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1. A portfolio with a rate of return 20%, standard deviation 20% , residual standard deviation 2% and alpha 2%, what’s the portfolio’s information ratio?
A.
0.30
B.
0.01
C.
0.80
D.
1.00
2. A portfolio generates an annual return of 15%, a beta of 1.1, and a standard deviation of 15%. The market index return is 10% and has a standard deviation of 10%. What is the M-Square measure of the portfolio if the risk-free rate is 1%?
A.
8.15%
B.
0.38%
C.
5.94%
D.
9.38%
3. Margin must be posted by
A. buyers of futures contracts only
B.
sellers of futures contracts only
C.
both buyers and sellers of futures contracts
D.
speculators only
5.A portfolio with a rate of return 15%, residual standard deviation 2% and alpha 1.6%, , what’s the portfolio’s information ratio?
0.80
B.
0.50
C.
0.60
D.
1.00
6.The yield on a 1-year bill in the United Kingdom is 6%, and the present exchange rate is 1 pound = US$2. If you expect the exchange rate to be 1 pound = US$1.95 a year from now, the return a U.S. investor can expect to earn by investing in U.K. bills is approximately ____.
-3%
B.
3%
C.
3.35%
D.
8.72%
8.A portfolio generates an annual return of 17%, a beta of 1.2, and a standard deviation of 19%. The market index return is 12% and has a standard deviation of 16%. What is the M2 measure of the portfolio if risk-free rate is 4%?
A.
2.15%
B.
2.76%
C.
2.94%
D.
3.14%
9.Suppose the initial margin requirement for the oil contract is 40%. Contract size is 1000 barrels. Current future price for March is $30. If the spot oil price at maturity date is 33, what’s your return if you long the contract?
A.
22.01%
B.
29.00%
C.
30.00%
D. 25.00%
10._____ refers to the possibility of expropriation of assets, changes in tax policy, and the possibility of restrictions on foreign exchange transactions.
A.
Default risk
B.
Foreign exchange risk
C.
Market risk
D.
Political risk
11.As exchange rates change, they
A.
change the relative purchasing power between countries.
B.
can affect imports and exports between those two countries.
C.
will affect the flow of funds between the countries.
D.
All of the options are true.
12. An oil distributor is planning to sell 100,000 barrels of oil in June (the current future price for June is $38 per barrel) and he wishes to hedge against a possible decline in oil prices. He sold 100 contracts, each contract for 1,000 barrels. Suppose that only three possible prices for oil in June are $36, $38, and $41 per barrel. If at June oil price turns out to be $41 per barrel, what’s the revenue from oil sales and profit on the futures?
A.
Revenue $5,048,000, Profit from futures $0.
B.
Revenue $9,000,000, Profit from futures -$200,000.
C.
Revenue $5,000,000, Profit from futures $0.
D.
Revenue $4,100,000, Profit from futures - $300,000.
14.Assume there is a fixed exchange rate between the Canadian and U.S. dollar. The expected return and standard deviation of return on the U.S. stock market are 18% and 15%, respectively. The expected return and standard deviation on the Canadian stock market are 13% and 20%, respectively. The covariance of returns between the U.S. and Canadian stock markets is 1.5%.
If you invested 50% of your money in the Canadian stock market and 50% in the U.S. stock market, the expected return on your portfolio would be
A.
12.0%.
B.
12.5%.
C.
13.0%.
D.
15.5%
15.The S&P 500 Index futures contract is an example of a(n) ___ delivery contract. The pork bellies contract is an example of a(n) ___ delivery contract.
A.
cash; cash
B.
cash; actual
C.
actual; cash
D.
actual; actual
16.A person with a long position in a commodity futures contract wants the price of the commodity to ____.
A.
decrease substantially
B.
increase substantially
C.
remain unchanged
D.
increase or decrease substantially
17.Suppose two portfolios have the same average return and the same standard deviation of returns, but portfolio A has a higher beta than portfolio B. According to the Treynor measure, the performance of portfolio A
A.
is better than the performance of portfolio B.
B.
is the same as the performance of portfolio B.
C.
is poorer than the performance of portfolio B.
D.
cannot be measured as there are no data on the alpha of the portfolio.
18. The following data are available relating to the performance of Monarch Stock Fund and the market portfolio:
Monarch Market Portfolio Average return 16% 12% Standard deviations of returns 26% 22% Beta 1.15 1.00 Residual standard deviation 1% 0%
The risk-free return during the sample period was 4%. Calculate Treynor's measure of performance for Monarch Stock Fund.
A 0.0143
B. 0.088
C 0.44
D. 0.50
20.The difference between a forward contract with a future contract is that __.
A.
Forward contracts are more liquid that futures.
B.
Forward contracts are mark to markets.
C.
Future contracts are more liquid.
D.
Forward contract are daily settlement.
21. The risk-free rate, average returns, standard deviations, and betas for three funds and the S&P 500 are given below.
Fund Avg Std Dev Beta A 18% 30% 1.05 B 25% 35% 1.3 C 20% 25% 1.2 S&P 500 15% 20% 1.0 Rf 5%
What is the Treynor measure for portfolio A?
