CFA LEVEL I PORTFOLIO MANAGEMENT EXAM QUESTIONS WITH CORRECT ANSWERS 100% 2024
The market portfolio in the Capital Market Theory contains which types of investments? - CORRECT ANSWERS-The market portfolio contains all risky assets in existence. It does not contain any risk-free assets.
Use the capital asset pricing model (CAPM) to find the required rate of return. - CORRECT ANSWERS-ERstock = Rf + (ERM - Rf) × Betastock
Investment constraints include: - CORRECT ANSWERS-1) liquidity needs; 2) time horizon; 3) tax concerns; 4) legal; 5)regulatory factors; and 6)unique needs and preferences.
While employer contributions may be of interest, and an issue in some instances, it is not classified as a specific investment constraint.
In a case where all portfolio's are undervalued, which portfolio should the investor sell (if
there is an unexpected need for cash)? - CORRECT ANSWERS-The investor should sell the portfolio that offers less excess return.
What describes an investment that is not on the efficient frontier? - CORRECT ANSWERS-The efficient frontier outlines the set of portfolios that gives investors the highest return for a given level of risk or the lowest risk for a given level of return. Therefore, if a portfolio is not on the efficient frontier, there must be a portfolio that has lower risk for the same return. Equivalently, there must be a portfolio that produces a higher return for the same risk.
When the market is in equilibrium: - CORRECT ANSWERS-All assets plot on the SML.
When the market is in equilibrium, expected returns equal required returns. Since this means that all assets are correctly priced, all assets plot on the SML.
By definition, all stocks and portfolios other than the market portfolio fall below the CML.
(Only the market portfolio is efficient.
The market portfolio in the Capital Market Theory contains which types of investments? - CORRECT ANSWERS-The market portfolio contains all risky assets in existence. It does not contain any risk-free assets.
Use the capital asset pricing model (CAPM) to find the required rate of return. - CORRECT ANSWERS-ERstock = Rf + (ERM - Rf) × Betastock
Investment constraints include: - CORRECT ANSWERS-1) liquidity needs; 2) time horizon; 3) tax concerns; 4) legal; 5)regulatory factors; and 6)unique needs and preferences.
While employer contributions may be of interest, and an issue in some instances, it is not classified as a specific investment constraint.
In a case where all portfolio's are undervalued, which portfolio should the investor sell (if
there is an unexpected need for cash)? - CORRECT ANSWERS-The investor should sell the portfolio that offers less excess return.
What describes an investment that is not on the efficient frontier? - CORRECT ANSWERS-The efficient frontier outlines the set of portfolios that gives investors the highest return for a given level of risk or the lowest risk for a given level of return. Therefore, if a portfolio is not on the efficient frontier, there must be a portfolio that has lower risk for the same return. Equivalently, there must be a portfolio that produces a higher return for the same risk.
When the market is in equilibrium: - CORRECT ANSWERS-All assets plot on the SML.
When the market is in equilibrium, expected returns equal required returns. Since this means that all assets are correctly priced, all assets plot on the SML.
By definition, all stocks and portfolios other than the market portfolio fall below the CML.
(Only the market portfolio is efficient.
