Ethics TE9 Test

Q. With respect to return-generating models, the slope term of the market model is an estimate of the asset’s:

• A. total risk.
• B. systematic risk.
• C. nonsystematic risk.

Q. If the 5-day moving average for AZB Company crossed over its 60-day moving average from underneath, it would be considered a:

• A. bullish indicator.
• B. bearish indicator.
• C. new level of resistance.

When analyzing a head and shoulders pattern that represents the reversal of an upward trend, the highest trading volume is most likely on the upward side of the:

• A. right shoulder.
• B. head.
• C. left shoulder.

An analyst uses a multi-factor model to estimate the expected returns of various securities. The model analyzes historical and cross-sectional return data to identify factors that explain the variance or covariance in the securities’ observed returns. This model is most likely a:

• A. statistical factor model.
• B. macroeconomic factor model.
• C. fundamental factor model.

Q. An organization choosing to accept a risk exposure may:

• A. buy insurance.
• B. enter into a derivative contract.
• C. establish a reserve fund to cover losses.

Q. The factors a risk management framework should address include all of the following except:

• A. communications.
• B. policies and processes.
• C. names of responsible individuals.

Q. Which of the following performance measures does not require the measure to be compared to another value?

• A. Sharpe ratio.
• B. Treynor ratio.
• C. Jensen’s alpha.

Q. An investment policy statement that includes a return objective of outperforming the FTSE 100 by 120 basis points is best characterized as having a(n):

• A. relative return objective.
• B. absolute return objective.
• C. arbitrage-based return objective.

Q. A benefit of risk budgeting is that it:

• A. considers risk tradeoffs.
• B. establishes a firm’s risk tolerance.
• C. reduces uncertainty facing the firm.

Q. A firm’s risk management committee would be expected to do all of the following except:

• A. approving the governing body’s proposed risk policies.
• B. deliberating the governing body’s risk policies at the operational level.
• C. providing top decision-makers with a forum for considering risk management issues.