- "D". This is the definition of a dollar-weighted return. a defines duration, b defines arithmetic return, c is incorrect.
- "D". None. a through c describe a dollar weighted return.
- "E". The calculation takes the bond's annual coupon in dollars and divides it by the market price.
- "D". The tax-equivalent yield is the rate at which the investor is indifferent between it and the tax-exempt yield. The second part of the definition describes the calculation methodology.
- "D". The answer to the question has two parts. One is the definition, the other is the calculation which assumes a 3.5% inflation rate.
- "C". The description defines when the two rates would be equal.
- "E". The answer has two parts: the correct holding period return and the formula for obtaining it.
- "E". This two part answer describes the Treynor and Sharpe ratios, respectively.
- "C". The answer drives home the point that the investor's marginal tax bracket is a critical ingredient in the TEY calculation.
- "B". The question requires calculation of the current yield and the observation that the bond is trading at a premium to ascertain that the yield to maturity will be less than the current yield. One does not need to resort to the IRR function on a financial calculator to answer this question.
- "A". All of the other talking points are incorrect.
- "D". The two part answer contains the exact response as well as the range into which it falls.
- "D". These are textbook definitions of the two concepts.
- "E". R2 measures the degree of variability of a dependent variable that is explained by changes in the independent variable, not degree of central tendency.
- "C". This is the definition of semivariance.
- "A". R2 is a performance attribution tool.
- "B". Beta measures market risk and is a subset of total risk which is measured by standard deviation.
- "A". This is an application of standard deviation of returns for the area under the bell curve. One takes the return and adds and subtracts the standard deviation percentage from it to obtain the range of dispersion.
- "B". Skewness gauges the extent of skew, or the degree of asymmetry of return distributions.
- "D". This question asks the candidate to apply the concept of R2.
Answers 21 - 31
Financial AdvisorThese techniques can help you pass this test without the added stress.
InvestingThe first tool for assessing portfolio performance while considering risk was the Treynor measure.
Financial AdvisorLearn three ratios that will help you evaluate your investment returns.
InvestingThe Jensen measure is another tool investors use to include risk when measuring portfolio performance.
InvestingThis simple ratio will tell you how much that extra return is really worth.
InvestingLearn how to follow the efficient frontier to increase your chances of successful investing.
RetirementThe biggest Medicare Part D risk is not having the right plan to cover the prescription drugs you need. And there are others. Here's how to plan for them.
Managing WealthLearn about how standard deviation is applied to the annual rate of return of an investment to measure the its volatility.
Managing WealthLearn why General Electric Company's new Series D Perpetual Preferred stock is an excellent choice for investors desiring a safe and steady income stream.
TradingThe entire study of statistics originated from Gauss and allowed us to understand markets, prices and probabilities, among other applications.