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Q10. Which of the following strategies is most appropriate for an investor whose risk tolerance drops to zero when the value of the portfolio drops below a floor value?
A) Constant proportion portfolio insurance.
B) Both of these responses are correct.
C) Buy and hold.
Q11. Which of the following asset allocation strategies takes a contrarian view of investing?
A) Constant proportion portfolio insurance (CPPI).
B) Constant mix.
C) Buy and hold.
Q12. Constant mix strategy:
A) requires purchase of a stock as the stock value rises.
B) requires purchase of bonds as stocks fall in value.
C) is preferable to a buy and hold strategy when the market reverses direction.
Q13. Which of the following statements regarding rebalancing strategies that have convex payoff diagrams (y-axis = portfolio value, x-axis = stock market value) is TRUE? Convex rebalancing strategies:
A) include the constant mix strategy.
B) sell stocks as prices fall and buy stocks as prices rise.
C) do well in flat, but oscillating, markets.
Q14. Annabelle Sellier, CFA, manages the fixed-income portfolio of a large research endowment fund. Sellier’s 2002 allocation among fixed-income assets, the returns she realized from these investments, and benchmark returns for each of the asset classes are presented in the table below.
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Fixed-income allocation and returns |
|
Asset Class |
Allocation |
Realized Returns (%) |
Benchmark Returns (%) |
|
U.S. Treasury |
0.35 |
10.28 |
9.78 |
|
U.S. Corporate |
0.40 |
9.57 |
8.37 |
|
U.S. Agency |
0.25 |
10.05 |
10.20 |
What is Sellier’s alpha for 2002?
A) 9.3210%.
B) 9.9385%.
C) 0.6175%.
Q15. Concave strategies:
A) include constant proportion portfolio insurance strategies (CPPI).
B) sell stocks as they fall in price.
C) buy stocks as they fall in price.
Q16. Carl Allen, CFA, has been assigned the task of documenting some of his company’s asset allocation techniques. After the firm receives accolades in a recent trade magazine article highlighting firms with innovative trading strategies, Allen’s supervisor decides it is time the firm began formally documenting how properly timed allocation shifts can add value to assets under management. Allen decides he will not only document the firm’s specific allocation adjustment strategies, but will also compile a document listing various allocation techniques. Allen decides to begin with input factors such as investor risk tolerance and market conditions and work his way to specific techniques designed to take advantage of various opportunities. His overall plan is to work from theoretical concepts to specific applications.
One of the first concepts Allen has to explain is the idea of holding an “optimal” portfolio. In his mind, Allen decides he has to adequately explain the two main factors that will allow an investor the ability to hold an optimal portfolio. Which of the following will dictate the selection of an investor’s optimal portfolio?
A) The global minimum variance portfolio.
B) The tangential intersection between an investor's indifference curve and the efficient frontier.
C) Any intersection between an investor's indifference curve and the investment opportunity set.
Q17. Allen has determined there are differential postures an asset manager can take, depending upon whether market conditions are trending up, trending down, or staying relatively level with significant volatility. Which rebalancing strategy provides the greatest benefit when markets are trending up or down with little oscillation?
A) Constant proportion portfolio insurance strategy.
B) Constant mix strategy.
C) Buy and hold strategy.
Q18. While conducting his research, Allen determines that some dynamic strategies can use a mathematical formula that can easily determine the amount of assets one invests in equities. Specifically, one formula Allen discovers is:
$ Invested in stock = m x (assets – floor)
where:
|
m |
= stock investment multiplier |
|
assets |
= total assets held in the portfolio (TA) |
|
floor |
= the minimum allowable portfolio value (F) (zero risk level) |
|
assets - floor |
= cushion or funds that can be put at risk |
Realizing that his firm’s trading strategies were highlighted in the recent edition of a trade magazine due in part to some timely exposure increases in trending markets, Allen begins to document how his firm applies this particular mathematical formula. Since Allen’s firm’s performance seems exemplary in a trending market, which value of “m” was probably chosen?
A) Equal to 1.
B) Greater than 1.
C) Less than 1.
Q19. Allen and Hanes joined Tacticon five years ago, fresh out of college. They are now both convinced that properly timed allocation shifts can add value to the investment process. The equity market trended upward for the first three years of their tenure, but has been slowly declining ever since. In spite of the lackluster performance of the markets in general, the firm has produced exceptional annual and 5-year trailing returns. Both analysts are certain that Tacticon’s ability to generate positive alpha is the result of a superior investment system.
Ridley wants Allen and Hanes to record the specifics of Tacticon’s investment process for internal use. He also wants them to compile a document explaining a variety of allocation techniques to be used by the marketing staff and portfolio managers when working with prospects and clients.
While conducting his research, Allen notes that certain dynamic strategies can use a mathematical formula to determine the amount of equities that should be held. Specifically, one formula Allen finds is:
Allen decides to organize his thoughts about asset allocation by constructing a matrix that compares some of the different strategies. His first draft is detailed in Exhibit A below.
Exhibit A – Dynamic Asset Allocation Strategies
|
Strategy |
Shape of Payoff Diagram |
Performs Well In |
|
Buy and Hold |
Straight line |
Upward trending markets |
|
Constant Mix |
Concave |
|
|
Constant Proportion Portfolio Insurance (CPPI) |
|
|
Hanes is having difficulty completing Exhibit A as he is unsure of the shape of the payoff diagram for CPPI. The correct shape for the CPPI payoff diagram is:
A) convex.
B) straight-line.
C) concave.
Q20. Which strategy in Exhibit A provides the greatest benefit when markets are trending up or down with little oscillation?
A) Buy and hold strategy.
B) Constant mix strategy.
C) Constant proportion portfolio insurance.
Q21. Allen realizes that his firm’s trading success might have been due to use of the mathematical formula he found. Since Tacticon’s performance was exemplary over the past five years, which value of “m” was probably chosen?
A) Equal to 1.
B) Less than 1.
C) Greater than 1.
Q22. Constant mix rebalancing involves:
A) buying the asset whose price falls; selling the asset whose price rises.
B) holding either all cash or all equities.
C) buying the asset whose price rises; selling the asset whose price falls. | 
发表于 2009-4-10 13:13
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