A. 12.38% B. 2.38% C. 0.91% D. 3.64%
23. In a particular year, Razorback Mutual Fund earned a return of 1% by making the following investments in asset classes:
Weight Return Bonds 20% 5% Stocks 80% 0%
The return on a bogey portfolio was 2%, calculated from the following information.
Bonds (Lehman Brothers Index) Stocks (S&P 500 Index)
Weight Return 50% 5% 50% -1%
The contribution of asset allocation across markets to the Razorback Fund's total excess return was
A. -1.80%. B. -1.00%. C 0.80%. D. 1.00%.
24.The yield on a 1-year bill in the United Kingdom is 5%, and the present exchange rate is 1 pound = US$2. If you expect the exchange rate to be 1 pound = US$1.98 a year from now, the return a U.S. investor can expect to earn by investing in U.K. bills is approximately ____.
A.
-5.4%
B.
2.5%
C.
3.15%
D.
3.95%
25.You research on two companies using Sharpe ratios. Company A has total return of 11% with standard deviation 10% and company B has total return of 12% with standard deviation 12%. According Sharpe ratios which company is good to invest assuming other factors are same and risk-free rate is 1%?
A.
Company A.
B.
Company B.
C.
Both Company A and company B.
D.
No of above
26.Suppose the initial margin requirement for the oil contract is 40%. Contract size is 1000 barrels. Current future price for March is $30. The spot oil price at maturity date is 36. If you only invest on oil commodity and don’t use future contract, what’s your return if you buy the oil? The leverage ratio from using oil futures is_____.
A.
50%, 2.0
B.
20%, 3.0
C.
10%, 4.0
D.
20%, 2.5
27.Suppose you purchase one share of the stock of XYZ Corporation at the beginning of year 1 for $36. At the end of year 1, you receive a $2 dividend and buy one more share for $30. At the end of year 2, you receive total dividends of $4 (i.e., $2 for each share) and sell the shares for $36.45 each. The dollar-weighted return on your investment is
A.
−1.75%.
B.
4.08%.
C.
8.53%.
D.
12.35%.
28.If you hold a $20m bond portfolio with modified duration of 9 years. You expected the market interest rate increase by 10 basis points (0.10%), what’s your profits/losses?
A.
$100,000
B.
$150,000
C.
$180,000
D.
$200,000
29.The performance of an internationally-diversified portfolio may be affected by
A.
country selection.
B.
currency selection.
C.
stock selection.
D.
All of the options are correct.
30.Suppose two portfolios have the same average return and the same standard deviation of returns, but portfolio A has a higher beta than portfolio B. According to the Sharpe measure, the performance of portfolio A
A.
is better than the performance of portfolio B.
B.
is the same as the performance of portfolio B.
C.
is poorer than the performance of portfolio B.
D.
cannot be measured as there are no data on the alpha of the portfolio.
31.A portfolio with a rate of return 15%, residual standard deviation 4% and alpha 2%, what’s the portfolio’s information ratio?
A.
0.50
B.
0.70
C.
0.90
D.
1.00
32.Using local currency returns, the S&P 500 has the highest correlation with
A.
Euronext.
B.
FTSE.
C.
Nikkei.
D.
Toronto.
33.The possibility of experiencing a drop in revenue or an increase in cost in an international transaction due to a change in foreign exchange rates is called
A.
foreign exchange risk.
B.
political risk.
C.
translation exposure.
D.
hedging risk.
35.You bought a stock at $100 per share and the dividend of the firm is $5 per share. If you plan to hold the stock for two years and then sell at $110, what’s your dollar-weighted return?
A.
15.13%
B.
13.14%
C.
9.77%
D.
5.51%
36.Which one of the following contracts requires no cash to change hands when initiated?
A.
listed put option
B.
short futures contract
C.
forward contract
D.
listed call option
37. A speculator will often prefer to buy a futures contract rather than the underlying asset because: I. Gains in futures contracts can be larger due to leverage. II. Transaction costs in futures are typically lower than those in spot markets. Ill. Futures markets are often more liquid than the markets of the underlying commodities.
A. I and II only
B. II and Ill only
C. I and Ill only
D. I, II, and Ill
38.International investing __.
A. cannot be measured against a passive benchmark, such as the S&P 500.
B.
can be measured against a widely-used index of non-U.S. stocks, the EAFE Index (Europe, Australia, Far East).
C.
can be measured against international indexes.
D.
can be measured against a widely-used index of non-U.S. stocks, the EAFE Index (Europe, Australia, Far East), and against international indexes.
39.Suppose the initial margin requirement for the oil contract is 25%. Contract size is 1000 barrels. Current future price for march is $62.48. If the spot oil price at maturity date is 65.48 and what’s the leverage ratio from using oil futures to the one you only invest on oil commodity and don’t use future contract?
A.
2.0
B.
3.0
C.
4.0
D.
5.0
QUESTION 40
A portfolio manager's five months' rate of returns is as the following:
Month 1
Month 2
Month 3
Month 4
Month 5
5%
-3%
0%
-5%
10%
What's the manager's time-weighted return?
A. 1.25%
B. 10.14%
C. 9.00%
D. 5.10%
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