WorksheetsFIV10104 - Quiz 1
Total questions: 25
Worksheet time: 1hrs 2mins
What is an investment?
A current commitment of money for future benefits.
The state or quality of being dedicated to a cause.
A sum of money that is owed or due.
The management of large amounts of money.
What are some of the examples for financial plan preliminaries?
Life insurance, car, and house
Emergency funds, life insurance, and groceries
Life insurance, non-life insurance, and emergency funds
Debt, health insurance, and lifestyle
There are four decisions of investment strategy. The two most important strategies are:
Allocation ranges allowed based on policy weights, and asset classes to consider.
Asset classes to consider, and policy weights to assign to each eligible class.
Specific securities to purchase, and policy weights to assign to each eligible class.
Policy weights to assign to each eligible class, and allocation ranges allowed.
A market with a large number of buyers and sellers, such that no single buyer or seller is able to influence the price or control any other aspect of the market. Which market suits this statement?
Efficient Market
Financial Market
Capital Market
Competitive Market
Risk refers to:
Impossible
Uncertainty
Losses
Expectation
A group of securities that have similar characteristics, attributes, and risk/return relationships. The statement refers to:
Asset Allocation
Asset Summary
Asset Class
Portfolio
Which of the below explains index portfolio construction techniques?
Buys a representative sample of stocks in the benchmark index according to their weights in the index.
Higher risk-taking to increase needed performance and beat the benchmark index.
Emphasizes the selection of securities without any initial market or sector analysis.
Form a portfolio of equities that can be purchased at a substantial discount to what his or her valuation model indicates they are worth.
Generally, which of the answers define the two types of investors in the market?
Financial institutions and retail investors
Speculators and hedgers
Banks and brokers
Individual and institutional investors
An efficient market is:
A market that reacts to information available
A market structure where competition is at the highest possible level
A market that is not bias based on relevant information
A market that investors can predict and have an advantage using private information
Three Components of Required Return are:
Standard deviation, variance and nominal rate of return
Risk, inflation and compensation
Time value of money, expected rate of inflation, and risk
Nominal rate of return, real rate of return and risk
What are the implications for investors in light of the mixed findings in Efficient Market Hypothesis (EMH)?
Review the three forms of EMH
Make decisions that can lead to above-average risk-adjusted profits
Focus on ensuring the accessibility of public and private information
Use technical, fundamental analysis, and Portfolio Management
What are the individual investor life cycles?
Accumulation, consolidation, and gifting phase
Accumulation, consolidation, spending and gifting phase
Accumulation, consolidation, spending and borrowing phase
Buying, consolidation, spending and gifting phase
There are two scenarios for portfolio managers. One is if they are equipped with superior analysts, and one is if they aren't. Which of the answers explain a style of a portfolio manager with a superior analyst?
Concentrate efforts in mid-cap stocks
Determine and quantify clients' risks
Diversify completely to eliminate unsystematic risk
Minimize total transaction costs
How do managers manage clients' investment portfolio?
Study clients' risk level, calculate risks and return, suggest asset allocation and monitor
Propose appropriate asset classes, identify risk level, analyze economic condition, valuation and construct
Specify policy statement, study current financial and economic conditions, construct, monitor and update
What is a risk-free rate investment?
An investment with minimal risk
An investment with risk
An investment with zero risk
An investment with limited risk
Which of the answers are techniques for active management portfolio?
Replicate
Stock Picking
Sampling
Programming
What are the components to calculate risk of historical rates of return?
standard deviation, expected rate of return and variance
Holding period yield, expected value of HPY equal to AM and number of observation
Inflation commonly cause lower compounded annual returns than taxes
True
False
Stock prices move to a new equilibrium after the release of new information in a gradual manner, causing trends in stock price movements that persist for periods of time. What kind of analysis is this?
Industry Analysis
Technical Analysis
Aggregate Market Analysis
Fundamental Analysis
A competitive market is a market in which no trader has the power to change the price of goods or services.
True
False
Information based on E/P ratio, size, BMV ratios are useful for fundamental analysis
True
False
The real rates of return for Stock A and Stock B are 1.25 and 0.89, respectively. Assuming if the inflation rate is at 5%, what would be the nominal rates of return?
136.25%, 98,45%
191.05%, 70.24%
130.25% , 50.27%
127.53%, 83.25%
On March 1, you bought 100 shares of stock in the Francesca Berhad for RM36 a share and a year later you sold it for RM40 a share. During the year, you received a cash dividend of RM2.00 a share. Compute your HPR and HPY on this Francesca stock investment.
HPR=1.20
HPY=20%
HPR=1.18
HPY=18%
HPR=1.15
HPY=15%
HPR=1.17
HPY=17%
Compute the arithmetic mean annual rate of return for each stock. Which stock is most desirable by this measure?
Stock A
Stock B
If stock A has an annual rates of return of 10%, 9%, -11%, -3%, and 15% for Year 1, 2, 3, 4 and 5, with an expected return of 5.4%, what is the standard deviation of Stock A?
0.1238
0.1168
0.1147
0.0965
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