10/12/2018 Learning Management System Question #1 of 26 Which portfolio construction method is most likely to be used when tracking an index with a large number of constituent stocks for relatively small clients? A) Full replication B) Strati ed sampling .in C) Optimization en tre Question #2 of 26 An investment analyst is addressing environmental, social, and governance (ESG) concerns for clients Her goal is to recommend suitable investments by excluding companies from the equity bo ok c investment universe that fail to meet client ESG standards Which of the following screening techniques should be applied by the investment analyst? A) Negative screening w w o C) Positive screening m B) Thematic investing w Question #3 of 26 Which of the following statements regarding using equities as an in ation hedge is most accurate? They have been a good in ation hedge: A) in many countries over a short time span B) but only in the U.S for a short time span C) in many countries over a long time span Question #4 of 26 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83447102/print 1/8 10/12/2018 Learning Management System An investment analyst is evaluating portfolio costs related to buying and selling equity securities Which of the following costs is an example of an implicit trading cost? A) Stock exchange fees B) Broker commissions C) Price impact from trading .in Question #5 of 26 The strategy of using derivatives to shift a portfolio back to the risk exposure that matches the en tre index as a result of short-term deviations is best referred to as: A) a rebalancing overlay C) a risk overlay m Question #6 of 26 bo ok c B) a completion overlay .o Management fees and trading commissions are most likely to be lowest for: w w A) passive factor-based investing B) active investing w C) market-cap weighted passive investing Question #7 of 26 Which of the following is least accurate regarding using equities as an in ation hedge? A) The historical record is impressive as to their e ectiveness B) Their ability to hedge is una ected by taxes C) The e ectiveness of an individual stock as a hedge depends on its product market https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83447102/print 2/8 10/12/2018 Learning Management System Question #8 of 26 Which of the predominant weighting schemes used in the construction of equity share indices assumes that the investor holds each company in the index according to its relative weight in the index? A) The market capitalization-weighted index B) The free oat-adjusted market capitalization index en tre in C) The price-weighted index Question #9 of 26 bo ok c Passive factor-based investing is also referred to in the industry as: A) strati ed investing B) smart beta .o m C) attribution trading w w Question #10 of 26 Which of the following is least accurate regarding equities in a portfolio? w A) Equities have been shown to be an in ation hedge worldwide B) European institutions hold more equity than U.S institutions in their portfolio C) U.S equity typically constitutes about half of world equity Question #11 of 26 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83447102/print 3/8 10/12/2018 Learning Management System If an optimization approach to portfolio construction yields a portfolio that is not meanvariance e cient relative to the benchmark, the most appropriate solution to this problem is to: A) re-estimate the key inputs to the model: returns, variances, and covariances B) add a constraint that portfolio volatility is equal to benchmark volatility C) switch to full replication .in Question #12 of 26 positive e ect on which characteristic of indexes? A) Transparent C) Investable .o m Question #13 of 26 bo ok c B) Rules-based en tre The use of free- oat weighting for a market-cap weighted portfolio most likely has the largest w w Which of the following statements is most accurate? A) Corporate governance issues are important to passive investors B) Passive investors typically have little or no access to corporate boards and w management C) The cost of voting proxies for passive investors typically outweighs the bene ts, so portfolio managers of passive funds don’t usually exercise the right to vote those i Question #14 of 26 Which of the following equity investment portfolios would most likely be passively managed? A) USA consumer defensive sector portfolio https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83447102/print 4/8 10/12/2018 Learning Management System B) Emerging markets small-cap value portfolio C) World large-cap growth portfolio Question #15 of 26 Three market-cap weighted indexes have the following Her ndahl-Hirschman indexes (HHI): HHI for Index XX = 0.01 HHI for Index YY = 0.05 .in HHI for Index ZZ = 0.10 weighted portfolio of 100 stocks? B) Index XX C) Index ZZ .o m Question #16 of 26 bo ok c A) Index YY en tre Which of these market-cap weighted portfolios has the same concentration risk as an equally w w Which type of analysis is most useful in identifying sources of tracking error? A) Attribution analysis w B) Optimization C) Strati ed sampling Question #17 of 26 Which fund most likely has the lowest tracking error relative to its benchmark? Fund Alpha: Fees = 0.11%; cash allocation = 4.2% Fund Beta: Fees = 0.02%; cash allocation = 1.6% Fund Gamma: Fees = 0.06%; cash allocation = 2.1% https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83447102/print 5/8 10/12/2018 Learning Management System A) Fund Alpha B) Fund Beta C) Fund Gamma Question #18 of 26 Which of the following indices would be biased towards small cap stocks? in A) An equal-weighted index B) A price-weighted index bo ok c Question #19 of 26 en tre C) A value-weighted index An investor who seeks to actively in uence speci c companies is least likely to: B) lend securities w w o C) start a proxy voting m A) be an activist investor w Question #20 of 26 An investment advisor is considering the addition of equity securities to one of his client's portfolios According to the client's investment policy statement, the client exhibits a low tolerance for risk and prefers stable portfolio income Which type of equity security would be most appropriate given this client's investment considerations? A) Mid-cap oil-producing company B) Large-cap consumer staples company C) Small-cap technology company https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83447102/print 6/8 10/12/2018 Learning Management System Question #21 of 26 Which of the following statements regarding a free oat-adjusted market capitalization index is least accurate? A) A free oat-adjusted market capitalization index assumes the investor has bought all the publicly available shares of each company in the index B) The major value-weighted indices in the world have not been adjusted for free oat C) The oat adjusted index is considered the best index type by many investors, because it en tre in is representative and can be mimicked with minimal tracking risk Question #22 of 26 bo ok c The fact that rms with greater market capitalization have a greater impact on the index than rms with lower market capitalization creates a primary bias in what type of index? A) Equal-weighted index B) Price-weighted index w w o m C) Value-weighted index w Question #23 of 26 A portfolio manager is planning to invest in an emerging market's small-cap index Which of the following equity universe segmentation approaches does this market index combine? A) Size/style and geographic segmentation B) Geographic and economic activity segmentation C) Size/style and economic activity segmentation Question #24 of 26 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83447102/print 7/8 10/12/2018 Learning Management System A portfolio manager is considering investing in a startup rm with a price-to-earnings (P/E) ratio of 42 The manager notes that the market P/E ratio is currently 25 Which of the following equity investment style boxes would best categorize this company? A) Small-cap value B) Large-cap growth C) Small-cap growth .in Question #25 of 26 en tre A wealth manager is researching the potential sources of income from owning and managing an equity portfolio Which of the following actions are required if the manager wishes to generate income from a dividend capture strategy? The manager should: bo ok c A) sell put options on equities B) transfer equities to another investor m C) buy-and-hold equities for a short period of time .o Question #26 of 26 w w Active management may demand or provide liquidity to equity markets Which of the following active investment strategies would most likely demand liquidity from the market? w A) Momentum strategies B) Deep value strategies C) Buy-and-hold strategies https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83447102/print 8/8 ... for a market-cap weighted portfolio most likely has the largest w w Which of the following statements is most accurate? A) Corporate governance issues are important to passive investors B) Passive. .. Passive investors typically have little or no access to corporate boards and w management C) The cost of voting proxies for passive investors typically outweighs the bene ts, so portfolio managers... equities B) transfer equities to another investor m C) buy-and-hold equities for a short period of time .o Question #26 of 26 w w Active management may demand or provide liquidity to equity markets