Question 1

Investors need to monitor economic and market activity to assess the potential impact these factors can have on their investment portfolios.

Accepted Answer

A) True 
 B)False

Question 2

Phil has a portfolio with a 13.2% total return. The beta of the portfolio is 1.48 and the standard deviation is 13%. Currently, the risk- free rate of return is 4% and the overall market has a total return of 11%. What is the value of Treynor's measure for Phil's portfolio?

Accepted Answer

A)  7.1%. 
B)  8.9%. 
C)  6.2%. 
D)  2.1%. 
A)  7.1%. 
B)  8.9%. 
C)  6.2%. 
D)  2.1%.

Question 3

The holding period return measures only the capital appreciation of an investment.

Accepted Answer

A) True 
 B)False

Question 4

Juan's investment portfolio was valued at $125,640 at the beginning of the year. During the year, Juan received $603 in interest income and $298 in dividend income. Juan also sold shares and realised $1,459 in capital gains. Juan's portfolio is valued at $142,608 at the end of the year. All income and realised gains were reinvested. No funds were contributed or withdrawn during the year. What is the amount of income Juan must declare this year for income tax purposes?

Accepted Answer

A)  $19,328. 
B)  $901. 
C)  $2,360. 
D)  $0. 
A)  $19,328. 
B)  $901. 
C)  $2,360. 
D)  $0.

Question 5

Which one of the following statements concerning formula plans is correct?

Accepted Answer

A)  Formula plans are based on the adherence to a mechanical set of rules with regard to when to buy and/or sell. 
B)  Securities with very stable prices are best suited to nearly all formula plans. 
C)  The objective of most formula plans is to maximise profits. 
D)  The use of subjective judgment is important to the routine administration of most formula plans. 
A)  Formula plans are based on the adherence to a mechanical set of rules with regard to when to buy and/or sell. 
B)  Securities with very stable prices are best suited to nearly all formula plans. 
C)  The objective of most formula plans is to maximise profits. 
D)  The use of subjective judgment is important to the routine administration of most formula plans.

Question 6

On January 1, Stacy's portfolio was valued at $96,534. During the year Stacy received $3,285 in interest and $4,100 in dividends. She also sold one share at a gain of $850. The value of the portfolio on December 31 of the same year was $113,201. At the end of June, Stacy withdrew $5,000 from the portfolio. What is the holding period return for the year?

Accepted Answer

A)  27.2%. 
B)  25.8%. 
C)  25.1%. 
D)  26.5%. 
A)  27.2%. 
B)  25.8%. 
C)  25.1%. 
D)  26.5%.

Question 7

A share has a total return of 16.4%, a standard deviation of 14.5% and a beta of 1.63. The market rate of return is 12.4%, while the market's Treynor measure is 6.3. What is the value of the Treynor measure of this portfolio?

Accepted Answer

A)  27.6%. 
B)  6.3%. 
C)  18.4%. 
D)  2.5%. 
A)  27.6%. 
B)  6.3%. 
C)  18.4%. 
D)  2.5%.

Question 8

Suppose the shares of the Chickadee Corporation traded seven times in the following sequence one day last week: 46, 45.88, 45.75, 45.50, 45.63, 46, 46.13. In this case, a limit order to sell at 46 would have been executed

Accepted Answer

A)  only at 46, whereas a market order to sell would have been executed at 46.13. 
B)  between 46 and 46.13, whereas a market order to sell could have been executed anywhere between 45.50 and 46.13. 
C)  anywhere between 45.50 and 46.13, whereas a market order to sell would have been executed only at 46. 
D)  only at 46.13, and a market order to sell would have been executed between 46 and 46.13. 
A)  only at 46, whereas a market order to sell would have been executed at 46.13. 
B)  between 46 and 46.13, whereas a market order to sell could have been executed anywhere between 45.50 and 46.13. 
C)  anywhere between 45.50 and 46.13, whereas a market order to sell would have been executed only at 46. 
D)  only at 46.13, and a market order to sell would have been executed between 46 and 46.13.

Question 9

A stop- loss order guarantees that an investor's unrealised profit will be protected.

