2019 CFA level 3 qbank reading 36 evaluating portfolio performance questions

10/12/2018 Learning Management System Question #1 of 170 With regard to the use of value added return in the measurement of hedge fund performance, which of the following statements is most accurate? A) Value added return is calculated as the di erence between the portfolio return, given benchmark weightings, and the actual portfolio return B) Value added return is simply the di erence between the portfolio return and the benchmark return .in C) Although weights sum to zero a return is calculated by summing the performance en tre impacts of the individual long positions bo ok c Question #2 of 170 Which of the following measures would be the most appropriate one to use when comparing the results of two portfolios in which each portfolio contains only a few number of stocks A) Sharpe ratio .o B) Information ratio m representing a limited number of industries? w w w C) Treynor measure Question #3 of 170 Frank Belanger would like to calculate the rate of return for an illiquid asset He states that he will use matrix pricing to obtain a substitute for the security's current price Which of the following most accurately describes matrix pricing? In matrix pricing, the analyst uses: A) dealer quotes for similar securities B) the price from the last trade for the same security C) an average of recent prices https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 1/70 10/12/2018 Learning Management System Question #4 of 170 Which of the following is the least likely to be an input into micro performance evaluation? A) The sector return for the manager B) The return on the risk-free asset C) The weight of a sector in the benchmark .in Question #5 of 170 en tre Bill Smith is evaluating the performance of four large-cap equity portfolios: Funds A, B, C and D As part of his analysis, Smith computed the Sharpe ratio and the Treynor measure for all four funds Based on his nding, the ranks assigned to the four funds are as follows: Treynor Measure Rank Sharpe Ratio Rank A B C D bo ok c Fund m o The di erence in rankings for Funds A and D is most likely due to: w w A) a lack of diversi cation in Fund A as compared to Fund D B) a di erence in risk premiums w C) di erent benchmarks used to evaluate each fund’s performance Question #6 of 170 Suppose that all of a rm's managers are outperforming the benchmark, some by a little, some by a lot If the dence intervals for a quality control charts in portfolio management were widened, what would the most likely e ect be? A) Type I error would become less likely and Type II error would become more likely B) Type I error would become more likely and Type II error would become less likely https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 2/70 10/12/2018 Learning Management System C) Type I error would become more likely and Type II error would become more likely Question #7 of 170 Which of the following is least likely to be a step in the construction of a custom security-based benchmark? A) Calculate the historical mean and standard deviation for the benchmark en tre C) Use the same weights for the benchmark as the manager .in B) Identify the manager’s investment process bo ok c Question #8 of 170 Which of the following is NOT required for macro performance attribution? A) Fund returns, valuations, and external cash ows B) Tactical asset allocations w w o m C) Benchmark portfolio returns w Question #9 of 170 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 3/70 10/12/2018 Learning Management System An analyst has gathered the following information about the performance of an equity fund and the S&P 500 index over the same time period Equity Fund S&P 500 Return 32% 26% Standard Deviation 41% 29% Beta 0.98 1.00 Risk-free rate is 6.00% in The di erence between the Sharpe ratio for the equity fund and the Sharpe ratio for the S&P 500 is the: en tre A) S&P 500 is 0.09 higher B) equity fund is 0.06 lower Question #10 of 170 bo ok c C) S&P 500 is 0.04 lower m An analyst has gathered the following information about the performance of an equity fund o and the S&P 500 index over the same time period S&P 500 13% 10.5% Standard Deviation 22% 20% Beta 1.21 1.00 w Return w w Equity Fund Risk-free rate is 5.25% The Treynor measure for the equity fund is: A) 0.048 B) 0.570 C) 0.064 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 4/70 10/12/2018 Learning Management System Question #11 of 170 Which of the following statements about style indexes is least accurate? A) They are widely available, widely understood and widely accepted B) Some style indexes can contain weightings in certain securities and/or sectors that may be larger than considered prudent C) They help fund sponsors better understand a manager’s investment style, by capturing Question #12 of 170 en tre in factor exposures Which of the following best describes the use of quality control charts in portfolio management? Quality control charts are used to determine if a manager has: bo ok c A) strayed from their stated style B) statistically signi cant excess returns m C) substantial