Q. The potential benefits of allocating a portion of a portfolio to alternative investments include:

B. improvement in the portfolio’s risk–return relationship.

C. accessible and reliable measures of risk and return.

Q. A credit derivative is a derivative contract in which the:

B. seller provides protection to the buyer against the credit risk of a third party.

A. clearinghouse provides a credit guarantee to both the buyer and the seller.

C. the buyer and seller provide a performance bond at initiation of the contract.

If markets are only weak-form efficient, which of the following investment approaches is least likely to consistently earn abnormal profits?

C. Trading based on patterns of prices and volume

A. Exploiting of non-public information

B. Buying and selling based on fundamental analysis

Q. Risks in infrastructure investing are most likely greatest when the project involves:

A. construction of infrastructure assets.

B. investment in existing infrastructure assets.

C. investing in assets that will be leased back to a government.

If an issuer is required to retire a specified portion of the bond’s principal each year, the bond most likely:

C. has a sinking fund provision.

Q. With respect to competitive strategy, a company with a successful cost leadership strategy is most likely characterized by:

C. the ability to offer products at higher prices than those of its competitors.

If the implied volatility for options on a broad-based equity market index goes up, then it is most likely that:

B. the general level of market uncertainty has gone up.

A. the broad-based equity market index has gone up in value.

C. market interest rates have gone up.

In assigning credit ratings, the practice of notching by the rating agencies is least likely used to quantify the:

B. priority of payment in the event of default.

C. potential severity of loss in the event of default.

Q. Which of the following market regulations will most likely impede market efficiency?

A. Restricting traders’ ability to short sell.

B. Allowing unrestricted foreign investor trading.

C. Penalizing investors who trade with nonpublic information.

Q. Which of the following combinations replicates a long derivative position?

B. A long asset and a short risk-free bond

A. A short derivative and a long asset

C. A short derivative and a short risk-free bond

Q. Relative to traditional investments, alternative investments are least likely to be characterized by:

A. high levels of transparency.

B. limited historical return data.

C. significant restrictions on redemptions.

Q. For a swap in which a series of fixed payments is exchanged for a series of floating payments, the parties to the transaction:

C. value the underlying sequentially at the time of each payment to determine the floating payment.

A. designate the value of the underlying at contract initiation.

B. value the underlying solely on the basis of its market value at the end of the swap.

Q. A significant challenge to investing in timber is most likely its:

B. dependence on an international competitive context.

A. high correlation with other asset classes.

C. return volatility compounded by financial market exposure.

Q. Enterprise value is most often determined as market capitalization of common equity and preferred stock minus the value of cash equivalents plus the:

C. market value of long-term debt.

Q. The law of one price is best described as:

C. two assets that will produce the same cash flows in the future must sell for equivalent prices.

A. the true fundamental value of an asset.

B. earning a risk-free profit without committing any capital.

Q. An analyst who bases the calculation of intrinsic value on dividend-paying capacity rather than expected dividends will most likely use the:

B. free cash flow to equity model.

C. cash flow from operations model.

Q. An analyst wanting to assess the downside risk of an alternative investment is least likely to use the investment’s: (2020 Q34)

C. standard deviation of returns.

Q. With respect to efficient markets, a company whose share price changes gradually after the public release of its annual report most likely indicates that the market where the company trades is:

C. receiving additional information about the company.

B. subject to behavioral biases.

Q. An investor in a country with an original issue discount tax provision purchases a 20-year zero-coupon bond at a deep discount to par value. The investor plans to hold the bond until the maturity date. The investor will most likely report:

C. taxable income from the bond every year until maturity.

B. a tax deduction in the year the bond is purchased.

Q. A characteristic of farmland strongly distinguishing it from timberland is its:

B. inherent rigidity of production for output.

A. commodity price-driven returns.

C. value as an offset to other human activities.

The return on a commodity index is likely to be different from returns on the underlying commodities because:

B. indices are constructed using futures contracts.

A. data are subject to survivorship bias.

C. assets are not marked to market.

Q. Which of the following is a source of wholesale funds for banks?

C. Negotiable certificates of deposit

Which of the following statements regarding the interest rate risk of a fixed-rate bond is correct?

C. Market price risk matters more than coupon reinvestment risk when the investor’s time horizon is short relative to the bond’s time to maturity.

A. Coupon reinvestment risk and market price risk are positively related.

B. All investors in a particular bond are exposed to the same interest rate risk.

Q. What is the most significant drawback of a repeat sales index to measure returns to real estate? (2020 Q14)

B. Understatement of volatility

C. Reliance on subjective appraisals

Q. In comparison to other alternative investment approaches, co-investing is most likely:

B. subject to adverse selection bias.

C. the most flexible approach for the investor.

Q. Which of the following is not a limitation of the cyclical/non-cyclical descriptive approach to classifying companies?

B. Business-cycle sensitivity is a discrete phenomenon rather than a continuous spectrum.

A. A cyclical company may have a growth component in it.

C. A global company can experience economic expansion in one part of the world while experiencing recession in another part.

TE10 Mock test 2 ss2

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90 Qs

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TE10 Mock test 2 ss2

Quiz

•

Professional Development

•

Professional Development

•

Practice Problem

•

Hard

Education Trustville

FREE Resource

90 questions

Show all answers

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Q. An alternative investment fund’s hurdle rate is a:

A. rate unrelated to a catch-up clause.

B. tool to protect clients from paying twice for the same performance.

C. minimum rate of return the GP must exceed in order to earn a performance fee.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Which of the following statements concerning different valuation approaches is most accurate?

A. One advantage of the three-stage dividend discount model (DDM) model is that it is equally appropriate to young companies entering the growth phase and those entering the maturity phase.

B. It is advantageous to use asset-based valuation approaches rather than forward-looking cash flow models in the case of companies that have significant intangibles.

C. The justified forward price-to-earnings ratio (P/E) approach offers the advantage of incorporating fundamentals and presenting intrinsic value estimations.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

None

A. $107.03.

B. $105.65.

C. $99.75.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Q. Holding all other factors constant, the most likely effect of low demand and heavy new issue supply on bond yield spreads is that yield spreads will:

A. widen.

B. tighten.

C. not be affected.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Q. Which of the following is a type of external credit enhancement?

A. Covenants

B. A surety bond

C. Overcollateralization

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

None

A. $812,920,131 .

B. $815,383,474 .

C. $817,846,817 .

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Which of the following statements concerning the use of industry analysis is most accurate? Industry analysis is most useful for:

A. sector allocations in passive equity portfolios.

B. portfolio performance attribution.

C. evaluating market efficiency.

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TE10 Mock test 2 ss2

90 questions

Q. An alternative investment fund’s hurdle rate is a:

Which of the following statements concerning different valuation approaches is most accurate?

None

Q. Holding all other factors constant, the most likely effect of low demand and heavy new issue supply on bond yield spreads is that yield spreads will:

Q. Which of the following is a type of external credit enhancement?

None

Which of the following statements concerning the use of industry analysis is most accurate? Industry analysis is most useful for:

Q. The potential benefits of allocating a portion of a portfolio to alternative investments include:

Q. Which of the following bond types provides the most benefit to a bondholder when bond prices are declining?

Q. A credit derivative is a derivative contract in which the:

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