Accepted Answer

A) True 
 B)False

Question 10

Portfolio revision is the ongoing process of systematically studying the issues in the portfolio and selling certain issues and purchasing others as the means of maintaining a portfolio that best meets the investor's objectives.

Accepted Answer

A) True 
 B)False

Question 11

Which one of the following provides the greatest reduction in total risk?

Accepted Answer

A)  Asset allocation. 
B)  Diversification. 
C)  Beta reduction. 
D)  Security selection. 
A)  Asset allocation. 
B)  Diversification. 
C)  Beta reduction. 
D)  Security selection.

Question 12

Before analysing needs and objectives, investors should first construct a portfolio.

Accepted Answer

A) True 
 B)False

Question 13

Sharpe measures total risk while Treynor and Jensen measure only systematic risk.

Accepted Answer

A) True 
 B)False

Question 14

Fred and Martha are in their seventies and retired. Which one of the following sets of portfolio statistics might best suit their situation if their primary investment goal is current income with limited risk?

Accepted Answer

A)  Beta of 1.1 and a dividend yield of 5.4%. 
B)  Beta of 1.6 and a dividend yield of 6.4%. 
C)  Beta of 0.86, and a dividend yield of 4.6%. 
D)  Beta of 0.83 and a dividend yield of 6.3%. 
A)  Beta of 1.1 and a dividend yield of 5.4%. 
B)  Beta of 1.6 and a dividend yield of 6.4%. 
C)  Beta of 0.86, and a dividend yield of 4.6%. 
D)  Beta of 0.83 and a dividend yield of 6.3%.

Question 15

Asset allocation should focus on

Accepted Answer

A)  maximisation of current income. 
B)  selection of individual securities within an asset class. 
C)  the investor's financial and family situation. 
D)  maximisation of short- term profits. 
A)  maximisation of current income. 
B)  selection of individual securities within an asset class. 
C)  the investor's financial and family situation. 
D)  maximisation of short- term profits.

Question 16

Investors who use formula plans believe that they have above average ability to time the market and pick successful investments.

Accepted Answer

A) True 
 B)False

Question 17

Marti is 31 years old and is saving for retirement. Which one of the following portfolio allocations might best suit her situation if she is willing to accept a fair amount of risk in exchange for long- term capital appreciation?

Accepted Answer

A)  50% mortgage bonds, 5% money market, 45% government bonds. 
B)  5% money funds, 10% bonds and 85% growth shares. 
C)  60% bonds, 15% money funds and 25% real estate. 
D)  25% bank CDs, 40% corporate bonds, 15% money market, 20% value shares. 
A)  50% mortgage bonds, 5% money market, 45% government bonds. 
B)  5% money funds, 10% bonds and 85% growth shares. 
C)  60% bonds, 15% money funds and 25% real estate. 
D)  25% bank CDs, 40% corporate bonds, 15% money market, 20% value shares.

Question 18

An investor's portfolio should only contain securities that are suitable to the investor's goals and needs.

Accepted Answer

A) True 
 B)False

Question 19

The holding period return (HPR)

Accepted Answer

A)  can be used to determine the actual total return on shares, bonds, and other investments for periods of one year or less. 
B)  is the most appropriate measure of returns for an investment period exceeding one year. 
C)  reflects only capital gains and losses for investment periods of one year or less. 
D)  calculates the annual dividend yield on shares or current interest yield on bonds. 
A)  can be used to determine the actual total return on shares, bonds, and other investments for periods of one year or less. 
B)  is the most appropriate measure of returns for an investment period exceeding one year. 
C)  reflects only capital gains and losses for investment periods of one year or less. 
D)  calculates the annual dividend yield on shares or current interest yield on bonds.

Question 20

The key areas to monitor when evaluating your portfolio holdings are the overall performance of both the economy and the financial markets, and the returns on your investments.

Accepted Answer

A) True 
 B)False

Investors need to monitor economic and market activity to assess the potential impact these factors can have on their investment portfolios.

Phil has a portfolio with a 13.2% total return. The beta of the portfolio is 1.48 and the standard deviation is 13%. Currently, the risk- free rate of return is 4% and the overall market has a total return of 11%. What is the value of Treynor's measure for Phil's portfolio?

The holding period return measures only the capital appreciation of an investment.

