Wealth Management Exams 1 & 2 Study
Guide (Latest UPDATE)
Questions & Answers 100% Correct
The expected market return is 12% and the risk-free rate of return is 3%. Using the
CAPM (SML), what is the expected return for a portfolio that has a standard deviation
of 18% and a beta of 1.3? - correct answer 14.7%
Dinah's portfolio consists of a 50% equity index fund and a 50% fixed income index fund.
The portfolio will be reallocated using the constant weighting method. More details are
shown below:
Dinah should do which of the following if the price of the Equity Fund changes to
$20.00 and the price of the Fixed Income Fund changes to $30.40? - correct answer
Sell 50 shares of Equity and purchase 33 shares of Fixed Income.
Parker has a portfolio with a beta of 1.0 and an alpha of 0. Based on the CAPM, the
return for the portfolio is __________. - correct answer Equal to the Rm.
,The Yoko Fund earns 11.2% during the year while the risk-free rate is 3.1%. The Yoko
Fund has a beta of 1.20 and a standard deviation of 17.5%. The Treynor Ratio is closest
to: - correct answer 6.750
Ollie, who is a financial advisor, manages an equity portfolio for the Green Arrow
University endowment fund, which has an 8.1% return objective. Ollie makes a strategic
allocation recommendation that produces a return of 7.8% in an economy that has
experienced a 2.7% rate of inflation. Ollie also creates his own benchmark for the fund
which includes multiple indexes that have similar risk profiles of the securities in the
fund. The benchmark return during the period is 7.5%. Is the endowment fund satisfied
with Ollie's performance? - correct answer Yes, because the fund outperformed the
benchmark return.
The Miracle Whip Fund (MWF) generated a return of 14.2% over the risk-free return of
3.2%. The relevant market premium was 10%. If MWF's beta is 1.3, then what is Jensen's
alpha for the fund closest to? - correct answer +1.2
,A portfolio manager generates a return of 14.9%. The relevant benchmark return is 13%.
The contribution of asset selection is -40 basis points. Which of the following is most
accurate? - correct answer Asset allocation contributes 230 basis points to total
performance.
A fixed-income portfolio manager with excellent access to an efficient trading desk
and with a reliable record of making profitable short-term substitutions will most
likely outperform the benchmark due to: - correct answer Trading effect.
A portfolio manager who earns a negative return to selectivity most likely has: -
correct answer Invested in assets that are overvalued.
The management effect in fixed income attribution analysis least likely includes: -
correct answer Policy Effect.
A money manager generates a return of 12% when the benchmark returns 10%. The
manager's asset allocation decisions underperform by 25 basis points. Which is most
, accurate? - correct answer Security selection decisions outperform by 225 basis
points.
The use of which of the following risk measures was proposed by Markowitz as the
appropriate statistic when developing portfolios? - correct answer Standard deviation.
Examples of anchoring most likely include: - correct answer An investor holding an
underperforming equity security until its price rises by 25%.
Emma Jones shows signs of being averse to losses. Jones will most likely: - correct
answer Avoid selling stocks that would generate capital loss.
Which of the following statements is correctly associated with William Sharpe's
extension of modern portfolio theory? - correct answer For a diversified portfolio, the
only risk worth pricing is the systematic risk of a security.
Dylan Hope uses commodity futures contracts as part of his search for low
correlations and diversification for his equity portfolio. Which of the following decisions
Guide (Latest UPDATE)
Questions & Answers 100% Correct
The expected market return is 12% and the risk-free rate of return is 3%. Using the
CAPM (SML), what is the expected return for a portfolio that has a standard deviation
of 18% and a beta of 1.3? - correct answer 14.7%
Dinah's portfolio consists of a 50% equity index fund and a 50% fixed income index fund.
The portfolio will be reallocated using the constant weighting method. More details are
shown below:
Dinah should do which of the following if the price of the Equity Fund changes to
$20.00 and the price of the Fixed Income Fund changes to $30.40? - correct answer
Sell 50 shares of Equity and purchase 33 shares of Fixed Income.
Parker has a portfolio with a beta of 1.0 and an alpha of 0. Based on the CAPM, the
return for the portfolio is __________. - correct answer Equal to the Rm.
,The Yoko Fund earns 11.2% during the year while the risk-free rate is 3.1%. The Yoko
Fund has a beta of 1.20 and a standard deviation of 17.5%. The Treynor Ratio is closest
to: - correct answer 6.750
Ollie, who is a financial advisor, manages an equity portfolio for the Green Arrow
University endowment fund, which has an 8.1% return objective. Ollie makes a strategic
allocation recommendation that produces a return of 7.8% in an economy that has
experienced a 2.7% rate of inflation. Ollie also creates his own benchmark for the fund
which includes multiple indexes that have similar risk profiles of the securities in the
fund. The benchmark return during the period is 7.5%. Is the endowment fund satisfied
with Ollie's performance? - correct answer Yes, because the fund outperformed the
benchmark return.
The Miracle Whip Fund (MWF) generated a return of 14.2% over the risk-free return of
3.2%. The relevant market premium was 10%. If MWF's beta is 1.3, then what is Jensen's
alpha for the fund closest to? - correct answer +1.2
,A portfolio manager generates a return of 14.9%. The relevant benchmark return is 13%.
The contribution of asset selection is -40 basis points. Which of the following is most
accurate? - correct answer Asset allocation contributes 230 basis points to total
performance.
A fixed-income portfolio manager with excellent access to an efficient trading desk
and with a reliable record of making profitable short-term substitutions will most
likely outperform the benchmark due to: - correct answer Trading effect.
A portfolio manager who earns a negative return to selectivity most likely has: -
correct answer Invested in assets that are overvalued.
The management effect in fixed income attribution analysis least likely includes: -
correct answer Policy Effect.
A money manager generates a return of 12% when the benchmark returns 10%. The
manager's asset allocation decisions underperform by 25 basis points. Which is most
, accurate? - correct answer Security selection decisions outperform by 225 basis
points.
The use of which of the following risk measures was proposed by Markowitz as the
appropriate statistic when developing portfolios? - correct answer Standard deviation.
Examples of anchoring most likely include: - correct answer An investor holding an
underperforming equity security until its price rises by 25%.
Emma Jones shows signs of being averse to losses. Jones will most likely: - correct
answer Avoid selling stocks that would generate capital loss.
Which of the following statements is correctly associated with William Sharpe's
extension of modern portfolio theory? - correct answer For a diversified portfolio, the
only risk worth pricing is the systematic risk of a security.
Dylan Hope uses commodity futures contracts as part of his search for low
correlations and diversification for his equity portfolio. Which of the following decisions
