Question 1

Under CFA Institute performance presentation standards, all of the following are true except

Accepted Answer

A)  all portfolios under management must be included in at least one composite. 
B)  portfolios no longer under management may be excluded from the historical record. 
C)  at least a ten year record of performance should be presented. 
D)  convertible securities should normally be treated as equity securities. 
A)  all portfolios under management must be included in at least one composite. 
B)  portfolios no longer under management may be excluded from the historical record. 
C)  at least a ten year record of performance should be presented. 
D)  convertible securities should normally be treated as equity securities.

Question 2

The CFA Institute total rate of return on a two-year bond investment with an original cost of $900, coupon of 6%, and a final maturity value of $1000?

Accepted Answer

A)  22% 
B)  24% 
C)  12% 
D)  11% 
A)  22% 
B)  24% 
C)  12% 
D)  11%

Question 3

The Sharpe measure related return to _____ risk.

Accepted Answer

A)  market 
B)  total 
C)  unsystematic 
D)  business 
A)  market 
B)  total 
C)  unsystematic 
D)  business

Question 4

CFA Institute recommended calculations include all of the following except

Accepted Answer

A)  use of trade date accounting. 
B)  return calculation prior to management fees. 
C)  return calculation prior to taxes. 
D)  return calculations both with and without unrealized capital gains. 
A)  use of trade date accounting. 
B)  return calculation prior to management fees. 
C)  return calculation prior to taxes. 
D)  return calculations both with and without unrealized capital gains.

Question 5

The portfolio performance measure no longer widely used is the

Accepted Answer

A)  Jensen measure 
B)  Sharpe measure 
C)  Treynor measure 
D)  none of the above since they are all widely used 
A)  Jensen measure 
B)  Sharpe measure 
C)  Treynor measure 
D)  none of the above since they are all widely used

Question 6

The Treynor performance measure relates return to systematic risk.

Accepted Answer

A) True 
 B)False

Question 7

Positive Jensen alpha is associated with better than average performance.

Accepted Answer

A) True 
 B)False

Question 8

Proper performance evaluation should focus on the riskiness of an investment rather than its return.

Accepted Answer

A) True 
 B)False

Question 9

A line from the risk free rate through the return associated with a beta of 1.0 is the

Accepted Answer

A)  capital market line. 
B)  line of dominance. 
C)  security market line. 
D)  stochastic dominance line. 
A)  capital market line. 
B)  line of dominance. 
C)  security market line. 
D)  stochastic dominance line.

Question 10

Sharp performance measures for individual securities will generally be _____ the capital market line because of

Accepted Answer

A)  right on; the measure of return per risk assumed. 
B)  randomly distributed above and below; systematic risk. 
C)  below; diversifiable risk. 
D)  below; market risk. 
A)  right on; the measure of return per risk assumed. 
B)  randomly distributed above and below; systematic risk. 
C)  below; diversifiable risk. 
D)  below; market risk.

Question 11

The total return performance measure does not consider time value.

Accepted Answer

A) True 
 B)False

Question 12

The Sharpe measure of single stock performance includes unsystematic risk.

Accepted Answer

A) True 
 B)False

Question 13

Finance theory suggests that

Accepted Answer

A)  few securities will plot above the security market line. 
B)  few securities will plot above the capital market line. 
C)  no securities will plot above the efficient frontier. 
D)  all of the above. 
A)  few securities will plot above the security market line. 
B)  few securities will plot above the capital market line. 
C)  no securities will plot above the efficient frontier. 
D)  all of the above.

Question 14

The daily valuation method considers cash flows and the timing of cash flows.

Accepted Answer

A) True 
 B)False

Question 15

By finance theory, most securities will plot just above the capital market line.

Accepted Answer

A) True 
 B)False

Question 16

The essence of performance evaluation is

Accepted Answer

A)  converting all returns to annualized equivalents. 
B)  estimating the likelihood of loss. 
C)  calculating the geometric mean return. 
D)  associating a measure of risk with the portfolio return. 
A)  converting all returns to annualized equivalents. 
B)  estimating the likelihood of loss. 
C)  calculating the geometric mean return. 
D)  associating a measure of risk with the portfolio return.

Question 17

The Sharpe performance measure relates return to total risk.

Accepted Answer

A) True 
 B)False

Question 18

For a set of individual companies being plotted, the difference between the Capital Market Line graph and the Security Market Line graph is

Accepted Answer

A)  the scale for rate of return 
B)  the measurement for risk 
C)  the intercept on the vertical axis 
D)  the measurement of return 
A)  the scale for rate of return 
B)  the measurement for risk 
C)  the intercept on the vertical axis 
D)  the measurement of return

Question 19

When considering the performance of a bond portfolio, CFA Institute standards require that interest income be calculated on an accrual basis.

Accepted Answer

A) True 
 B)False

Question 20

If a firm advertises performance figures, CFA Institute standards require that all portfolios under management must be included in at least one composite measure of performance.

Accepted Answer

A) True 
 B)False

Exam 22: Performance Measurement and Presentation

Under CFA Institute performance presentation standards, all of the following are true except

The CFA Institute total rate of return on a two-year bond investment with an original cost of $900, coupon of 6%, and a final maturity value of $1000?

The Sharpe measure related return to _____ risk.

CFA Institute recommended calculations include all of the following except

The portfolio performance measure no longer widely used is the

The Treynor performance measure relates return to systematic risk.

Positive Jensen alpha is associated with better than average performance.

Proper performance evaluation should focus on the riskiness of an investment rather than its return.

A line from the risk free rate through the return associated with a beta of 1.0 is the

Sharp performance measures for individual securities will generally be _____ the capital market line because of

The total return performance measure does not consider time value.

The Sharpe measure of single stock performance includes unsystematic risk.

Finance theory suggests that

The daily valuation method considers cash flows and the timing of cash flows.

By finance theory, most securities will plot just above the capital market line.

The essence of performance evaluation is

The Sharpe performance measure relates return to total risk.

For a set of individual companies being plotted, the difference between the Capital Market Line graph and the Security Market Line graph is

When considering the performance of a bond portfolio, CFA Institute standards require that interest income be calculated on an accrual basis.

If a firm advertises performance figures, CFA Institute standards require that all portfolios under management must be included in at least one composite measure of performance.

Understanding Risk and Return

The Marketplace

Bond Fundamentals

Common Stock

Market Mechanics

Fundamental Stock Analysis

Valuation Tools

Technical Analysis

Market Efficiency

Behavioral Finance

Gathering Investment Information

Market Indexes

Convertible Securities

Investing Internationally

Why Diversify

Derivative Assets

Managing the Equity Portfolio

Managing the Fixed Income Portfolio

Mortgage-Backed Securities

Investment Companies

Filters