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

Tim purchased a stock ten months ago for $14 a share, received a $1 dividend per share last month, and sold the stock today for $16 per share.Tim has a marginal tax rate of 30%.Both capital gains for securities held more than one year and dividend income is taxed at 15%.What is Tim's after-tax holding period return?

Accepted Answer

A)  14.1% 
B)  15.9% 
C)  16.1% 
D)  18.2% 
A)  14.1% 
B)  15.9% 
C)  16.1% 
D)  18.2%

Question 3

Sharpe's measure is a measure of the risk premium per unit of total risk.

Accepted Answer

A) True 
 B)False

Question 4

Only capital gains that have been realized should be included in the measurement of a portfolio's return over a given period of time.

Accepted Answer

A) True 
 B)False

Question 5

A problem investment

Accepted Answer

A)  requires immediate attention. 
B)  is one you would buy if you did not already own it. 
C)  is defined as any investment with unrealized losses. 
D)  should be left alone and given time to correct itself. 
A)  requires immediate attention. 
B)  is one you would buy if you did not already own it. 
C)  is defined as any investment with unrealized losses. 
D)  should be left alone and given time to correct itself.

Question 6

The holding period return calculation for a portfolio time-weights portfolio additions and deletions in accordance with the number of months they were in the portfolio.

Accepted Answer

A) True 
 B)False

Question 7

Lipper indexes are to assess the performance of
I.equity funds.
II.bond funds.
III.money market funds.
IV.Real Estate Investment Trusts (REITS).

Accepted Answer

A)  I and II only 
B)  I and III only 
C)  I, II, and III only 
D)  I, II, III, and IV 
A)  I and II only 
B)  I and III only 
C)  I, II, and III only 
D)  I, II, III, and IV

Question 8

The maximum capital loss that can be applied to ordinary income for income tax purposes in any one year is $3000.

Accepted Answer

A) True 
 B)False

Question 9

A portfolio has a total return of 10.5%, a beta of 0.72 and a standard deviation of 6.3%.The risk free rate is 3.8%, the market return is 12.4%.Jensen's measure of this portfolio's performance is

Accepted Answer

A)  0.5%. 
B)  4.3%. 
C)  7.9%. 
D)  9.3%. 
A)  0.5%. 
B)  4.3%. 
C)  7.9%. 
D)  9.3%.

Question 10

Which of the following are characteristics of stop-loss orders?
I.the risk of whipsawing
II.the ability to limit downside losses
III.the guaranteed execution within the order period
IV.the conversion to a market order

Accepted Answer

A)  I and II only 
B)  III and IV only 
C)  I, II and IV only 
D)  II, III and IV only 
A)  I and II only 
B)  III and IV only 
C)  I, II and IV only 
D)  II, III and IV only

Question 11

Dollar cost averaging is a procedure by which an investor

Accepted Answer

A)  buys more stock as its price increases. 
B)  times investments in order to buy low and sell high. 
C)  invests a fixed dollar amount in a security at fixed intervals. 
D)  maintains a constant ratio of conservative and aggressive investments. 
A)  buys more stock as its price increases. 
B)  times investments in order to buy low and sell high. 
C)  invests a fixed dollar amount in a security at fixed intervals. 
D)  maintains a constant ratio of conservative and aggressive investments.

Question 12

A portfolio has a total return of 14.5%, a beta of 1.54, and a standard deviation of 17.6%.If the risk free rate is 4.5% and the market return is 10.2%, then Treynor's measure of this portfolio's performance is

Accepted Answer

A)  2.8%. 
B)  3.7%. 
C)  6.5%. 
D)  9.4%. 
A)  2.8%. 
B)  3.7%. 
C)  6.5%. 
D)  9.4%.

Question 13

Formula plans are high-risk investment strategies that attempt to benefit from cyclical price movements.

Accepted Answer

A) True 
 B)False

Question 14

Sharpe's measure of portfolio performance compares the risk premium on a portfolio to

Accepted Answer

A)  a broad-based market index such as the S&P 500 index. 
B)  the portfolio's standard deviation of return. 
C)  the portfolio's beta. 
D)  the prevailing risk-free rate of return. 
A)  a broad-based market index such as the S&P 500 index. 
B)  the portfolio's standard deviation of return. 
C)  the portfolio's beta. 
D)  the prevailing risk-free rate of return.

Question 15

The theory behind the variable ratio plan is to

Accepted Answer

A)  passively buy and hold a wide variety of securities. 
B)  time the cyclical movements of the stock market and thereby "buy low and sell high." 
C)  avoid selling any security for a capital gain, and thus indefinitely avoiding the capital gains tax. 
D)  keep the unit cost of the portfolio at a constant level. 
A)  passively buy and hold a wide variety of securities. 
B)  time the cyclical movements of the stock market and thereby "buy low and sell high." 
C)  avoid selling any security for a capital gain, and thus indefinitely avoiding the capital gains tax. 
D)  keep the unit cost of the portfolio at a constant level.

Question 16

Treynor's measure of portfolio performance focuses on

Accepted Answer

A)  nondiversifiable risk. 
B)  diversifiable risk. 
C)  total risk. 
D)  the standard deviation of the portfolio. 
A)  nondiversifiable risk. 
B)  diversifiable risk. 
C)  total risk. 
D)  the standard deviation of the portfolio.

