Question 1

Under the variable-ratio plan, additional speculative investments are made when the ratio

Accepted Answer

A)  of conservative investments to speculative investments increases by 10%. 
B)  of the rate of return on the speculative investments exceeds the overall market return by 1% or more. 
C)  of the realized rate of return falls below the desired rate of return by 1% or more. 
D)  of the value of the speculative investments to the total portfolio value drops below a predetermined level. 
A)  of conservative investments to speculative investments increases by 10%. 
B)  of the rate of return on the speculative investments exceeds the overall market return by 1% or more. 
C)  of the realized rate of return falls below the desired rate of return by 1% or more. 
D)  of the value of the speculative investments to the total portfolio value drops below a predetermined level.

Question 2

The process of selling certain issues in a portfolio and purchasing new ones to replace them is known as

Accepted Answer

A)  portfolio revision. 
B)  market timing. 
C)  red herring baiting. 
D)  dollar cost averaging. 
A)  portfolio revision. 
B)  market timing. 
C)  red herring baiting. 
D)  dollar cost averaging.

Question 3

The two primary media for warehousing liquidity are

Accepted Answer

A)  money market mutual funds and money market deposit accounts. 
B)  certificates of deposit and short-term bond funds. 
C)  certificates of deposit and long-term bond funds. 
D)  short-term bond funds and asset allocation funds. 
A)  money market mutual funds and money market deposit accounts. 
B)  certificates of deposit and short-term bond funds. 
C)  certificates of deposit and long-term bond funds. 
D)  short-term bond funds and asset allocation funds.

Question 4

Fixed weightings, flexible weightings, and tactical asset allocation are three approaches to asset allocation.Compare and contrast these three different approaches.

Accepted Answer

The fixed weightings approach assigns a

Question 5

One year ago, Matt bought 100 shares of ACE Corp.stock for $5,619 including commission.He is about to sell the ACE stock for $6,528 net of commissions.When he made the purchase the S&P 500 index was at 907; now it is 1070.The beta of ACE stock is 0.98, and the market's risk-free rate is 4.0%.No dividends were paid.Based on Jensen's measure, did Matt make a good purchase?

Accepted Answer

HPR (ACE)= ($6,528 - $5,619)/$5,619 = 16

Question 6

Ten months ago, Junior purchased a stock for $14 a share.The stock pays a quarterly dividend of $0.50 per share.Today, Junior sold the stock for $15 a share.What is his holding period return?

Accepted Answer

A)  10.0% 
B)  10.7% 
C)  16.7% 
D)  17.9% 
A)  10.0% 
B)  10.7% 
C)  16.7% 
D)  17.9%

Question 7

The S & P 500 Index is an appropriate benchmark for

Accepted Answer

A)  diversified portfolios of large company stocks. 
B)  portfolios diversified among several asset classes such as stocks, bonds, and real estate. 
C)  diversified portfolios with a mix of large, small, and mid-cap stocks. 
D)  diversified portfolios of mid-cap and small company stocks. 
A)  diversified portfolios of large company stocks. 
B)  portfolios diversified among several asset classes such as stocks, bonds, and real estate. 
C)  diversified portfolios with a mix of large, small, and mid-cap stocks. 
D)  diversified portfolios of mid-cap and small company stocks.

Question 8

Six months ago, Suzanne purchased a stock for $28 a share.Today she sold the stock at a price of $32 a share.During the time she owned the stock, she received a total of $1.30 in dividends per share.What is her holding period return?

Accepted Answer

A)  16.6% 
B)  18.9% 
C)  33.2% 
D)  37.8% 
A)  16.6% 
B)  18.9% 
C)  33.2% 
D)  37.8%

Question 9

A constant plan allows for speculative gains while limiting potential losses.

Accepted Answer

A) True 
 B)False

Question 10

The holding period return (HPR)

Accepted Answer

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

Question 11

Sharpe's measure, Treynor's measure, and Jensen's measure all focus on non-diversifiable risk.

Accepted Answer

A) True 
 B)False

Question 12

If an investor has a loss position in an investment and wants to sell it, the best time to sell for tax purposes is when a capital gain is available against which the loss can be applied.

Accepted Answer

A) True 
 B)False

Question 13

Sharpe's measure of portfolio performance adjusts for risk by dividing total portfolio return by the portfolio beta.

Accepted Answer

A) True 
 B)False

Question 14

An investor who wants to take advantage of a temporary decline in the price of a stock should use a limit order.

Accepted Answer

A) True 
 B)False

Question 15

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

Question 16

One important tax rule concerning capital losses is that

Accepted Answer

A)  capital losses are always fully deductible. 
B)  a maximum of $3,000 of losses in excess of capital gains can be written off against other income in any one year. 
C)  a maximum of $10,000 of losses in excess of capital gains can be written off against other income in any one year. 
D)  capital losses are never deductible. 
A)  capital losses are always fully deductible. 
B)  a maximum of $3,000 of losses in excess of capital gains can be written off against other income in any one year. 
C)  a maximum of $10,000 of losses in excess of capital gains can be written off against other income in any one year. 
D)  capital losses are never deductible.

