ML4T FINAL QUESTIONS WITH VERIFIED ACCURATE
ANSWERS 2026
1. Why did it come a good investment to bet against mortgage-backed securities?
A) The default rate on the mortgages kept rising.
B) Rating agencies were accurately assigning ratings.
C) Banks were incentivized to issue more and more mortgages.
D) A and C - Answers -The default rate on the mortgages kept rising.
Banks were incentivized to issue more and more mortgages.
458. How does alpha and gamma values in Q-learning relate to the agent
learning/update?
A) The agent learns more quickly with larger alpha value and values
later rewards more with smaller gamma
B) The agent learns more quickly with larger alpha value and values
later rewards more with larger gamma
C) The agent learns more slowly with larger alpha value and values
later rewards more with smaller gamma
D) The agent learns more slowly with larger alpha value and values
later rewards more with larger gamma - Answers -The agent learns more quickly with
larger alpha value and values later rewards more with larger gamma.
496. What is the strong form of EMH?
A) Prices adjust to new public information
B) Future prices cannot be predicted by just analyzing historic prices
C) Prices adjust to public and private information
D) None of the above - Answers -Prices adjust to public and private information
11. In the movie, "The Big Short", what did Credit Default Swaps do?
A) Insured the bonds against failure and the insurer paid the claim if the
underlying bonds fail
B) Insured the bonds against failure and the insurer paid the claim if the
underlying bonds make money
C) To increase employees
D) As an annual practice - Answers -Insured the bonds against failure, and the insurer
paid the claim if the underlying bonds fail
145. The information coefficient(IC) of a manager is 0.2. The manager makes monthly
bets on 27 stocks. What is the information ratio(IR) or performance of the manager?
A) 0.6 * sqrt(3)
B) 5.4
C) 0.45 * sqrt(3)
D) 3.6 - Answers -3.6
, 472. Which of the following is not an input of the mean variance optimization(MVO)?
A) Volatility
B) Covariance
C) Target return
D) Asset weights for portfolio that minimize risk - Answers -Asset weights for portfolio
that minimize risk
557. Which of the following is not a form of the EMH?
A) Weak
B) Semi-Weak
C) Strong
D) Semi-Strong - Answers -semi-weak
668. With regards to the Fundamental Law, what is summarized in the information
coefficient?
A) Breadth
B) Beta
C) Skill
D) Performance - Answers -skill
344. Which of the following statements below is correct considering moving average?
A) A moving average helps remove daily fluctuation from analysis.
B) The shorter the time period under consideration, the easier it is to
predict long-term trends.
C) The longer the time period under consideration, the more
sensitive the moving average is towards daily volatility.
D) A moving average is always computed using the same arithmetic
model. - Answers -A moving average helps remove daily fluctuation from analysis
417. Which of the following is true about the coin flip casino lessons?
A) Lower Alpha generates a higher Sharpe Ratio
B) More execution opportunities provide a higher Sharpe Ratio
C) Sharpe Ratio grows as the square root of performance
D) All of above - Answers -More execution opportunities provide a higher Sharpe Ratio
460. In S&P credit rating, which rating means the best rating?
A) AAAA
B) AAA
C) AA
D) A - Answers -AAA
463. In the fundamental law, the given equation is IR = IC * √BR), the information ratio,
which is the measure of how the portfolio exceeds the market's performance, is
calculated by:
A) Mean(αp(t))/stddev(αp(t))
ANSWERS 2026
1. Why did it come a good investment to bet against mortgage-backed securities?
A) The default rate on the mortgages kept rising.
B) Rating agencies were accurately assigning ratings.
C) Banks were incentivized to issue more and more mortgages.
D) A and C - Answers -The default rate on the mortgages kept rising.
Banks were incentivized to issue more and more mortgages.
458. How does alpha and gamma values in Q-learning relate to the agent
learning/update?
A) The agent learns more quickly with larger alpha value and values
later rewards more with smaller gamma
B) The agent learns more quickly with larger alpha value and values
later rewards more with larger gamma
C) The agent learns more slowly with larger alpha value and values
later rewards more with smaller gamma
D) The agent learns more slowly with larger alpha value and values
later rewards more with larger gamma - Answers -The agent learns more quickly with
larger alpha value and values later rewards more with larger gamma.
496. What is the strong form of EMH?
A) Prices adjust to new public information
B) Future prices cannot be predicted by just analyzing historic prices
C) Prices adjust to public and private information
D) None of the above - Answers -Prices adjust to public and private information
11. In the movie, "The Big Short", what did Credit Default Swaps do?
A) Insured the bonds against failure and the insurer paid the claim if the
underlying bonds fail
B) Insured the bonds against failure and the insurer paid the claim if the
underlying bonds make money
C) To increase employees
D) As an annual practice - Answers -Insured the bonds against failure, and the insurer
paid the claim if the underlying bonds fail
145. The information coefficient(IC) of a manager is 0.2. The manager makes monthly
bets on 27 stocks. What is the information ratio(IR) or performance of the manager?
A) 0.6 * sqrt(3)
B) 5.4
C) 0.45 * sqrt(3)
D) 3.6 - Answers -3.6
, 472. Which of the following is not an input of the mean variance optimization(MVO)?
A) Volatility
B) Covariance
C) Target return
D) Asset weights for portfolio that minimize risk - Answers -Asset weights for portfolio
that minimize risk
557. Which of the following is not a form of the EMH?
A) Weak
B) Semi-Weak
C) Strong
D) Semi-Strong - Answers -semi-weak
668. With regards to the Fundamental Law, what is summarized in the information
coefficient?
A) Breadth
B) Beta
C) Skill
D) Performance - Answers -skill
344. Which of the following statements below is correct considering moving average?
A) A moving average helps remove daily fluctuation from analysis.
B) The shorter the time period under consideration, the easier it is to
predict long-term trends.
C) The longer the time period under consideration, the more
sensitive the moving average is towards daily volatility.
D) A moving average is always computed using the same arithmetic
model. - Answers -A moving average helps remove daily fluctuation from analysis
417. Which of the following is true about the coin flip casino lessons?
A) Lower Alpha generates a higher Sharpe Ratio
B) More execution opportunities provide a higher Sharpe Ratio
C) Sharpe Ratio grows as the square root of performance
D) All of above - Answers -More execution opportunities provide a higher Sharpe Ratio
460. In S&P credit rating, which rating means the best rating?
A) AAAA
B) AAA
C) AA
D) A - Answers -AAA
463. In the fundamental law, the given equation is IR = IC * √BR), the information ratio,
which is the measure of how the portfolio exceeds the market's performance, is
calculated by:
A) Mean(αp(t))/stddev(αp(t))
