Question 1

Which of the following is true regarding Modigliani-squared?

Accepted Answer

A)  It compares Treasury bills to the S&P 500 Index. 
B)  It states its results in both percentage and graphical form. 
C)  It equates the volatility of a portfolio with the market. 
D)  It compares fixed income securities with equities securities. 
A)  It compares Treasury bills to the S&P 500 Index. 
B)  It states its results in both percentage and graphical form. 
C)  It equates the volatility of a portfolio with the market. 
D)  It compares fixed income securities with equities securities. C

Question 2

If we are to assess performance carefully, we must do so on what kind of basis?

Accepted Answer

A)  quarterly 
B)  annual 
C)  attribution-weighted 
D)  risk-adjusted 
A)  quarterly 
B)  annual 
C)  attribution-weighted 
D)  risk-adjusted D

Question 3

One problem with style analysis is style:

Accepted Answer

A)  consistency. 
B)  comparability. 
C)  correctness. 
D)  character. 
A)  consistency. 
B)  comparability. 
C)  correctness. 
D)  character. A

Question 4

GIPS presentation standards require

Accepted Answer

A)  a 5-year performance record, or since inception if the fund is less than 5-years old. 
B)  inclusion of terminated portfolios. 
C)  cash accounting. 
D)  exclusion of cash and cash equivalents. 
A)  a 5-year performance record, or since inception if the fund is less than 5-years old. 
B)  inclusion of terminated portfolios. 
C)  cash accounting. 
D)  exclusion of cash and cash equivalents.

Question 5

What are the appropriate uses of the Sharpe and the Treynor performance measures?

Accepted Answer

Sharpe's RVAR considers total risk and i

Question 6

Which of the following indices would be most appropriate as a benchmark portfolio for a large-cap mutual fund?

Accepted Answer

A)  Wilshire 5000. 
B)  S&P 500. 
C)  Dow Jones Industrial Average. 
D)  Russell 2000. 
A)  Wilshire 5000. 
B)  S&P 500. 
C)  Dow Jones Industrial Average. 
D)  Russell 2000.

Question 7

requirements include: uniformity in certain performance calculations and disclosures; inclusion of all actual fee-paying discretionary portfolios in composites with similar objectives; compliant history for at least 5 years, or since inception if less than 5 years.

Accepted Answer

A) True 
 B)False

Question 8

The following information is to be used to answer questions 13-17.
 $\begin{array}{llcc}
\underline{ \text { SD }} &\underline{ \text {Beta }}&\underline{ \text {alpha }}&\underline{ \text { $\mathrm{R}^{2}$}}  \
 \text { Fund 11.97 } &1.0&1.3&0.95\
 \text { Fund 22.94 } &0.8&0.6^*&0.80\
 \text {  Fund 33.82} &1.2&-3.5&0.90\
 \text { Fund 44.70 } &1.4&4.2&065\
 &\
\end{array}$
$\text { *Significant at the } 5 \text { percent level }$
-Which of these four funds had the largest market risk?

Accepted Answer

A)  Fund 1 Solution: Fund 4 has the highest beta. 
B)  Fund 2 
C)  Fund 3 
D)  Fund 4 
A)  Fund 1 Solution: Fund 4 has the highest beta. 
B)  Fund 2 
C)  Fund 3 
D)  Fund 4

Question 9

What are some of the problems associated with using risk-adjusted portfolio performance measures?

Accepted Answer

(1) The Treasury bill rate may not be a

Question 10

Under Jensen's differential return approach to portfolio evaluation, superior market timing is exhibited by a

Accepted Answer

A)  statistically significant positive alpha. 
B)  statistically significant negative alpha. 
C)  zero alpha. 
D)  low positive alpha. 
A)  statistically significant positive alpha. 
B)  statistically significant negative alpha. 
C)  zero alpha. 
D)  low positive alpha.