excess returns .o Markus Smith, CFA, is looking at di erent measures of risk for bond portfolios as well as stock w w and bond mutual funds He has several projects currently underway Smith's rst project is to decompose the various sources of return for the BBB Bond Fund (BBB) which yielded a return of 12% The actual treasury yield was 8%, which is 1.0% better than the w expected yield of 7.0% In addition, Smith has ascertained that the BBB portfolio bene ted by 0.50% due to maturity management and 1.25% from spread/quality management Smith's second project involves AAA Bond Fund (AAA) Smith gathers the following data: Actual AAA portfolio return = 10% (duration of portfolio = 10 years) Lehman Brothers Benchmark Index return = 8% (duration of portfolio = years) According to the bond market line (BML), the return for a portfolio with a10-year duration should be 9% The AAA Bond Fund's long-term strategic portfolio has a duration of years, and a target return of 8.5% https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 5/70 10/12/2018 Learning Management System Smith now turns his attention towards his third project, Star Equity Fund The table below details relevant information: Star Fund Weights Star Fund Returns Benchmark Returns Stocks 0.95 12% 14% Cash 0.05 4% 5% Asset Class Overall Star Fund return = 11.60% Smith's last project is for the Plumb America Index Fund 22% Standard Deviation 30% Beta 1.2 Question #13 of 170 bo ok c Return S & P 500 en tre Plumb America in Overall benchmark return = 13.82% 18% 22% 1.0 Fund? w w A) +0.2716 .o m Assuming a risk-free rate of 5%, what is the Treynor measure for the Plumb America Index B) +0.1417 w C) -0.1714 Question #14 of 170 Assuming a risk-free rate of 5%, what is the Sharpe ratio for the Plumb America Index Fund? A) -0.5776 B) +0.6716 C) +0.5667 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 6/70 10/12/2018 Learning Management System Question #15 of 170 The ratio of return to systematic risk for an investment portfolio is 0.70, while the market is 0.50 This information suggests that the portfolio: A) exhibits inferior performance because it has more risk than the market B) exhibits superior performance because the return per unit of risk is above that of the market C) is not diversi ed enough, and more securities should be purchased to bring the en tre in portfolio in line with the market Question #16 of 170 bo ok c Kelli Blakely, a portfolio manager with the Miranda Fund, a large cap index fund, achieved a 10.2% return during the past year while the S&P 500 lost 22.5% for the same period Her portfolio consisted of stocks and cash Blakely was able to produce such returns through her exceptional market timing and securities selection skills During the year, the S&P exhibited a m standard deviation of 44% while Blakely's portfolio standard deviation was 37% The calculated beta on the Miranda Fund was 1.10 The market proxy and benchmark for performance o measurement purposes is the S&P 500 w w Using the S&P 500 as a benchmark for the year, the allocation between stock and cash was a constant 97% and 3%, respectively During the year, Blakely was concerned that the w combination of a weak economy and geopolitical uncertainties would negatively impact the market returns Taking a bold step, she changed her market allocation to an average of 50% in stocks and 50% in cash Throughout the year, the risk-free rate of cash returns was 2% What is the total value added? A) 21.26% B) 34.70% C) 32.70% https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 7/70 10/12/2018 Learning Management System Question #17 of 170 For a global portfolio, the money-weighted returns for the four quarters of last year are: 3%, -2%, 5%, and 2.5% The corresponding time-weighted returns are: 2.5%, -1%, 4%, and 3.5% What would an investor report as the annual rate of return on the portfolio? A) 9.23% B) 9.0% Question #18 of 170 en tre in C) 8.64% In using micro attribution analysis to break down the performance of the manager of a fund, the analyst nds the following for a particular asset class: 9% bo ok c Portfolio Weight Sector Benchmark Weight 7% Sector Portfolio Return 4% 3% Benchmark Return 0.2% o m Sector Benchmark Return w w Based upon these numbers, the within sector selection return would be: A) 0.056% w B) 0.020% C) 0.070% Question #19 of 170 Which of the following statements relating to allocation/selection attribution and fundamental factor model attribution is least accurate? A) The strength of allocation/selection attribution is that it is relatively easy to calculate https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 8/70 10/12/2018 Learning Management System B) The strength of fundamental factor analysis is its simplicity and the reliability of the correlations it produces C) The strength of allocation/selection attribution is that it disaggregates performance e ects of manager’s decisions between sectors and securities Question #20 of 170 The following data pertains to the UBZ Balanced Fund: Stock 0.625 0.500 Bond 0.250 0.333 Cash 0.125 0.167 Fund Return (%) Benchmark Return (%) in Benchmark