporate paying annual coupon of 11%. The tenure of the bonds is 10 years and he desires to hold them till maturity. What would be the impact of declining interest rates on his cash flows during this tenure?

CorrectIncorrect - Question 82 of 110
##### 82. Question

Which of the following strategies seeks to increase the portfolio value by reinvesting current income in addition to capital gains?

CorrectIncorrect - Question 83 of 110
##### 83. Question

A preferred stock will pay a dividend of Rs. 1.50 in the upcoming year, and every year thereafter, i.e., dividends are not expected to grow. You require a return of 12% on this stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock.

CorrectIncorrect - Question 84 of 110
##### 84. Question

Which of the following are true about the interest-rate sensitivity of bonds?

(I) Bond prices and yields are inversely related.

(II) Prices of long-term bonds tend to be more sensitive to interest rate changes than prices of short-term bonds.

(III) Interest-rate risk is directly related to the bond’s coupon rate.

(IV) The sensitivity of a bond’s price to a change in its yield to maturity is inversely related to the yield to maturity at which the bond is currently selling.CorrectIncorrect - Question 85 of 110
##### 85. Question

If a bank has a positive dollar gap and interest rates are expected to increase in the near future, the net interest margin of the bank will

CorrectIncorrect - Question 86 of 110
##### 86. Question

If a bank has a zero gap, it is using which of the following interest rate risk management strategies?

CorrectIncorrect - Question 87 of 110
##### 87. Question

The problem of imperfect correlation of interest rates in the use of gap analysis can be dealt with by using

CorrectIncorrect - Question 88 of 110
##### 88. Question

Aggressive gap management that successfully increases the net interest income of the bank may well decrease shareholder wealth, all else the same, because

CorrectIncorrect - Question 89 of 110
##### 89. Question

What is the price of a stock estimated to pay a dividend of $.60 next year, if the dividend growth rate is 5% and the appropriate discount rate is 8%?

CorrectIncorrect - Question 90 of 110
##### 90. Question

The common stock of TESU Corporation has been trading in a narrow range around $50 per share for months, and you believe it will stay in that range for the next 3 months. A 3-month put option with an exercise price of $50 sells for $4. A call with the same expiration date and exercise price sells for $4. What simple options strategy using a put and a call will take advantage of your belief about the stock price’s future movement?

CorrectIncorrect - Question 91 of 110
##### 91. Question

During the past five years, the returns of a stock are:

For first year 9%, second year 5%, third year-11%, fourth year 8%, fifth year 12%. Calculate Cumulative Wealth Index, Arithmetic Mean, Geometric Mean and Standard Deviation?CorrectIncorrect - Question 92 of 110
##### 92. Question

You are evaluating the rankings based on performance ratios of three funds X,Y and Z. The average returns obtained from funds X,Y and Z have been 16%, 19% and 14% respectively against the market return of 13%. The standard returns of the fund returns have been 17,22 and 16 respectively versus the market return standard deviation of 15. If the beta reported of these funds is 1.2, 1.4 and 1.1 respectively and the risk free rate of return is 5.5%. What are your ranking in the order of best to worst with regards to Treynor ratio, Sharpe ratio and Jensen ratio?

CorrectIncorrect - Question 93 of 110
##### 93. Question

Standard deviation of an asset is 2.5%. Market standard deviation is 2%. Risk free rate of return is 13%. Expected return on market portfolio is 15% and Correlation coefficient of portfolio with market is 0.8,if portfolio beta is 0.5 and risk free return is 10%, Calculate the expected rate of return of the portfolio?

CorrectIncorrect - Question 94 of 110
##### 94. Question

What is a growth statistic that measures the compound annual return of investments over a set period of time, assuming you reinvest your profits (i.e. compounding effect)?

CorrectIncorrect - Question 95 of 110
##### 95. Question

You are evaluating the rankings based on Treynor Ratio of three funds X,Y and Z. The average returns obtained from funds X,Y and Z have been 14%, 17% and 12% respectively against the market return of 11%. The standard deviations of fund returns have been 15%, 19% and 14% respectively versus the market return standard deviation of 13%. If the beta reported of these funds is 1.1, 1.5 and 1.0 respectively. The risk free rate of return is 6%. What are your rankings in the order of best to worst?

CorrectIncorrect - Question 96 of 110
##### 96. Question

Which one of the following showed that the duration of a bond was a more appropriate measure of time characteristics than the term to maturity of the bond because duration considers both the repayment of capital at maturity and the size and timing of coupon payments prior to final maturity?

