ML4T MIDTERM SPRING 2024 QUESTIONS
WITH 100% VERIFIED SOLUTIONS!!
Question 1: Why did it become 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 Answer - Correct Answer: D
What is the output of the following Python session?
>>> a = 3
>>> b = a
>>> a = 2
>>> print b * a Answer - 6
COL_1 COL_2 COL_3
100.00 0.00 0.00
101.00 0.01 0.01
102.00 0.02 0.01
100.00 0.00 -0.02
102.00 0.02 0.02
What might the data in each of the columns represent (from left to right)?
A) Cumulative return, portfolio value, daily return
,B) Daily return, portfolio value, cumulative return
C) Cumulative return, daily return, portfolio value
D) Portfolio value, cumulative return, daily return Answer - D
5. Which code snippet below would correctly calculate the Sharpe ratio for
time series daily_rets that represents 60 days of daily returns? The risk free
rate is represented by rfr
# snippet A
sharpe = math.sqrt(60.0) * np.mean(daily_rets - rfr) / np.std(daily_rets)
#snippet B
sharpe = math.sqrt(60.0) * np.std(daily_rets - rfr) / np.mean(daily_rets)
#snippet C
sharpe = math.sqrt(252.0) * np.mean(daily_rets - rfr) / np.std(daily_rets)
#snippet D
sharpe = math.sqrt(252.0) * np.std(daily_rets - rfr) / np.mean(daily_rets)
Answer - C
Which of the following is also referred to as "Risk Adjusted Reward"
A) Cumulative Return
B) Standard Deviation
C) Sharpe Ratio
D) Average Daily Return Answer - C) Sharpe Ratio
The Sharpe ratio can be used to evaluate a portfolio's risk-adjusted
performance
Source: Quiz 4?
,7. Which statement is TRUE?
A) Mutual funds can be traded throughout the trading day.
B) Hedge fund holdings are fully transparent.
C) ETF managers earn 20% of the ETF's profits.
D) ETFs can be traded throughout the trading day. Answer - D) ETFs can be
traded throughout the trading day.
8. Which statement is FALSE?
A) Hedge fund managers typically charge 2% of profits and 20% of AUM as fees.
B) Mutual fund managers typically charge 0.25% to 2.0% of AUM as fees.
C) ETF managers typically charge 0.1% to 1.0% of AUM as fees.
D) Hedge fund managers typically charge 2% of AUM and 20% of profits as
fees. Answer - A) Hedge fund managers typically charge 2% of profits and 20%
of AUM as fees.
What is AMU? Answer - Assets under management (AUM) is the total market
value of the investments that a person or entity manages on behalf of clients.
9. Consider two hedge funds. Both of them have provided equivalent positive
cumulative returns. Which of the following might be a valid reason for choosing
HF1 over HF2?
A) HF1 has a lower Sharpe ratio than it's benchmark, but HF2 has a higher
Sharpe that its benchmark.
B) HF1 has a higher standard deviation of daily returns than HF2.
C) HF1 has a lower standard deviation of daily returns than HF2.
D) HF1 has a higher Bollinger value than HF2. Answer - C) HF1 has a lower
standard deviation of daily returns than HF2.
, A lower std dev indicates HF1 is less risky.
10. According to the 60 minutes video "Is the stock market rigged?" which
strategies have high frequency traders used to exploit market mechanics?
A) A dedicated fiber optic link between Silicon Valley and the exchanges in New
York.
B) A dedicated fiber optic link between Chicago and the exchanges in New
Jersey.
C) Front running orders by exploiting faster network connectivity.
D) B and C. Answer - D)
A dedicated fiber optic link between Chicago and the exchanges in New Jersey.
and
Front running orders by exploiting faster network connectivity.
11. How does the IEX exchange defeat the high frequency traders investigated
in the 60 minutes video?
A) Using dark pools.
B) Using 60 kilometers of fiber optic link to delay visibility of the order book. C)
By converting the market to a series of discrete auctions every 2 seconds. D) By
prohibiting limit orders. Answer - B) Using 60 kilometers of fiber optic link to
delay visibility of the order book. This device is coined "The Magic Shoebox"
Souce: 60 Minutes - Is the market rigged
15. Consider the following valuation factors of a company:
It owns 1000 cars valued at $20,000 each
It holds patents worth $5,000,000
It owes $5,000,000 in loans
It pays $1.00 per year per share in dividends starting in one year
WITH 100% VERIFIED SOLUTIONS!!