Weight en tre Fund Weight 9.85 8.64 5.34 5.92 2.38 2.47 bo ok c Asset Class What is the within-sector selection e ect? A) 0.397% w w o C) 1.085% m B) 0.291% w Question #21 of 170 Which of the following least accurately characterizes fundamental factor model attribution and allocation/selection attribution? A) Security weights need to be determined at the start of the evaluation period in allocation/selection attribution B) Allocation/selection attribution is relatively easy to calculate C) Allocation/selection attribution can lead to spurious correlations https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 9/70 10/12/2018 Learning Management System Question #22 of 170 Which of the following is the most appropriate method of calculating the manager's active return? The manager's active return is the: A) portfolio return minus the market return B) market return minus the benchmark return C) portfolio return minus the benchmark return en tre in Question #23 of 170 Suppose that a portfolio management rm has abnormally high turnover in their sta Which of the following is the most likely scenario? A) The rm’s Type I error rate is high and their Type II error rate is high bo ok c B) The rm’s Type I error rate is high and their Type II error rate is low m C) The rm’s Type I error rate is low and their Type II error rate is high .o Question #24 of 170 w w Which of the following measures would be the most appropriate one to use when comparing the results of two portfolios in which each portfolio contains many stocks from a broad w selection of di erent industries? A) Treynor measure B) Sharpe ratio C) Information ratio The following information is available for the Trumark Fund: The Trumark Fund has an average annual return of 12% over the last ve years Trumark has a beta value of 1.35 Trumark has a standard deviation of returns of 16.80% https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 10/70 10/12/2018 Learning Management System Blakely was able to produce exceptional returns last year (as outlined in Table A below) through her market timing and security selection skills At the outset of the year, she became extremely concerned that the combination of a weak economy and geopolitical uncertainties would negatively impact the market Taking a bold step, she changed her market allocation For the entire year her asset class exposures averaged 50% in stocks and 50% in cash The S&P's allocation between stocks and cash during period was a constant 97% and 3%, respectively The risk-free rate of cash returns was 2% Table – One-Year Trailing Returns: Miranda Fund vs S&P 500 S&P 500 10.2% -22.5% Standard Deviation 37% 44% Beta 1.10 1.00 bo ok c Question #135 of 170 en tre Return in Miranda Fund What are the Sharpe ratios for the Miranda Fund and the S&P 500? Miranda Fund S&P 500 −0.2227 B) 0.2216 −0.5568 o −0.2450 w w w C) 0.3515 m A) 0.3515 Question #136 of 170 What is the Treynor measure for the Miranda Fund and the S&P 500? Miranda Fund S&P 500 A) 0.2216 −0.5568 B) 0.0745 −0.2450 C) 0.1109 −0.2050 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 56/70 10/12/2018 Learning Management System Question #137 of 170 What is the Jensen measure for the Miranda Fund? A) 0.3515 B) 0.3270 .in C) 0.0745 en tre Question #138 of 170 What are the one-year asset class returns (stocks, cash) for Miranda and the benchmark? Miranda Fund (stocks, cash) bo ok c S&P 500 (stocks, cash) A) 22.4%, 2% -23.13%, 2% B) 18.4%, 2% -23.10%, 3% C) 18.4%, 2% w w o m −23.26%, 2% Question #139 of 170 w What was the e ect of Blakely's active management decision on the Miranda Fund's one-year performance? A) 20.83% B) 11.87% C) 32.70% Question #140 of 170 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 57/70 10/12/2018 Learning Management System What was the e ect of Blakely's within-sector selection ability on the Miranda Fund's one-year performance? A) 11.87% B) 40.41% C) 22.83% .in Question #141 of 170 June Spraker, CFA, manages a portfolio for a private family In the recent update of the en tre investment policy statement (IPS), the family has asked Spraker to increase the sophistication of her portfolio performance evaluation to give an exhaustive assessment of the risks to which the portfolio is exposed The family insists on including the details of the evaluation process in the IPS Their request is: bo ok c A) justi ed because this is what the law requires, but the usefulness of the request is not clear B) not justi ed because portfolio performance evaluation should not be addressed in the IPS m C) justi ed because there are a wide variety of ways investment returns can be earned w w o with many types of risk exposures, and the details of the process should be in the IPS w Question #142 of 170 What is the goal of performance appraisal? A) Identi cation of overall risk and return B) Interpretation of performance attribution C) Identi cation of the sources of di erences between portfolio and benchmark risk and return https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 58/70 10/12/2018 Learning Management System Question #143 of 170 Which of the following