Question 11

The reward-to-variability ratio measures:

Accepted Answer

A)  return above the risk-free rate. 
B)  excess return per unit of total risk. 
C)  total risk per unit of excess return. 
D)  return above the risk-free rate relative to the risk-free rate. 
A)  return above the risk-free rate. 
B)  excess return per unit of total risk. 
C)  total risk per unit of excess return. 
D)  return above the risk-free rate relative to the risk-free rate.

Question 12

When evaluating the performance of a mutual fund holding several S&P 500 stocks, one should always use the S&P 500 as the benchmark.

Accepted Answer

A) True 
 B)False

Question 13

The following information is to be used to answer questions 13-17.
 $\begin{array}{llcc}
\underline{ \text { SD }} &\underline{ \text {Beta }}&\underline{ \text {alpha }}&\underline{ \text { $\mathrm{R}^{2}$}}  \
 \text { Fund 11.97 } &1.0&1.3&0.95\
 \text { Fund 22.94 } &0.8&0.6^*&0.80\
 \text {  Fund 33.82} &1.2&-3.5&0.90\
 \text { Fund 44.70 } &1.4&4.2&065\
 &\
\end{array}$
$\text { *Significant at the } 5 \text { percent level }$
-Which of the funds' returns are best explained by the market's returns?

Accepted Answer

A)  Fund 1 Solution: Fund 1 has highest R2. 
B)  Fund 2 
C)  Fund 3 
D)  Fund 4 
A)  Fund 1 Solution: Fund 1 has highest R2. 
B)  Fund 2 
C)  Fund 3 
D)  Fund 4

Question 14

Superior portfolio performance can result from

Accepted Answer

A)  the ability to select undervalued securities. 
B)  the ability to time market turns. 
C)  superior selectivity or timing performance. 
D)  neither superior selection nor timing. The market is too efficient. 
A)  the ability to select undervalued securities. 
B)  the ability to time market turns. 
C)  superior selectivity or timing performance. 
D)  neither superior selection nor timing. The market is too efficient.

Question 15

Time-weighted as opposed to dollar-weighted return captures rate of return actually earned by the portfolio manager.

Accepted Answer

A) True 
 B)False

Question 16

Standard deviation, beta and coefficient of determination are readily available for mutual funds from sources like Morningstar.

Accepted Answer

A) True 
 B)False

Question 17

The coefficient of determination is also known as R-squared, is used to denote the degree of diversification.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following measures uses the standard deviation, and evaluates portfolio performance on the basis of both return and diversification.

Accepted Answer

A)  Jensen's Alpha. 
B)  Treynor's Reward to Volatility. 
C)  M2. 
D)  Sharpe Ratio. 
A)  Jensen's Alpha. 
B)  Treynor's Reward to Volatility. 
C)  M2. 
D)  Sharpe Ratio.

Question 19

The dollar-weighted rate of return is equivalent to the internal rate of return.

Accepted Answer

A) True 
 B)False

Question 20

The major question when evaluating the performance of a portfolio is:

Accepted Answer

A)  "Does the portfolio match the investor characteristics of the individual investor?" 
B)  "Does the expected return of the portfolio meet the needs of the individual investor?" 
C)  "Is the return on the portfolio adequate to compensate for the risk taken?" 
D)  "Is the risk on the portfolio in line with the personal characteristics of the investor?" 
A)  "Does the portfolio match the investor characteristics of the individual investor?" 
B)  "Does the expected return of the portfolio meet the needs of the individual investor?" 
C)  "Is the return on the portfolio adequate to compensate for the risk taken?" 
D)  "Is the risk on the portfolio in line with the personal characteristics of the investor?"

Which of the following is true regarding Modigliani-squared?

If we are to assess performance carefully, we must do so on what kind of basis?

One problem with style analysis is style:

GIPS presentation standards require

What are the appropriate uses of the Sharpe and the Treynor performance measures?

Which of the following indices would be most appropriate as a benchmark portfolio for a large-cap mutual fund?

requirements include: uniformity in certain performance calculations and disclosures; inclusion of all actual fee-paying discretionary portfolios in composites with similar objectives; compliant history for at least 5 years, or since inception if less than 5 years.

What are some of the problems associated with using risk-adjusted portfolio performance measures?