Question 1: Why did it become 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 Answer - Correct Answer: D
What is the output of the following Python session?
>>> a = 3
>>> b = a
>>> a = 2
>>> print b * a Answer - 6
COL_1 COL_2 COL_3
100.00 0.00 0.00
101.00 0.01 0.01
102.00 0.02 0.01
100.00 0.00 -0.02
102.00 0.02 0.02
What might the data in each of the columns represent (from left to right)?
A) Cumulative return, portfolio value, daily return
,B) Daily return, portfolio value, cumulative return
C) Cumulative return, daily return, portfolio value
D) Portfolio value, cumulative return, daily return Answer - D
5. Which code snippet below would correctly calculate the Sharpe ratio for
time series daily_rets that represents 60 days of daily returns? The risk free
rate is represented by rfr
# snippet A
sharpe = math.sqrt(60.0) * np.mean(daily_rets - rfr) / np.std(daily_rets)
#snippet B
sharpe = math.sqrt(60.0) * np.std(daily_rets - rfr) / np.mean(daily_rets)
#snippet C
sharpe = math.sqrt(252.0) * np.mean(daily_rets - rfr) / np.std(daily_rets)
#snippet D
sharpe = math.sqrt(252.0) * np.std(daily_rets - rfr) / np.mean(daily_rets)
Answer - C
Which of the following is also referred to as "Risk Adjusted Reward"
A) Cumulative Return
B) Standard Deviation
C) Sharpe Ratio
D) Average Daily Return Answer - C) Sharpe Ratio
The Sharpe ratio can be used to evaluate a portfolio's risk-adjusted
performance
Source: Quiz 4?
,7. Which statement is TRUE?
A) Mutual funds can be traded throughout the trading day.
B) Hedge fund holdings are fully transparent.
C) ETF managers earn 20% of the ETF's profits.
D) ETFs can be traded throughout the trading day. Answer - D) ETFs can be
traded throughout the trading day.
8. Which statement is FALSE?
A) Hedge fund managers typically charge 2% of profits and 20% of AUM as fees.
B) Mutual fund managers typically charge 0.25% to 2.0% of AUM as fees.
C) ETF managers typically charge 0.1% to 1.0% of AUM as fees.
D) Hedge fund managers typically charge 2% of AUM and 20% of profits as
fees. Answer - A) Hedge fund managers typically charge 2% of profits and 20%
of AUM as fees.
What is AMU? Answer - Assets under management (AUM) is the total market
value of the investments that a person or entity manages on behalf of clients.
9. Consider two hedge funds. Both of them have provided equivalent positive
cumulative returns. Which of the following might be a valid reason for choosing
HF1 over HF2?
A) HF1 has a lower Sharpe ratio than it's benchmark, but HF2 has a higher
Sharpe that its benchmark.
B) HF1 has a higher standard deviation of daily returns than HF2.
C) HF1 has a lower standard deviation of daily returns than HF2.
D) HF1 has a higher Bollinger value than HF2. Answer - C) HF1 has a lower
standard deviation of daily returns than HF2.
, A lower std dev indicates HF1 is less risky.
10. According to the 60 minutes video "Is the stock market rigged?" which
strategies have high frequency traders used to exploit market mechanics?
A) A dedicated fiber optic link between Silicon Valley and the exchanges in New
York.
B) A dedicated fiber optic link between Chicago and the exchanges in New
Jersey.
C) Front running orders by exploiting faster network connectivity.
D) B and C. Answer - D)
A dedicated fiber optic link between Chicago and the exchanges in New Jersey.
and
Front running orders by exploiting faster network connectivity.
11. How does the IEX exchange defeat the high frequency traders investigated
in the 60 minutes video?
A) Using dark pools.
B) Using 60 kilometers of fiber optic link to delay visibility of the order book. C)
By converting the market to a series of discrete auctions every 2 seconds. D) By
prohibiting limit orders. Answer - B) Using 60 kilometers of fiber optic link to
delay visibility of the order book. This device is coined "The Magic Shoebox"
Souce: 60 Minutes - Is the market rigged
15. Consider the following valuation factors of a company:
It owns 1000 cars valued at $20,000 each
It holds patents worth $5,000,000
It owes $5,000,000 in loans
It pays $1.00 per year per share in dividends starting in one year