statements best describes the steps required to construct a custom security-based benchmark? A) Identify the manager’s investment process including asset selection and weighting; use representative assets and long run average weightings for the benchmark; assess and b l h b h k d i d h d l B) Identify the manager’s investment process including asset selection and weighting; use the same assets as the manager and the long run average weighting for the benchmark; d b l h b h k d i d h d l C) Identify the manager’s investment process including asset selection and weighting; use h k d i d h d l en tre b in the same assets and weighting for the benchmark; assess and rebalance the Question #144 of 170 bo ok c Lee Hill, CFA, is evaluating three portfolio managers that he is considering adding to his consulting rm's select list The risk-free rate is 5% Portfolio Manager 0.13 0.75 0.06 0.17 0.85 0.11 0.08 1.20 0.01 w w C Standard Deviation o B Beta m A Return If Hill uses the Sharpe measure as his chosen performance measure, which portfolio would he w add? A) Manager A B) Manager C C) Manager B Peter Michaels, CFA, works at Composite Consulting, and is in charge of evaluating the performance of various portfolio managers His main tasks are to measure and evaluate the sources of return that can be attributed to manager performance Michaels understands the importance of incorporating risk into his analyses, but realizes the limitations associated with https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 59/70 10/12/2018 Learning Management System some performance measurement techniques in accomplishing that particular objective Michaels begins the evaluation of a number of managers by examining return information from both the portfolio being evaluated and its designated benchmark Michaels has the following return information for the AM Growth Fund: S&P 500 Return 14% 12% Standard deviation 25% 18% Beta 1.15 1.00 in AM Growth Fund en tre Question #145 of 170 If the risk-free rate is currently 4%, which of the following represent the calculation for the Sharpe Ratio and the Treynor measure, respectively, for the AM Growth Fund? bo ok c A) 0.56 and 0.12 B) 0.40 and 0.09 m C) 0.08 and 0.02 w w o Question #146 of 170 If the AM Growth Fund is considered to be well-diversi ed, which measure would be more w appropriate in evaluating its risk/return performance? A) The Treynor measure B) The Sharpe ratio C) The M2 measure Question #147 of 170 The Treynor measure is correctly de ned as a measure of a fund's: https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 60/70 10/12/2018 Learning Management System A) return earned compared to its unsystematic risk B) excess earned compared to its systematic risk C) return earned compared to its systematic risk Question #148 of 170 The Sharpe ratio has become a commonly used performance measure for hedge funds Which of the following statements in relationship to the use of the Sharpe ratio in the assessment of in hedge fund performance is least accurate? en tre A) The use of derivatives positions in a hedge fund removes most of the skewness in returns making the use of standard deviations appropriate B) A hedge fund’s Sharpe ratio can be compared to that of a universe of similar hedge funds m Question #149 of 170 bo ok c C) The Sharpe ratio is the excess returns to the volatility encountered in earning them .o Robert Brown is in the process of decomposing the various sources of return to his bond w w portfolio that yielded a return of 10% The actual treasury yield was 8%, which is 0.5% better than the expected yield of 7.5% In addition, Brown has ascertained that his portfolio bene ted by 0.50% due to sector allocation and 0.25% from allocation/selection interaction Based on this w information, how much of the portfolio's overall return is attributable to within-sector selection? A) 1.00% B) 1.25% C) 1.75% Question #150 of 170 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 61/70 10/12/2018 Learning Management System The money-weighted return measures the: A) total return during the period B) return per unit of domestic currency C) return on the average investment during the period Question #151 of 170 in Value added return is de ned as the: en tre A) portfolio return minus the benchmark return B) portfolio return in excess of the return predicted based on the Capital Asset Pricing Model Question #152 of 170 bo ok c C) fund return minus the risk-free rate of return m An analyst has gathered the following information about the performance of an equity fund o and the S&P 500 index over the same time period S&P 500 -12% -16% Standard Deviation 15% 19% Beta 1.18 1.00 w Return w w Equity Fund Risk-free rate is 6.00% The di erence between the Treynor measure for the equity fund and the Treynor measure for the S&P 500 is: A) 0.15 B) 0.07 C) 0.17 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 62/70 10/12/2018 Learning Management System Question #153 of 170 Which of the following would be least appropriate in macro performance evaluation? A) A benchmark return is calculated as a weighted average of the individual