Which one of the following statements concerning formula plans is correct?

A share has a total return of 16.4%, a standard deviation of 14.5% and a beta of 1.63. The market rate of return is 12.4%, while the market's Treynor measure is 6.3. What is the value of the Treynor measure of this portfolio?

Suppose the shares of the Chickadee Corporation traded seven times in the following sequence one day last week: 46, 45.88, 45.75, 45.50, 45.63, 46, 46.13. In this case, a limit order to sell at 46 would have been executed

A stop- loss order guarantees that an investor's unrealised profit will be protected.

Portfolio revision is the ongoing process of systematically studying the issues in the portfolio and selling certain issues and purchasing others as the means of maintaining a portfolio that best meets the investor's objectives.

Which one of the following provides the greatest reduction in total risk?

Before analysing needs and objectives, investors should first construct a portfolio.

Sharpe measures total risk while Treynor and Jensen measure only systematic risk.

Fred and Martha are in their seventies and retired. Which one of the following sets of portfolio statistics might best suit their situation if their primary investment goal is current income with limited risk?

Asset allocation should focus on

Investors who use formula plans believe that they have above average ability to time the market and pick successful investments.

Marti is 31 years old and is saving for retirement. Which one of the following portfolio allocations might best suit her situation if she is willing to accept a fair amount of risk in exchange for long- term capital appreciation?

An investor's portfolio should only contain securities that are suitable to the investor's goals and needs.

The holding period return (HPR)

The key areas to monitor when evaluating your portfolio holdings are the overall performance of both the economy and the financial markets, and the returns on your investments.

The Investment Environment

Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Shares

Analysing Shares

Share Valuation

Technical Analysis, Market Efficiency and Behavioural Finance

Fixed-Income Securities

Bond Valuation

Managed Funds: Professionally Managed Portfolios

Options: Puts and Calls

Commodities and Financial Futures

Filters

Exam 13: Managing Your Own Portfolio

Investors need to monitor economic and market activity to assess the potential impact these factors can have on their investment portfolios.

Phil has a portfolio with a 13.2% total return. The beta of the portfolio is 1.48 and the standard deviation is 13%. Currently, the risk- free rate of return is 4% and the overall market has a total return of 11%. What is the value of Treynor's measure for Phil's portfolio?

The holding period return measures only the capital appreciation of an investment.

Which one of the following statements concerning formula plans is correct?

A share has a total return of 16.4%, a standard deviation of 14.5% and a beta of 1.63. The market rate of return is 12.4%, while the market's Treynor measure is 6.3. What is the value of the Treynor measure of this portfolio?

Suppose the shares of the Chickadee Corporation traded seven times in the following sequence one day last week: 46, 45.88, 45.75, 45.50, 45.63, 46, 46.13. In this case, a limit order to sell at 46 would have been executed

A stop- loss order guarantees that an investor's unrealised profit will be protected.

Portfolio revision is the ongoing process of systematically studying the issues in the portfolio and selling certain issues and purchasing others as the means of maintaining a portfolio that best meets the investor's objectives.

Which one of the following provides the greatest reduction in total risk?

Before analysing needs and objectives, investors should first construct a portfolio.

Sharpe measures total risk while Treynor and Jensen measure only systematic risk.

Fred and Martha are in their seventies and retired. Which one of the following sets of portfolio statistics might best suit their situation if their primary investment goal is current income with limited risk?

Asset allocation should focus on

Investors who use formula plans believe that they have above average ability to time the market and pick successful investments.

Marti is 31 years old and is saving for retirement. Which one of the following portfolio allocations might best suit her situation if she is willing to accept a fair amount of risk in exchange for long- term capital appreciation?

An investor's portfolio should only contain securities that are suitable to the investor's goals and needs.

The holding period return (HPR)

The key areas to monitor when evaluating your portfolio holdings are the overall performance of both the economy and the financial markets, and the returns on your investments.

The Investment Environment

Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Shares

Analysing Shares

Share Valuation

Technical Analysis, Market Efficiency and Behavioural Finance

Fixed-Income Securities

Bond Valuation

Managed Funds: Professionally Managed Portfolios

Options: Puts and Calls

Commodities and Financial Futures

Filters