Question 17

Which of the following are generally considered to be good investment guidelines?
I.Sell any security that has become riskier than anticipated.
II.Hold all securities until they produce the highest profit attainable.
III.Sell securities only if the profit can be offset with a tax loss.
IV.Sell any security that no longer meets the needs of the investor.

Accepted Answer

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

Question 18

Dollar-cost averaging plans and constant-dollar plans are both formula approaches to portfolio management.Briefly explain the two plans.

Accepted Answer

Dollar-cost averaging involves investing

Question 19

The S&P 500 Stock Composite Index and the NASDAQ Composite Index can be used to represent the stock market as a whole.

Accepted Answer

A) True 
 B)False

Question 20

The fixed-weightings approach to asset allocation

Accepted Answer

A)  is based on an allocation of an equal percentage of the portfolio to each separate asset category. 
B)  requires periodic rebalancing of the portfolio to maintain the desired weights. 
C)  is based on periodic adjustments to category weights in response to market changes. 
D)  uses stock-index futures and bond futures in a market timing strategy. 
A)  is based on an allocation of an equal percentage of the portfolio to each separate asset category. 
B)  requires periodic rebalancing of the portfolio to maintain the desired weights. 
C)  is based on periodic adjustments to category weights in response to market changes. 
D)  uses stock-index futures and bond futures in a market timing strategy.

Under the variable-ratio plan, additional speculative investments are made when the ratio

The process of selling certain issues in a portfolio and purchasing new ones to replace them is known as

The two primary media for warehousing liquidity are

Fixed weightings, flexible weightings, and tactical asset allocation are three approaches to asset allocation.Compare and contrast these three different approaches.

Ten months ago, Junior purchased a stock for $14 a share.The stock pays a quarterly dividend of $0.50 per share.Today, Junior sold the stock for $15 a share.What is his holding period return?

The S & P 500 Index is an appropriate benchmark for

Six months ago, Suzanne purchased a stock for $28 a share.Today she sold the stock at a price of $32 a share.During the time she owned the stock, she received a total of $1.30 in dividends per share.What is her holding period return?

A constant plan allows for speculative gains while limiting potential losses.

The holding period return (HPR)

Sharpe's measure, Treynor's measure, and Jensen's measure all focus on non-diversifiable risk.

If an investor has a loss position in an investment and wants to sell it, the best time to sell for tax purposes is when a capital gain is available against which the loss can be applied.

Sharpe's measure of portfolio performance adjusts for risk by dividing total portfolio return by the portfolio beta.

An investor who wants to take advantage of a temporary decline in the price of a stock should use a limit order.

One important tax rule concerning capital losses is that

Dollar-cost averaging plans and constant-dollar plans are both formula approaches to portfolio management.Briefly explain the two plans.

The S&P 500 Stock Composite Index and the NASDAQ Composite Index can be used to represent the stock market as a whole.

The fixed-weightings approach to asset allocation

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

Under the variable-ratio plan, additional speculative investments are made when the ratio

The process of selling certain issues in a portfolio and purchasing new ones to replace them is known as

The two primary media for warehousing liquidity are

Fixed weightings, flexible weightings, and tactical asset allocation are three approaches to asset allocation.Compare and contrast these three different approaches.

Ten months ago, Junior purchased a stock for $14 a share.The stock pays a quarterly dividend of $0.50 per share.Today, Junior sold the stock for $15 a share.What is his holding period return?

The S & P 500 Index is an appropriate benchmark for

Six months ago, Suzanne purchased a stock for $28 a share.Today she sold the stock at a price of $32 a share.During the time she owned the stock, she received a total of $1.30 in dividends per share.What is her holding period return?

A constant plan allows for speculative gains while limiting potential losses.

The holding period return (HPR)

Sharpe's measure, Treynor's measure, and Jensen's measure all focus on non-diversifiable risk.

If an investor has a loss position in an investment and wants to sell it, the best time to sell for tax purposes is when a capital gain is available against which the loss can be applied.

Sharpe's measure of portfolio performance adjusts for risk by dividing total portfolio return by the portfolio beta.

An investor who wants to take advantage of a temporary decline in the price of a stock should use a limit order.

One important tax rule concerning capital losses is that

Dollar-cost averaging plans and constant-dollar plans are both formula approaches to portfolio management.Briefly explain the two plans.

The S&P 500 Stock Composite Index and the NASDAQ Composite Index can be used to represent the stock market as a whole.

The fixed-weightings approach to asset allocation

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