managers' benchmark returns B) External cash ows would be used to determine the impact of the sponsor’s decision making Question #154 of 170 en tre in C) Market indices would be used for manager styles The following are a number of contributions to return for a xed-income portfolio: Return on trading activity bo ok c Return on interest rate management Return due to changes in forward rates Return on the default-free benchmark Which of the above statements is (are) CORRECT? Contribution of the Management Process w w o m E ect of External Interest Environment and B) 1, and w A) and C) and and Bill Carter, CFA and Bob Walters, CFA are analyzing the recent return of several funds they have been assigned to manage The funds are Fund A, Fund B, Fund C, and Fund D as indicated in the table below Return Fund A Fund B Fund C Fund D Market 7.80% 7.20% 8.20% 7.60% 7.00% https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 63/70 10/12/2018 Learning Management System Beta 1.10 0.90 1.20 1.05 1.00 Return Std.Dev 4.00% 3.44% 4.15% 3.50% 3.55% Tracking Error* 0.82% 0.45% 1.02% 0.67% *Tracking error is the standard deviation of the di erence between the Fund Return and the Market Index Return The risk-free rate of return for the relevant period was 3.5% The management of the rm that Carter and Walters works for is very proud of the fact that all of the four funds had a higher return than the overall market as indicated on the table The in rm's management wants to advertise how, using the market as a benchmark, these funds have had returns higher than that benchmark The rm's management asks Carter and Walters en tre to compute several performance measures such as the Treynor measure, the Sharpe ratio, and the M2 measure The rm's management also asks for the construction of quality control charts bo ok c In going over the results, Carter is skeptical of the results and using the market as a benchmark because that benchmark was not speci ed in advance Walters says that he is skeptical too because it is not clear if the market is an appropriate benchmark in all cases They want to proceed cautiously because the rm's management recently instituted policies for manager continuation For each manager, the rm's management has set up the null hypothesis that a m manager has no skill and the alternative hypothesis is that the manager has skill in adding o value w w Carter and Walters discuss constructing a custom benchmark for some of these or other funds they might manage A few of these funds hold cash positions to take advantage of good investment opportunities when they arise Carter says that the benchmark they construct w should include cash in the weighting scheme They set aside a few weeks to construct a preliminary benchmark for several funds Walters wants to be thorough, because once they construct the benchmark, he doesn't plan to make any modi cations to the custom benchmark Question #155 of 170 The portfolio with the highest Sharpe ratio is: A) Fund D B) Fund A C) Fund C https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 64/70 10/12/2018 Learning Management System Question #156 of 170 What is the M2 measure for fund D? A) 6.76% B) 11.26% .in C) 7.66% en tre Question #157 of 170 If the returns of each fund were plotted over a quality control chart using the market as a benchmark, the nal point of the value-added line would be above zero, i.e., above the bo ok c horizontal axis for: A) all of the funds except C only B) none of the funds .o m C) all of the funds w w Question #158 of 170 With respect to the reasons for Carter and Walters being skeptical of using the market as a w benchmark: A) both Carter and Walters are wrong B) both Carter and Walters are correct C) Carter is wrong and Walters is correct Question #159 of 170 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 65/70 10/12/2018 Learning Management System With respect to the considerations that Carter and Walters put into preparing a custom benchmark, including a weighting for cash and not making modi cations: A) Carter and Walters are both correct B) Carter is correct and Walters is wrong C) Carter is wrong and Walters is correct .in Question #160 of 170 The rm that Carter and Walters work for have set up a null hypothesis for each manager In A) keeps an unskilled manager en tre such a case, the rm would make a type II error if it: C) res a skilled manager m Question #161 of 170 bo ok c B) hires a second manager to help a doubtful manager .o Accounts that contain illiquid assets present additional problems of accurately measuring return Which of the following statements would NOT be regarded as a problem associated w w directly with illiquid assets? A) Account valuations use trade date accounting as opposed to settlement accounting w B) Matrix pricing is used C) Assets are carried at the price of the last trade Question #162 of 170 Which of the following statements about fund performance is CORRECT? A) When analyzing the performance of a bond portfolio the manager should be evaluated relative to a style universe Focusing on maturity ranges or a particular market segment