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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