GIT CS 7646 ML4T Exam 1 ACTUAL UPDATED QUESTIONS AND CORRECT
ANSWERS
Question 1: Why did it become a good investment to bet Correct answer: D
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
Question 2: In terms of the fundamental law, when aiming Correct answer: C
for high performance, you can make up for low skill with .
A) low breadth
B) low sharpe ratio
C) high breadth
D) high volatility
Question 3: Is Bollinger Bands a leading indicator? Correct answer: B
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
,Question 4: What should you do when the stock hits the Correct answer: D
bottom 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
Question 5: Who was the first bank Michael approached Correct answer: B
to make him the CDSs?
A) JP Morgan
B) Goldman Sachs
C) Deutsche Bank
D) Bank of America
Question 6: If the Information Coefficient is doubled and Correct answer: C
the trading 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
Question 7: What is the best way an investor who is Correct answer: C
lacking in skill can beat a more skillful investor?
A) Hire skillful people
B) Make smarter trades
C) Make more trades per day
D) Pick better stocks
Question 8: Which statement is true regarding the Correct answer: A
Fundamental Law of Portfolio Management?
A) IR = IC * sqrt(BR)
B) IC = IR * sqrt(BR)
C) BR = IC * IR
D) IR = IC + sqrt(BR)
Question 9: Which of the following can not improve your Correct answer: D
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
, Question 10: What does CDS stand for? Correct answer: B
A) Collateralized Debt Swap
B) Credit Default Swap
C) Collateralized Debt Security
D) Credit Default Security
Question 11: In the movie "The Big Short", what did Credit Correct answer: A
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
Question 12: Which of the following is not the keys of Correct answer: C
Grinold's fundamental law?
A) Skill
B) Performance
C) Luck
D) Breadth
Question 13: Which of these scenarios does not indicate Correct answer: C
an upward 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
Question 14: Which of these could represent a State in a Correct answer: B
Reinforcement Learning problem when referring to a
trading scenario?
A) BUY
B) Daily Return
C) Return from Trade
D) All of the above
ANSWERS
Question 1: Why did it become a good investment to bet Correct answer: D
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
Question 2: In terms of the fundamental law, when aiming Correct answer: C
for high performance, you can make up for low skill with .
A) low breadth
B) low sharpe ratio
C) high breadth
D) high volatility
Question 3: Is Bollinger Bands a leading indicator? Correct answer: B
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
,Question 4: What should you do when the stock hits the Correct answer: D
bottom 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
Question 5: Who was the first bank Michael approached Correct answer: B
to make him the CDSs?
A) JP Morgan
B) Goldman Sachs
C) Deutsche Bank
D) Bank of America
Question 6: If the Information Coefficient is doubled and Correct answer: C
the trading 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
Question 7: What is the best way an investor who is Correct answer: C
lacking in skill can beat a more skillful investor?
A) Hire skillful people
B) Make smarter trades
C) Make more trades per day
D) Pick better stocks
Question 8: Which statement is true regarding the Correct answer: A
Fundamental Law of Portfolio Management?
A) IR = IC * sqrt(BR)
B) IC = IR * sqrt(BR)
C) BR = IC * IR
D) IR = IC + sqrt(BR)
Question 9: Which of the following can not improve your Correct answer: D
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
, Question 10: What does CDS stand for? Correct answer: B
A) Collateralized Debt Swap
B) Credit Default Swap
C) Collateralized Debt Security
D) Credit Default Security
Question 11: In the movie "The Big Short", what did Credit Correct answer: A
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
Question 12: Which of the following is not the keys of Correct answer: C
Grinold's fundamental law?
A) Skill
B) Performance
C) Luck
D) Breadth
Question 13: Which of these scenarios does not indicate Correct answer: C
an upward 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
Question 14: Which of these could represent a State in a Correct answer: B
Reinforcement Learning problem when referring to a
trading scenario?
A) BUY
B) Daily Return
C) Return from Trade
D) All of the above
