Finance 4407-Investment and Portfolio
Management Final Exam and Correct
Answers (2025) Updated.
Security Market Line - Answer This graphical representation shows the relationship between
the expected return and the systematic risk on a risky asset.
Non-systematic risk - Answer Associated with specific securities, this can be reduced through
diversification.
Beta - Answer Measures how closely a security or portfolio moves with the market.
What is the Sharpe ratio? - Answer Measures the risk-adjusted rate of return using standard
deviation.
What is Markowitz Portfolio Theory? - Answer States that a single asset or portfolio of assets is
considered to be efficient if no other asset or portfolio of assets offers higher expected return
with the same (or lower) risk, or lower risk with the same (or higher) expected return.
What is a balanced fund? - Answer A type of mutual fund which combines both growth
equities and fixed-income products.
What is $25 - Answer The NAVPS of a mutual fund with four million shares outstanding, assets
of $102,000,000 and liabilities of $2,000,000
What is a back-end or deferred sales charge? - Answer Based on a receding scale, investors
may have to pay this on redemption
What is 5.26% - Answer After paying a front-end fee of 5%, this represents the portion of your
money actually invested that you have paid as fees.
After buying a $10,000 fund, reinvesting distributions of $3,500 at the end of the 1st year, and
selling the fund for $17,000 you would pay this much capital gains in a 40% tax bracket when
redeeming in the 2nd year. - Answer $700
, When a bond manager attempts to eliminate interest rate risk by deriving a specific rate of
return to a given investment horizon, he is practicing this. - Answer Immunization
This calculation is used to help determine bond portfolio immunization - Answer Macaulay
duration
This would best describe the historical correlation between fixed-income and equity securities -
Answer Low correlation
What is the YTM of a 5-year, 8% coupon annual-pay bond priced at $95 - Answer 9.3%
What is indexing? - Answer A passive management style that buys securities to match a
benchmark such as the S&P 500.
Value buyers would look for low numbers of these - Answer P/E or P/BVPS ratios?
What is top-down management - Answer This management style examines the big picture
first, making investment decisions based on a macro-economic view.
What is tactical asset allocation - Answer Shifting assets to a sector of the economy that is
expected to outperform
This industry group may be expected to continue to outperform during downturns in the
business cycle. - Answer Consumer staples
What is the capital asset pricing model? - Answer Represented by RP=Rf+B(Rm-Rf)
How to calculate the Sharpe Ratio - Answer Take the portfolio return, subtract the risk-free
rate, and divide the result by the standard deviation.
What is the expected return for a fund with a beta of 1.1, a return on the S&P/TSX composite of
10% and a T-Bill rate of 4% - Answer 10.6%
What are Porters competitive forces? - Answer 5 items characterize competition within an
Management Final Exam and Correct
Answers (2025) Updated.
Security Market Line - Answer This graphical representation shows the relationship between
the expected return and the systematic risk on a risky asset.
Non-systematic risk - Answer Associated with specific securities, this can be reduced through
diversification.
Beta - Answer Measures how closely a security or portfolio moves with the market.
What is the Sharpe ratio? - Answer Measures the risk-adjusted rate of return using standard
deviation.
What is Markowitz Portfolio Theory? - Answer States that a single asset or portfolio of assets is
considered to be efficient if no other asset or portfolio of assets offers higher expected return
with the same (or lower) risk, or lower risk with the same (or higher) expected return.
What is a balanced fund? - Answer A type of mutual fund which combines both growth
equities and fixed-income products.
What is $25 - Answer The NAVPS of a mutual fund with four million shares outstanding, assets
of $102,000,000 and liabilities of $2,000,000
What is a back-end or deferred sales charge? - Answer Based on a receding scale, investors
may have to pay this on redemption
What is 5.26% - Answer After paying a front-end fee of 5%, this represents the portion of your
money actually invested that you have paid as fees.
After buying a $10,000 fund, reinvesting distributions of $3,500 at the end of the 1st year, and
selling the fund for $17,000 you would pay this much capital gains in a 40% tax bracket when
redeeming in the 2nd year. - Answer $700
, When a bond manager attempts to eliminate interest rate risk by deriving a specific rate of
return to a given investment horizon, he is practicing this. - Answer Immunization
This calculation is used to help determine bond portfolio immunization - Answer Macaulay
duration
This would best describe the historical correlation between fixed-income and equity securities -
Answer Low correlation
What is the YTM of a 5-year, 8% coupon annual-pay bond priced at $95 - Answer 9.3%
What is indexing? - Answer A passive management style that buys securities to match a
benchmark such as the S&P 500.
Value buyers would look for low numbers of these - Answer P/E or P/BVPS ratios?
What is top-down management - Answer This management style examines the big picture
first, making investment decisions based on a macro-economic view.
What is tactical asset allocation - Answer Shifting assets to a sector of the economy that is
expected to outperform
This industry group may be expected to continue to outperform during downturns in the
business cycle. - Answer Consumer staples
What is the capital asset pricing model? - Answer Represented by RP=Rf+B(Rm-Rf)
How to calculate the Sharpe Ratio - Answer Take the portfolio return, subtract the risk-free
rate, and divide the result by the standard deviation.
What is the expected return for a fund with a beta of 1.1, a return on the S&P/TSX composite of
10% and a T-Bill rate of 4% - Answer 10.6%
What are Porters competitive forces? - Answer 5 items characterize competition within an
