Question 81

A bond analyst is looking at historical returns for two bonds, Bond 1 and Bond 2. Bond 2’s returns are much more volatile than Bond 1. The variance of returns for Bond 1 is 0.012 and the variance of returns of Bond 2 is 0.308. The correlation between the returns of the two bonds is 0.79, and the covariance is 0.048. If the variance of Bond 1 increased to 0.026 while the variance of Bond B decreased 0.188 and the covariance remains the same, the correlation between the two bonds will:

A)    increase.

B)   remain the same.

C)   the values given are not plausible.

D)   decrease.

Which of the following statements about the capital market line (CML) is least accurate?

A)    The CML will not be a linear relationship if investors' borrowing and lending rates are not equal.

B)   The market portfolio lies on the CML and has only unsystematic risk.

C)   Investors choose a portfolio on the CML by varying their weightings of the risk-free asset and the market portfolio.

D)   The CML illustrates the relationship between return and standard deviation.

Martin Dean, CFA, is a portfolio manager who is writing an investment policy statement (IPS) for Albert Francis, a new client. Reasons why Dean should prepare an IPS are least likely to include:

A)    complying with Standard III(C), Suitability.

B)   encouraging Francis to state his needs and constraints and consider whether his goals are realistic.

C)   specifying a benchmark against which to measure the performance of Francis’ portfolio.

D)   ensuring that Francis’ portfolio earns a return that exceeds the rate of inflation over Francis’ investment horizon.

In the Markowitz portfolio framework, an investor’s optimal portfolio:

A)    is the same for all investors.

B)   depends on the investor’s degree of risk aversion.

C)   can be identified as the market portfolio.

D)   lies on the efficient frontier at the point of minimum risk.

Sonia Fennell purchases 1,000 shares of Xpressoh Inc. for $35 per share. One year later, she sells the stock for $42 per share. Xpressoh Inc. pays no dividends. The initial margin requirement is 50%. Fennell's one-year return assuming an all-cash transaction, and if she buys on margin (assume she pays no transaction or borrowing costs and has not had to post additional margin), are closest to:

       All-cash       50% margin

A)    20%                80%

B)   40%         80%

C)   20%          -40%

D)   20%          40%

[此贴子已经被作者于2008-11-7 17:39:40编辑过]

答案和详解如下！

Question 81

A bond analyst is looking at historical returns for two bonds, Bond 1 and Bond 2. Bond 2’s returns are much more volatile than Bond 1. The variance of returns for Bond 1 is 0.012 and the variance of returns of Bond 2 is 0.308. The correlation between the returns of the two bonds is 0.79, and the covariance is 0.048. If the variance of Bond 1 increased to 0.026 while the variance of Bond B decreased 0.188 and the covariance remains the same, the correlation between the two bonds will:

A)    increase.

B)   remain the same.

C)   the values given are not plausible.

D)   decrease.

The correct answer was D) decrease.

P_1,2 = 0.048/(0.026^0.5 × 0.188^0.5) = 0.69 which is lower than the original 0.79.

This question tested from Session 12, Reading 50, LOS d

Question 82

Which of the following statements about the capital market line (CML) is least accurate?

A)    The CML will not be a linear relationship if investors' borrowing and lending rates are not equal.

B)   The market portfolio lies on the CML and has only unsystematic risk.

C)   Investors choose a portfolio on the CML by varying their weightings of the risk-free asset and the market portfolio.

D)   The CML illustrates the relationship between return and standard deviation.

The correct answer was B ) The market portfolio lies on the CML and has only unsystematic risk.

The first part of this statement is true - the market portfolio does lie on the CML. However, the market portfolio is well diversified and thus has no unsystematic risk. The risk that remains is market risk, or nondiversifiable, or systematic risk.

The CML measures standard deviation (or total risk) against returns. The CML will “kink” if the borrowing rate and lending rate are not equal. Investors choose a portfolio on the CML by lending or borrowing at the risk-free rate to vary the weighting of their investments in the risk-free asset and the market portfolio.

This question tested from Session 12, Reading 51, LOS c

Question 83

Martin Dean, CFA, is a portfolio manager who is writing an investment policy statement (IPS) for Albert Francis, a new client. Reasons why Dean should prepare an IPS are least likely to include:

A)    complying with Standard III(C), Suitability.

B)   encouraging Francis to state his needs and constraints and consider whether his goals are realistic.

C)   specifying a benchmark against which to measure the performance of Francis’ portfolio.

D)   ensuring that Francis’ portfolio earns a return that exceeds the rate of inflation over Francis’ investment horizon.

The correct answer was D) ensuring that Francis’ portfolio earns a return that exceeds the rate of inflation over Francis’ investment horizon.

An IPS requires an investor to consider and articulate his objectives and constraints. It also provides an objective standard by which the portfolio’s performance will be judged by specifying a benchmark portfolio. Guidance for Standard III(C), Suitability requires members to prepare IPS when beginning advisory relationships with clients. Ensuring a portfolio return that exceeds the rate of inflation is not a reason for preparing an IPS, but is a possible investment objective.

This question tested from Session 12, Reading 49, LOS a, (Part 2)

Question 84

In the Markowitz portfolio framework, an investor’s optimal portfolio:

A)    is the same for all investors.

B)   depends on the investor’s degree of risk aversion.

C)   can be identified as the market portfolio.

D)   lies on the efficient frontier at the point of minimum risk.

The correct answer was B ) depends on the investor’s degree of risk aversion.

An optimal portfolio for any investor is the point on the efficient frontier at which that investor’s highest indifference curve for risk versus return is tangent to the efficient frontier. Each investor’s risk aversion is represented by these indifference curves. Thus, the optimal portfolio is different for each degree of risk aversion and can be at any point on the Markowitz efficient frontier.

This question tested from Session 12, Reading 50, LOS g

Question 85

Sonia Fennell purchases 1,000 shares of Xpressoh Inc. for $35 per share. One year later, she sells the stock for $42 per share. Xpressoh Inc. pays no dividends. The initial margin requirement is 50%. Fennell's one-year return assuming an all-cash transaction, and if she buys on margin (assume she pays no transaction or borrowing costs and has not had to post additional margin), are closest to:

       All-cash       50% margin

A)    20%                80%

B)   40%         80%

C)   20%          -40%

D)   20%          40%

The correct answer was D) 20%   40%

All-cash return = 42/35 − 1 = 20%

Margin return = (42 − 35)/[(35)(0.5)] = 40%

This question tested from Session 13, Reading 52, LOS g, (Part 1)

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