ML4T EXAM 2 PART 5 (661-781) QUESTIONS WITH VERIFIED ACCURATE ANSWERS 2026

ML4T EXAM 2 PART 5 (661-781) QUESTIONS WITH
VERIFIED ACCURATE ANSWERS 2026

Question 663: Optimal portfolios that comprise the efficient frontier offers:
A) The highest expected return for a defined level of risk.
B) The lowest risk for a given level of expected return.
C) A and B
D) None of the above. - Answers -Correct Answer: C

Question 668: With regards to the Fundamental Law, what is summarized in the
Information Coefficient?
A) Breadth
B) Beta
C) Skill
D) Performance - Answers -Correct Answer: C

Question 670: With Efficient Markets Hypothesis (EMH), which form says that doing
fundamental analysis is acceptable?
A) Weak form
B) Semi-Weak form
C) Semi-Strong form
D) Strong form - Answers -Correct Answer: A

Question 677: Suppose stocks A, B have the same cumulative return but negatively
correlated daily returns, and our current portfolio has been allocated among these
stocks to minimize risk. Compared to stock A, the portfolio will have
A) higher return, lower or same risk
B) same return, lower or same risk
C) higher return, higher risk
D) same return, higher risk - Answers -Correct Answer: B

Question 682: Which one doesn't make reinforcement learning different from other
machine learning paradigms?
A) No labels in dataset
B) Utilize reward signal
C) Agent's actions affect the subsequent data it receives
D) Time really matters - Answers -Correct Answer: A

Question 692: Is it possible to construct a portfolio with a higher return and a lower risk
that its underlying assets, using the Efficient Frontier?
A) No, the portfolio's return is upper bound by the highest return of any individual asset
it holds.
B) No, the portfolio's risk is lower bound by the lowest risk of any individual asset it
holds.

, C) Yes, if you have the right mix of anti-correlated assets.
D) Yes, this mix is found on the peak of the efficient frontier. - Answers -Correct
Answer: A

Question 695: In the Black-Sholes Formula, what does N(d2) mean?
A) probability of S < K
B) probability of S > K
C) probability of S < K
D) It means nothing. - Answers -Correct Answer: B

Question 697: If we think price of the stock will go down dramatically, which one of the
following 4 actions is generally the best?
A) Long a Call
B) Long a Put
C) Long a Call and Long a Put
D) Short a Call and Short a Put - Answers -Correct Answer: B

Question 698: The fundamental law is IR = IC * root(breadth). Which of the following
statements is correct regarding the fundamental law?
A) Only IC can be improved easily
B) Only Breadth can be improved easily
C) Both IC and Breadth can be improved easily
D) Neither IC or Breadth can be improved easily - Answers -Correct Answer: B

Question 701: If the weak form of the Efficient Market Hypothesis is correct, which of
the following is true?
A) Inside Traders Cannot Succeed
B) Technical Analysis Cannot Work
C) Fundamental Analysis Cannot Work
D) Hedge Funds Cannot Succeed - Answers -Correct Answer: B

Question 702: What makes an "Efficient Frontier" efficient?
A) It takes the least amount of time to decide whether to buy or sell.
B) It contains the portfolios with the lowest Sharpe ratios
C) It allocates as much money as an investor has available to invest.
D) It contains the portfolios with the lowest possible risk given a particular amount of
return. - Answers -Correct Answer: D

Question 708: For a Markov Decision Problem (MDP), it is assumed that the Agent
knows the following in advance:
A) Set of States S and Set of Actions A
B) Transition Function T[s,a,s']
C) Reward Function R[s,a]
D) All of the above - Answers -Correct Answer: D

Question 710: What are the correct forms of the Efficient Markets Hypothesis?