CorrectIncorrect - Question 97 of 110
##### 97. Question

Clive Rodney Megabucks offers your friend, Yunyoung, an interesting gamble involving giving her the choice of the contents in one of two sealed, identical-looking boxes. One box has $20,000 in cash and the second has nothing inside. There is an equal probability that the chosen box contains cash versus nothing. Yunyoung states that she would not call off the gamble if you offered her a certain $4,999 instead of her choice of box. However, she would be indifferent if $5,000 was offered in place of the risky gamble; and she would definitely take $5,001 to call off the gamble. We would describe Yunyoung as

CorrectIncorrect - Question 98 of 110
##### 98. Question

What is the variability of return on stocks or portfolios not explained by general market movements. It is avoidable through diversification?

CorrectIncorrect - Question 99 of 110
##### 99. Question

The risk-free rate for the next year is 3%, and the market risk premium is expected to be 10%. The beta of Acme’s stock is 1.5. If you believe that Acme’s stock will actually return 18.2% over the next year, then according to the CAPM you should

CorrectIncorrect - Question 100 of 110
##### 100. Question

Stock A has a beta of 1.0 and very high unique risk. If the expected return on the market is 20%, then according to the CAPM the expected return on Stock A will be

CorrectIncorrect - Question 101 of 110
##### 101. Question

The risk-free rate and the expected market rate of return are 0.06 and 0.12, respectively. According to the capital asset pricing model (CAPM), the expected rate of return on security X with a beta of 1.2 is equal to

CorrectIncorrect - Question 102 of 110
##### 102. Question

Your client started investing Rs. 12000 per month a year ago in an asset allocation of 30:70 in equity and debt to achieve a goal in 6 years from now for accumulating Rs.10,00,000. You realize that he would be requiring Rs. 15,00,000 for the same goal. You expect equity and debt to give returns of 11.75% p.a and 8.25% p.a respectively in the entire period of investment. You assess changing asset allocation to 65:35 in equity and debt by investing Rs. 2000 additional per month to see how closer he can reach to his goal.

CorrectIncorrect - Question 103 of 110
##### 103. Question

An investor invests 30 percent of his wealth in a risky asset with an expected rate of return of 0.15 and a variance of 0.04 and 70 percent in a T-bill that pays 6 percent. His portfolio’s expected return and standard deviation are __________ and __________, respectively.

CorrectIncorrect - Question 104 of 110
##### 104. Question

Shares of a closed-end fund are trading at a 4% premium over NAV. If NAV is $10 per share, what is the current market price of the fund’s shares?

CorrectIncorrect - Question 105 of 110
##### 105. Question

A closed-end fund owns foreign securities with a market value of $95 million, has 5 million shares outstanding, owes its employees $500,000, and trades at a 5% discount. The net asset value per share is

CorrectIncorrect - Question 106 of 110
##### 106. Question

A 20 year, 10% corporate bond with face value Rs.1000 and interest payable semi annually matures after 8 years. The bond is available at a yield to maturity of 8.5%.if the record date for the last coupon has just passed, at what value 36 bonds of the corporate are likely to be quoted in the market?

CorrectIncorrect - Question 107 of 110
##### 107. Question

Your client starts investing immediately for 15 years annually Rs. 80,000 in the ratio of 70:30 in equity and debt products. You expect return from equity and debt to be 12% and 8.5% p.a. during this period. To protect the wealth, he rebalances the portfolio in 40:60 ratio of equity and debt after 15 years and invests in the same ratio annually Rs. 80,000 for the next 5 years. The return expected from equity and debt in this period is 9% p.a. and 8% p.a. What rate of return is expected on his total investments? How would this return fare when seen from average inflation of 5% during the entire period?

CorrectIncorrect - Question 108 of 110
##### 108. Question

Diversified Portfolios had year-end assets of $279,000,000 and liabilities of $43,000,000. If Diversified NAV was $42.13, how many shares must have been held in the fund?

CorrectIncorrect - Question 109 of 110
##### 109. Question

1 day VaR of a portfolio is Rs. 500,000 with 95% confidence level. In a period of six months (125 working days) how many times the loss on the portfolio may exceed Rs. 500,000?

CorrectIncorrect - Question 110 of 110
##### 110. Question

Given the following information:

Interest Sensitive Assets = $300 30-day commercial paper

Interest Sensitive Liabilities = $400 90-day CDs

30-day commercial paper is 50 percent as volatile as 90-day T-bills

90-day CDs are 120 percent as volatile as 90-day T-bills

Calculate the standardized gap for the bank.CorrectIncorrect