There are 20 questions in this test from the Portfolio Management section of the CFA Level 1 syllabus. You will get 30 minutes to complete the test.
If one stock doubles in price, the other will also double in price
The rates of return tend to move in the same direction relative to their individual means
The two stocks will create a perfectly diversified portfolio
Diversification benefits will be realized up to the point that they offset transactions costs
Each investor can have a unique view of a security market line
All securities will plot very close to the security market line
Risk tolerance
Time horizon
Tax concerns
5
4
3
50%, 25%, 25%
20%, 30%, 50%
90%, 6%, 4%
Beta
Standard deviation
Semivariance
Systematic risk
Diversifiable risk
Company-specific risk
Beta of PNS: 0.66; Beta of InCharge: 0.61
Beta of PNS: 1.10; Beta of InCharge: 0.92
Beta of PNS: 0.61; Beta of InCharge: 0.66
The frontier extends to the left, or northwest quadrant representing a reduction in risk while maintaining or enhancing portfolio returns
The efficient frontier is stable unless return expectations change. If expectations change, the efficient frontier will extend to the upper right with little or no change in risk
The efficient frontier is stable unless the asset’s expected volatility changes. This depends on each asset’s standard deviation
17.4%
16.3%
17.1%
Return objectives should be considered in conjunction with risk preferences
Return objectives may be stated in percentages
Return-only objectives provide a more concise and efficient way to measure performance for investment managers
Expected return on the market
Risk-free rate
Efficient frontier
Risk premium
Risk free rate
Risk adjusted return
If one stock shows 50% price variation, the other will move by 50%
The rates of return will move in the same direction
Portfolio of these two stocks only will be perfectly diversified portfolio
II only
I Only
None of the given
Nominal rate of return must exceed the rate of inflation
Nominal rate of return must equal the inflation rate
Nominal rate of return must be less than the rate of inflation
It is measured by alpha
It cannot be reduced through diversification
It is a risk of collapse of an entire financial market
It states the return percentage to be given to the investors
It defines investors’ objectives and constraints
It limits the stocks, which portfolio manager will invest into
34.74%
35.75%
33.3%
Generally Capital preservation is for investors who seeks return over long term, whereas Capital appreciation is for investors who seeks return over short term
Generally Capital preservation is for investors who seeks return over short term, whereas Capital appreciation is for investors who seeks return over long term
Investors who opt for capital preservation or capital appreciation, time horizon is irrelevant