Question 17

An investor adopts a policy of investing in both an aggressive mutual fund and a short-term bond fund.When the value of the aggressive fund exceeds 65% of the portfolio value, shares of that fund are sold such that the aggressive fund represents only 45% of the portfolio.This is an example of a ________ plan.

Accepted Answer

A)  constant-dollar 
B)  dollar-cost averaging 
C)  constant-ratio 
D)  variable-ratio 
A)  constant-dollar 
B)  dollar-cost averaging 
C)  constant-ratio 
D)  variable-ratio

Question 18

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

Accepted Answer

A)  diversification 
B)  asset allocation 
C)  security selection 
D)  beta reduction 
A)  diversification 
B)  asset allocation 
C)  security selection 
D)  beta reduction

Question 19

Which of the following are reasons to consider selling an investment that is currently in a portfolio?
I.The investment has met the original objective.
II.Better investment opportunities currently exist.
III.The outlook for the investment has improved.
IV.The investment has not met expectations and no change is expected.

Accepted Answer

A)  I, II and IV only 
B)  I, III and IV only 
C)  I, II and III only 
D)  I, II, III and IV 
A)  I, II and IV only 
B)  I, III and IV only 
C)  I, II and III only 
D)  I, II, III and IV

Question 20

If an investor's portfolio is comprised of a broad range of common stocks, the best measure to use as a basis of comparison of performance is the

Accepted Answer

A)  Dow Jones Industrial Average (DJI
A) . 
B)  S&P 500 index. 
C)  Dow Jones Corporate Bond Index. 
D)  American Stock Exchange utilities index. 
A)  Dow Jones Industrial Average (DJI
A) . 
B)  S&P 500 index. 
C)  Dow Jones Corporate Bond Index. 
D)  American Stock Exchange utilities index.

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

Sharpe's measure is a measure of the risk premium per unit of total risk.

Only capital gains that have been realized should be included in the measurement of a portfolio's return over a given period of time.

A problem investment

The holding period return calculation for a portfolio time-weights portfolio additions and deletions in accordance with the number of months they were in the portfolio.

Lipper indexes are to assess the performance of I.equity funds. II.bond funds. III.money market funds. IV.Real Estate Investment Trusts (REITS).

The maximum capital loss that can be applied to ordinary income for income tax purposes in any one year is $3000.

A portfolio has a total return of 10.5%, a beta of 0.72 and a standard deviation of 6.3%.The risk free rate is 3.8%, the market return is 12.4%.Jensen's measure of this portfolio's performance is

Which of the following are characteristics of stop-loss orders? I.the risk of whipsawing II.the ability to limit downside losses III.the guaranteed execution within the order period IV.the conversion to a market order

Dollar cost averaging is a procedure by which an investor

A portfolio has a total return of 14.5%, a beta of 1.54, and a standard deviation of 17.6%.If the risk free rate is 4.5% and the market return is 10.2%, then Treynor's measure of this portfolio's performance is

Formula plans are high-risk investment strategies that attempt to benefit from cyclical price movements.

Sharpe's measure of portfolio performance compares the risk premium on a portfolio to

The theory behind the variable ratio plan is to

Treynor's measure of portfolio performance focuses on

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

If an investor's portfolio is comprised of a broad range of common stocks, the best measure to use as a basis of comparison of performance is the

The Investment Environment

Securities Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency, Behavioral Finance, and Technical Analysis

Fixed-Income Securities

Bond Valuation

Mutual Funds: Professionally Managed Portfolios

Options: Puts and Calls

Commodities and Financial Futures

Filters

Exam 13: Managing Your Own Portfolios

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

Sharpe's measure is a measure of the risk premium per unit of total risk.

Only capital gains that have been realized should be included in the measurement of a portfolio's return over a given period of time.

A problem investment

The holding period return calculation for a portfolio time-weights portfolio additions and deletions in accordance with the number of months they were in the portfolio.

Lipper indexes are to assess the performance of I.equity funds. II.bond funds. III.money market funds. IV.Real Estate Investment Trusts (REITS).

The maximum capital loss that can be applied to ordinary income for income tax purposes in any one year is $3000.

A portfolio has a total return of 10.5%, a beta of 0.72 and a standard deviation of 6.3%.The risk free rate is 3.8%, the market return is 12.4%.Jensen's measure of this portfolio's performance is

Which of the following are characteristics of stop-loss orders? I.the risk of whipsawing II.the ability to limit downside losses III.the guaranteed execution within the order period IV.the conversion to a market order

Dollar cost averaging is a procedure by which an investor

A portfolio has a total return of 14.5%, a beta of 1.54, and a standard deviation of 17.6%.If the risk free rate is 4.5% and the market return is 10.2%, then Treynor's measure of this portfolio's performance is

Formula plans are high-risk investment strategies that attempt to benefit from cyclical price movements.

Sharpe's measure of portfolio performance compares the risk premium on a portfolio to

The theory behind the variable ratio plan is to

Treynor's measure of portfolio performance focuses on

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

If an investor's portfolio is comprised of a broad range of common stocks, the best measure to use as a basis of comparison of performance is the

The Investment Environment

Securities Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency, Behavioral Finance, and Technical Analysis

Fixed-Income Securities

Bond Valuation

Mutual Funds: Professionally Managed Portfolios

Options: Puts and Calls

Commodities and Financial Futures

Filters