https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 66/70 10/12/2018 Learning Management System B) A fund had total excess return of 1.82% Of the total, 1.60% was due to the style of the fund that was speci ed by the sponsor, and 0.22% was due to security selection The f h h h ld b di d h f d i 82% C) An equity fund had a return over the past year of 17% and a standard deviation of returns of 12% During this period the risk-free return was 3% The Sharpe ratio for the f d Question #163 of 170 The Campbell account is $5,000,000 at the beginning of January and $5,200,000 at the end of in the month During the month a contribution of $60,000 was received What would be the rate contribution was received on January 31? January 31 4.00% B) 4.00% 2.80% C) 2.77% 2.80% o m A) 2.77% bo ok c January en tre of return on the account if the contribution was received on January 1, what would it be if the w w Question #164 of 170 Given the following data, how is the manager's performance most accurately characterized? 5.2% Benchmark Return 6.3% Market Index Return 4.3% w Manager's Return A) The manager earned an excess return from style but not from active management B) The manager earned an excess return from active management but not from style C) The manager earned an excess return from style and active management https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 67/70 10/12/2018 Learning Management System Question #165 of 170 One of the properties of a valid benchmark is that it be re ective of current investment opinion Which of the following is the most accurate explanation of this property? A) The manager should accept the applicability of the benchmark B) The securities in the benchmark should be those favored by a majority of analysts C) The manager should have knowledge of the securities in the benchmark .in Question #166 of 170 en tre Which of the following statements with regard to tests of benchmark quality is CORRECT? A) An account’s exposure to systematic risk should be similar to those of the benchmark at all times bo ok c B) Tracking error is de ned as the variance of the excess returns earned due to active management C) An active position is the di erence between the weight of a security in the managed o m portfolio versus the benchmark w w Question #167 of 170 Which of the following statements regarding attribution analysis, benchmarks, and evaluating w portfolio managers is CORRECT? A) Benchmark error is nonexistent with the Treynor measure B) Attribution analysis separates a portfolio manager's performance into an allocation e ect and a selection e ect C) Attribution analysis for bonds is virtually impossible Question #168 of 170 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 68/70 10/12/2018 Learning Management System A portfolio manager has a well diversi ed portfolio and they are trying to determine whether or not to add a particular stock to the portfolio to increase the portfolio's overall risk adjusted return To decide whether or not to add the stock the manager will back test the portfolio based on historical data of the stock and the portfolio The relevant measure to use in comparing the results of the back tested model comparing the results of the portfolio before and after the addition of the stock would be the: A) Sharpe ratio B) Treynor measure en tre in C) Information ratio Question #169 of 170 When constructing a quality control chart which of the following is an important assumption bo ok c that is made about the distribution of the manager's value added returns? A) Value-added returns are independent from period to period and normally distributed B) The null hypothesis states that the expected value-added return is the risk free rate of return m C) The investment process is consistent thus ensuring that a high degree of the error term w w o in one period can be explained by the error term in the previous period w Question #170 of 170 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 69/70 10/12/2018 Learning Management System The results of a macro performance attribution analysis of a fund is listed below Fund Value $100,000 Net contributions 100,000 Risk-free asset 101,000 Asset category 108,000 Benchmarks 109,000 Investment strategies 110,000 Allocation e ects 112,000 in Beginning value en tre Had the manager only engaged in a pure index approach, instead of 12%, the return of the fund would have been: A) 10% bo ok c B) 8% w w w o m C) 9% https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83448547/print 70/70 ... 6.7 83% B) 3. 529% 14.881% C) 1.654% 3. 529% Question # 83 of 170 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice /qbank/ 24 038 518/quiz/ 834 48547/print 33 /70... of portfolio X, Y and Z? X Y Z A) 0 .37 0.29 0.28 B) 3. 46 1.52 1.09 C) 0. 83 0.55 0.46 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice /qbank/ 24 038 518/quiz/ 834 48547/print... https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice /qbank/ 24 038 518/quiz/ 834 48547/print 36 /70 10/12/2018 Learning Management System C) return on the average investment during the period Question # 93 of 170 Which of