CFA 2018 level 3 schweser practice exam CFA 2018 level 3 question bank 11 trading questions

TRADING QUESTION IS COMPOSED OF ONE PART FOR A TOTAL OF 10 MINUTES Jeff Hill, CFA, is a portfolio manager specializing in investing in large cap equities He’s been interested in Moog Inc., (MOOG) for some time and is finally ready to purchase shares Yesterday, MOOG opened at $532/share and Hill placed an order to buy 1,000 shares when the stock was at $535.00/share The order was not filled and MOOG finished the day closing at $535.15/share At the beginning of trading today, the order was resubmitted at $536.25/share and 750 shares of MOOG were purchased at that price Subsequently the price went up to $537.25/share, and the order was cancelled The cost of purchasing the shares (commission) was $402 Calculate the implementation shortfall in percent for MOOG stock and the components for explicit costs, realized profit/loss, delay costs, and missed trade opportunity cost Show your work (10 minutes) i Implementation shortfall ii Explicit costs iii Realized profit/loss iv Delay costs v Missed trade opportunity costs (MTOC) QUESTION HAS FOUR PARTS (A, B, C, D) FOR A TOTAL OF 19 MINUTES Euro Electric is a United Kingdom company specializing in manufacturing small electric cars of high quality at a reasonable price They have created a niche market with 37 dealerships located throughout the United Kingdom The company has a sponsor-directed profit sharing plan (Plan) managed by Alexis Tan, CFA, and Roger Lewin, CFA They are meeting to evaluate the Plan’s performance and review the Plan’s Investment Policy Statement (IPS) At the meeting they got into a lengthy discussion of rebalancing the portfolio and made the following comments: Tan: "Empirical evidence supports an ad hoc (discretionary) approach to rebalancing as the best way to add value because it reduces portfolio risk and adds incremental return." Lewin: "Returning the asset class mix to strategic policy weights each quarter could be considered a contrarian approach that supplies liquidity to equity markets." Excerpts from the Plan's IPS are shown in the exhibits below: Exhibit A Euro Electric Profit-Sharing Plan—Select Data Total Plan Assets (March 31st): Return Objective: Risk Tolerance: Size of Workforce: Average Age of Workforce: Number of Projected Retirements (over next years): Liquidity Needs: Time Horizon: £30,400,000 12% (or inflation plus 9%) High 650 employees 37 Low Long Exhibit B Euro Electric Profit-Sharing Plan Strategic Asset Allocation Asset Class Target Allocation % Broad Domestic Equity 25 Developed Country International Stocks 25 Emerging Markets Equities 20 Domestic Fixed Income 20 Hedge Funds 10 Total 100 Note: Rebalancing occurs quarterly on Jan 1st, April 1st, July 1st, and October 1st A 10% ±2% allocation would mean a range of 8–12% Exhibit C Euro Electric Profit-Sharing Plan—Select Asset Class Data Hedge Funds Expected Return 6.6% Trading Costs High Tracking Risk Versus Strategic Mix Moderate Correlation With Other Assets in Portfolio 0.47 Asset Class Volatility Low Domestic Fixed Income 5.4% Low Moderate 0.17 Low Emerging Markets Equities 9.9% High High 0.50 Moderate A Determine whether the statements by Tan and Lewin regarding portfolio rebalancing are correct or incorrect Justify your responses (6 minutes) B Based only on the data in exhibit A, determine whether the optimal asset class rebalancing corridors should be wider or narrower and explain why (3 minutes) C On March 31st, Developed Country International stocks are valued at £8,816,000 Based on the data in exhibit B, determine the most appropriate rebalancing decision on April 1st for Developed Country International stocks using the target weight ±5 percentage points Show your calculations (4 minutes) D Based on the data in exhibit C, determine whether the optimal asset class rebalancing corridor width for fixed income or hedge funds would be relatively narrower Explain and support your answer with two reasons (6 minutes) ... niche market with 37 dealerships located throughout the United Kingdom The company has a sponsor-directed profit sharing plan (Plan) managed by Alexis Tan, CFA, and Roger Lewin, CFA They are meeting... Assets (March 31 st): Return Objective: Risk Tolerance: Size of Workforce: Average Age of Workforce: Number of Projected Retirements (over next years): Liquidity Needs: Time Horizon: 30 ,400,000... optimal asset class rebalancing corridors should be wider or narrower and explain why (3 minutes) C On March 31 st, Developed Country International stocks are valued at £8,816,000 Based on the data