ML4T Final Practice Questions ACTUAL UPDATED QUESTIONS AND CORRECT
ANSWERS
Why did it become a good investment to bet against D) A and C
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
In terms of the fundamental law, when aiming for high C) high breadth
performance, you can make up for low skill with ___.
A) low breadth
B) low sharpe ratio
C) high breadth
D) high volatility
Is Bollinger Bands a leading indicator? B) No, Bollinger Bands is a lagging indicator
A) Yes
B) No, Bollinger Bands is a lagging indicator
C) No, Bollinger Bands is not an indicator
D) No, Bollinger bands is neither a leading or a lagging
indicator
,What should you do when the stock hits the bottom D) Long the stock to have positive shares
Bollinger Band?
A) Hold your position (don't change your position at all)
B) Exit any position you currently have and then hold at 0
shares
C) Short the stock to have negative shares
D) Long the stock to have positive shares
Who was the first bank Michael approached to make him B) Goldman Sachs
the CDSs?
A) JP Morgan
B) Goldman Sachs
C) Deutsche Bank
D) Bank of America
If the Information Coefficient is doubled and the trading C) The Information Ratio is multiplied by 6
opportunities are multiplied by 9, what happens to the
Information Ratio.
A) The Information Ratio is multiplied by 1 (remains
unchanged)
B) The Information Ratio is multiplied by 4.5
C) The Information Ratio is multiplied by 6
D) The Information Ratio is multiplied by 18
What is the best way an investor who is lacking in skill can C) Make more trades per day
beat a more skillful investor?
A) Hire skillful people
B) Make smarter trades
C) Make more trades per day
D) Pick better stocks
Which statement is true regarding the Fundamental Law A) IR = IC * sqrt(BR)
of Portfolio Management?
A) IR = IC * sqrt(BR)
B) IC = IR * sqrt(BR)
C) BR = IC * IR
D) IR = IC + sqrt(BR)
Which of the following can not improve your D) Decrease breadth but improve the skill
performance based on the Fundamental Law?
A) Improve your skill
B) Increase the Breadth
C) Increase the IC and BR
D) Decrease breadth but improve the skill
, What does CDS stand for? B) Credit Default Swap
A) Collateralized Debt Swap
B) Credit Default Swap
C) Collateralized Debt Security
D) Credit Default Security
In the movie "The Big Short", what did Credit Default A) Insured the bonds against failure and the insurer paid the claim if the
Swaps do? underlying bonds fail
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
Which of the following is not the keys of Grinold's C) Luck
fundamental law?
A) Skill
B) Performance
C) Luck
D) Breadth
Which of these scenarios does not indicate an upward C) A particular stock's short-term EMA falls below its long-term EMA
trend in stock price:
A) A particular stock's price surpasses the upper
Bollinger Band
B) A particular stock's 20-day SMA surpasses its 100-day
SMA
C) A particular stock's short-term EMA falls below its
long-term EMA
D) The value of a particular stock's Bollinger Band
Percentage > 0.8 and its price/SMA ratio is >= 1
Which of these could represent a State in a B) Daily Return
Reinforcement Learning problem when referring to a
trading scenario?
A) BUY
B) Daily Return
C) Return from Trade
D) All of the above
Which celebrity chef and "Kitchen Confidential" author D) Anthony Bourdain
explains collateralized debt obligations (CDOs) by
comparing them to fish stew?
A) Gordon Ramsay
B) Mario Batali
C) Thomas Keller
D) Anthony Bourdain
ANSWERS
Why did it become a good investment to bet against D) A and C
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
In terms of the fundamental law, when aiming for high C) high breadth
performance, you can make up for low skill with ___.
A) low breadth
B) low sharpe ratio
C) high breadth
D) high volatility
Is Bollinger Bands a leading indicator? B) No, Bollinger Bands is a lagging indicator
A) Yes
B) No, Bollinger Bands is a lagging indicator
C) No, Bollinger Bands is not an indicator
D) No, Bollinger bands is neither a leading or a lagging
indicator
,What should you do when the stock hits the bottom D) Long the stock to have positive shares
Bollinger Band?
A) Hold your position (don't change your position at all)
B) Exit any position you currently have and then hold at 0
shares
C) Short the stock to have negative shares
D) Long the stock to have positive shares
Who was the first bank Michael approached to make him B) Goldman Sachs
the CDSs?
A) JP Morgan
B) Goldman Sachs
C) Deutsche Bank
D) Bank of America
If the Information Coefficient is doubled and the trading C) The Information Ratio is multiplied by 6
opportunities are multiplied by 9, what happens to the
Information Ratio.
A) The Information Ratio is multiplied by 1 (remains
unchanged)
B) The Information Ratio is multiplied by 4.5
C) The Information Ratio is multiplied by 6
D) The Information Ratio is multiplied by 18
What is the best way an investor who is lacking in skill can C) Make more trades per day
beat a more skillful investor?
A) Hire skillful people
B) Make smarter trades
C) Make more trades per day
D) Pick better stocks
Which statement is true regarding the Fundamental Law A) IR = IC * sqrt(BR)
of Portfolio Management?
A) IR = IC * sqrt(BR)
B) IC = IR * sqrt(BR)
C) BR = IC * IR
D) IR = IC + sqrt(BR)
Which of the following can not improve your D) Decrease breadth but improve the skill
performance based on the Fundamental Law?
A) Improve your skill
B) Increase the Breadth
C) Increase the IC and BR
D) Decrease breadth but improve the skill
, What does CDS stand for? B) Credit Default Swap
A) Collateralized Debt Swap
B) Credit Default Swap
C) Collateralized Debt Security
D) Credit Default Security
In the movie "The Big Short", what did Credit Default A) Insured the bonds against failure and the insurer paid the claim if the
Swaps do? underlying bonds fail
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
Which of the following is not the keys of Grinold's C) Luck
fundamental law?
A) Skill
B) Performance
C) Luck
D) Breadth
Which of these scenarios does not indicate an upward C) A particular stock's short-term EMA falls below its long-term EMA
trend in stock price:
A) A particular stock's price surpasses the upper
Bollinger Band
B) A particular stock's 20-day SMA surpasses its 100-day
SMA
C) A particular stock's short-term EMA falls below its
long-term EMA
D) The value of a particular stock's Bollinger Band
Percentage > 0.8 and its price/SMA ratio is >= 1
Which of these could represent a State in a B) Daily Return
Reinforcement Learning problem when referring to a
trading scenario?
A) BUY
B) Daily Return
C) Return from Trade
D) All of the above
Which celebrity chef and "Kitchen Confidential" author D) Anthony Bourdain
explains collateralized debt obligations (CDOs) by
comparing them to fish stew?
A) Gordon Ramsay
B) Mario Batali
C) Thomas Keller
D) Anthony Bourdain
