Which of the following statements is (are) true with respect to the calculation of returns of composites ...

By Investopedia Staff AAA
Q:
Which of the following statements is (are) true with respect to the calculation of returns of composites in accordance with the AIMR-GIPS standards?
I. Results that cover a period of less than a year must be annualized.
II. Geometric return calculations must be used for multi-period results.
III. Cash basis must be used to calculate returns from securities that accrue interest.
IV. The weights used to calculate composite returns are based on the average asset values over the measurement period.
a) II only
b) I, II, III and IV
c) II, III and IV only
d) I, III and IV only
A:
The correct answer is: a)
(I) is incorrect because results that cover a period of less than a year must "not" be annualized. (III) is incorrect because accrual accounting must be used to calculate returns from securities that accrue interest. (IV) is incorrect because the weights used to calculate composite returns are based on the beginning of period asset values.
2005 LOS: 1.4 -1.5.e

RELATED FAQS

  1. If an investor has a required rate of return of 10% on a 20-year zero ...

    The correct answer is d. The value of a zero coupon bond is the present value of the lump-sum principal payment. There is ...
  2. XYZ Corp. has an asset turnover ratio of 0.75. Because the economy is currently ...

    The correct answer is: b) Return on Assets = NI/Sales = Sales/Assets x NI/Sales
  3. At the beginning of the year, ABC Corp. began to lease a major piece of equipment ...

    The correct answer is: A) Under the capitalized lease method, the lessee must treat the asset as if it was purchased with ...
  4. Which of the following statements is (are) true with respect to the factors that ...

    The correct answer is: d) (I) is incorrect because if interest rates are expected to rise, banks will generally "increase" ...
RELATED TERMS
  1. No results found.

You May Also Like

Related Articles
  1. No results found.
Trading Center