1) Exhibit 25.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The data presented below has been collected at this point in time.
Compute the Jensen Measure for the YYY fund.
a. 6.98
b. 2.35
c. 2.53
d. 3.86
e. 1.72
2) Which of the following are functions that a portfolio manager should perform for
clients?
a. Determine investment objectives and constraints, diversify the portfolio, eliminate
tax payments.
b. Determine investment objectives, diversify the portfolio, maintain ethical standards
and eliminate tax payments.
c. Determine investment objectives and constraints, diversify the portfolio, and
maintain ethical standards.
d. Determine constraints, diversify the portfolio, eliminate tax payments.
e. Determine investment objectives and constraints, diversify the portfolio, eliminate
tax payments, and achieve risk adjusted return superior to the relevant benchmark.
3) The active strategies for bond management include all of the following, except
a. Interest rate anticipation.
b. Credit analysis.
c. Spread analysis.
d. Classical immunization.
e. Bond swaps.
4) Which of the following behaviors is consistent with escalation bias?
a.Buying more of a stock as it increases in value.
b.Buying more of a stock as it decreases in value.
c.Selling a stock as it decreases in value.
d.Selling a stock as it increases in value.
e.Buying or selling a stock as it increases in value.
5) Exhibit 6.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Rit= return for stock i during period t
Rmt= return for the aggregate market during period t
Refer to Exhibit 6.1. What is the abnormal rate of return for Stock C when you consider
its systematic risk measure (beta)?
a.4.0%
b.1.2%
c.2.0%
d.-1.05%
e.-8.5%
6) Suppose you purchase 200 shares of Best Hat Corporation at $52 a share by making
a margin deposit of 50%. If the maintenance margin is 30%, at what price will you
receive a margin call?
a.$37.14
b.$37.95
c.$38.23
d.$38.76
e.$39.42
7)
Refer to Exhibit 7.1. What is the expected return of a portfolio of two risky assets if the
expected return E(Ri), standard deviation (si), covariance (COVi,j), and asset weight
(Wi) are as shown above?
a. 8.79%
b. 12.5%
c. 13.75%
d. 7.72%
e. 12%
8) Exhibit 12.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume that the dividend payout ratio will be 55 percent when the rate on long-term
government bonds falls to 9 percent. Since investors are becoming more risk averse, the
equity risk premium will rise to 8 percent and investors will require a 7 percent return.
The return on equity will be 13 percent.
What is the expected sustainable growth rate?
a. 5.85
b. 7.15
c. 4.05
d. 6.75
e. 8.25
9) You are considering investing $1,000 in a load fund which charges a fee of 2.5%,
with an expected return of 12% over the next year. Alternatively, you could invest in a
no-load fund with similar risk that is expected to earn 8% and charges a 1/2 percent
redemption fee. Which is better and by how much?
a. Load fund by $12.00
b. Load fund by $15.32
c. Load fund by $17.40
d. No-load fund by $6.55
e. No-load fund by $1.30
10) Which of the following is not a life cycle phase?
a.Discovery phase
b.Accumulation phase
c.Consolidation phase
d.Spending phase
e.Gifting phase
11) In an interest rate swap, the fixed rate payer profits if interest rates fall.
12) Investors choose a portfolio on the efficient frontier based on their utility functions
that reflect their attitudes towards risk.
13) The best known monetary variable is the level of taxes.
14) Government bond issues require an annual sinking fund payment of not less than
one percent of the outstanding issue.
15) A benchmark portfolio is defined as a passive portfolio whose average
characteristics match the client’s risk-return objectives.
16) In Germany, the government sector is the largest bond market segment.
17) Price-to-sales ratio is still considered the predominant firm valuation technique.