Q. Investment managers incentivized or accountable for short-term performance by current and prospective clients is a potentially rational explanation for which of the following?

C. Value stocks outperforming growth stocks

Q. Which of the following is least likely to be placed in the appendices to an investment policy statement (IPS)?

C. Statement of Duties and Responsibilities.

B. Forgone opportunities to reduce risk by combining assets with low correlations

A. Concentrated portfolio positions

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.

Q. Which of the following institutions will on average have the greatest need for liquidity?

C. Non-life insurance companies.

For a portfolio consisting of two assets with a correlation coefficient of +1.0, it is most likely that portfolio risk is:

A. equal to the weighted average of the risk of the two assets in the portfolio.

B. less than the weighted average of the risk of the two assets in the portfolio.

C. greater than the weighted average of the risk of the two assets in the portfolio.

Q. Technical analysis is a form of security analysis that:

A. assesses past price action to project future prices.

B. requires in-depth knowledge of financial instruments.

C. is ineffective when evaluating long-term price movements.

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

C. establish a reserve fund to cover losses.

B. enter into a derivative contract.

A trader determines that a stock price formed a pattern with a horizontal trendline that connects the high prices and a trendline with positive slope that connects the low prices. Given the pattern formed by the stock price, the trader will most likely:

A. purchase the stock because the pattern indicates a bullish signal.

B. sell the stock because the pattern indicates a bearish signal.

C. avoid trading the stock because the pattern indicates a sideways trend.

Q. Effective risk governance in an enterprise provides guidance on all of the following except:

C. specific methods to mitigate risk for each subsidiary in the enterprise.

B. worst losses that may be tolerated.

A good risk management framework:

C. is typically a process that addresses a common set of factors within different organizations.

A. is a top-down process and guidance directing risk management activities.

B. seeks to prioritize avoidance of financial loss over defining policies and processes.

A key difference between a wrap account and a mutual fund is that wrap accounts:

A. have assets that are owned directly by the individual.

B. cannot be tailored to the tax needs of a client.

C. have a lower required minimum investment.

Q. If a company has a one-day 5% Value at Risk of $1 million, this means:

A. 5% of the time the firm is expected to lose at least $1 million in one day.

B. 95% of the time the firm is expected to lose at least $1 million in one day.

C. 5% of the time the firm is expected to lose no more than $1 million in one day.

Q. With respect to capital market theory, an investor’s optimal portfolio is the combination of a risk-free asset and a risky asset with the highest:

C. capital allocation line slope.

A major benefit of employing a risk budgeting process is that it most likely:

B. forces risk tradeoffs across the organization.

A. allows the organization to determine its enterprise risk tolerance.

C. eliminates the need for hedging within the organization.

PM 1.11 Test

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Professional Development

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MULTIPLE CHOICE QUESTION

2 mins • 1 pt

An investor with $10,000 decides to borrow an additional $5,000 at the risk-free rate and invest all the available funds in the market portfolio. This investor’s portfolio beta is closest to:

A. 0.5.

B. 1.0.

C. 1.5.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Q. The intercept of the best fit line formed by plotting the excess returns of a manager’s portfolio on the excess returns of the market is best described as Jensen’s:

A. beta.

B. ratio.

C. alpha.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

None

A. Security 1.

B. Security 2.

C. Security 3.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Q. Which of the following is the correct sequence of events for risk governance and management that focuses on the entire enterprise? Establishing:

A. risk tolerance, then risk budgeting, and then risk exposures.

B. risk exposures, then risk tolerance, and then risk budgeting.

C. risk budgeting, then risk exposures, and then risk tolerance.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

None

A. Investment 1.

B. Investment 2.

C. Investment 3.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Q. With respect to capital market theory, the optimal risky portfolio:

A. is the market portfolio.

B. has the highest expected return.

C. has the lowest expected variance.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Q. With respect to the portfolio management process, the asset allocation is determined in the:

A. planning step.

B. feedback step.

C. execution step.

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PM 1.11 Test

An investor with $10,000 decides to borrow an additional $5,000 at the risk-free rate and invest all the available funds in the market portfolio. This investor’s portfolio beta is closest to:

Q. The intercept of the best fit line formed by plotting the excess returns of a manager’s portfolio on the excess returns of the market is best described as Jensen’s:

None

Q. Which of the following is the correct sequence of events for risk governance and management that focuses on the entire enterprise? Establishing:

None

Q. With respect to capital market theory, the optimal risky portfolio:

Q. With respect to the portfolio management process, the asset allocation is determined in the:

An analyst observes that stock markets usually demonstrate return distributions concentrated to the right with a higher frequency of negative deviation from the mean. This feature is most likely known as:

Q. Investment managers incentivized or accountable for short-term performance by current and prospective clients is a potentially rational explanation for which of the following?

Q. An investor purchased 100 shares of a stock for $34.50 per share at the beginning of the quarter. If the investor sold all of the shares for $30.50 per share after receiving a $51.55 dividend payment at the end of the quarter, the holding period return is closest to:

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