CFP

Investment Theory and Portfolio Development - Review Questions 7 - 12

  1. Rocco's portfolio returned 9.32% last year when the market returned 11.24%. The risk-free rate was 6.01% and the β for his portfolio as 1.09. From this scenario, we would conclude that:
    1. Rocco's portfolio was overvalued.
    2. Rocco's portfolio was undervalued and added alpha.
    3. There are insufficient data to draw a conclusion.
    4. The forecast return and the required return on Rocco's portfolio are equal.
  2. All of the following terms are associated with technical analysis, EXCEPT:
    1. Advance/Decline Line.
    2. Quick Ratio.
    3. Head and shoulders.
    4. Candlestick charting.
  3. Examples of expansionary monetary policy include all of the following, except:
    1. lowering reserve requirements.
    2. FOMC purchase of government securities.
    3. Increased government spending.
    4. Decrease in the discount rate.
  4. The creation of the investment policy statement forms the basis for:
    1. Strategic asset allocation.
    2. Tactical asset allocation.
    3. Rebalancing.
    4. All of the foregoing.
  5. The Sharpe and Treynor ratios have all of the following in common, except:
    1. They measure risk-adjusted performance.
    2. They use total risk in the denominator.
    3. They may be used to evaluate individual securities as well as portfolios.
    4. The greater the ratios, the greater degree to which the performance is worth the risk.
  6. All of the following statements accurately describe the attributes of a benchmark, except:
    1. Unambiguous.
    2. Efficient.
    3. Measurable.
    4. Investable.




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