Under Jensen's differential return approach to portfolio evaluation, superior market timing is exhibited by a

The reward-to-variability ratio measures:

When evaluating the performance of a mutual fund holding several S&P 500 stocks, one should always use the S&P 500 as the benchmark.

Superior portfolio performance can result from

Time-weighted as opposed to dollar-weighted return captures rate of return actually earned by the portfolio manager.

Standard deviation, beta and coefficient of determination are readily available for mutual funds from sources like Morningstar.

The coefficient of determination is also known as R-squared, is used to denote the degree of diversification.

Which of the following measures uses the standard deviation, and evaluates portfolio performance on the basis of both return and diversification.

The dollar-weighted rate of return is equivalent to the internal rate of return.

The major question when evaluating the performance of a portfolio is:

Investing Is an Important Activity Worldwide

Investment Alternatives: Generic Principles All Investors Must Know

Indirect Investing: a Global Activity

Securities Markets Matter to All Investors

All Financial Markets Have Regulations and Trading Practices

Return and Risk: the Foundation of Investing Worldwide

Portfolio Theory Is Universal

Portfolio Selection for All Investors

Asset Pricing Principles

Common Stock Valuation Lessons for All Investors

Managing a Stock Portfolio: a Worldwide Issue

What Happens If Markets Are Efficient or Not?

Economy/ market Analysis Must Be Considered by All Investor

Sector/ industry Analysis

Company Analysis

Technical Analysis

Fixed Income Securities Are Available Worldwide

Managing Bond Portfolios: Some Issues Affect All Investors

Understanding Derivative Securities: Options

Understanding Derivative Securities: Futures

All Investors Must Consider Portfolio Management

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Exam 22: Evaluation of Investment Performance: a Global Concept

Which of the following is true regarding Modigliani-squared?

If we are to assess performance carefully, we must do so on what kind of basis?

One problem with style analysis is style:

GIPS presentation standards require

What are the appropriate uses of the Sharpe and the Treynor performance measures?

Which of the following indices would be most appropriate as a benchmark portfolio for a large-cap mutual fund?

requirements include: uniformity in certain performance calculations and disclosures; inclusion of all actual fee-paying discretionary portfolios in composites with similar objectives; compliant history for at least 5 years, or since inception if less than 5 years.

What are some of the problems associated with using risk-adjusted portfolio performance measures?

Under Jensen's differential return approach to portfolio evaluation, superior market timing is exhibited by a

The reward-to-variability ratio measures:

When evaluating the performance of a mutual fund holding several S&P 500 stocks, one should always use the S&P 500 as the benchmark.

Superior portfolio performance can result from

Time-weighted as opposed to dollar-weighted return captures rate of return actually earned by the portfolio manager.

Standard deviation, beta and coefficient of determination are readily available for mutual funds from sources like Morningstar.

The coefficient of determination is also known as R-squared, is used to denote the degree of diversification.

Which of the following measures uses the standard deviation, and evaluates portfolio performance on the basis of both return and diversification.

The dollar-weighted rate of return is equivalent to the internal rate of return.

The major question when evaluating the performance of a portfolio is:

Investing Is an Important Activity Worldwide

Investment Alternatives: Generic Principles All Investors Must Know

Indirect Investing: a Global Activity

Securities Markets Matter to All Investors

All Financial Markets Have Regulations and Trading Practices

Return and Risk: the Foundation of Investing Worldwide

Portfolio Theory Is Universal

Portfolio Selection for All Investors

Asset Pricing Principles

Common Stock Valuation Lessons for All Investors

Managing a Stock Portfolio: a Worldwide Issue

What Happens If Markets Are Efficient or Not?

Economy/ market Analysis Must Be Considered by All Investor

Sector/ industry Analysis

Company Analysis

Technical Analysis

Fixed Income Securities Are Available Worldwide

Managing Bond Portfolios: Some Issues Affect All Investors

Understanding Derivative Securities: Options

Understanding Derivative Securities: Futures

All Investors Must Consider Portfolio Management

Filters