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周教授CFA金融课程:2019/2020年CFA一二三级系列课程

Portfolio Management and Wealth Planning【Session17 - Reading 41】

June Spraker, CFA, manages a portfolio for a private family. In the recent update of the 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:
A)
not justified because portfolio performance evaluation should not be addressed in the IPS.
B)
justified because there are a wide variety of ways investment returns can be earned with many types of risk exposures, and the details of the process should be in the IPS.
C)
justified because this is what the law requires, but the usefulness of the request is not clear.



Understanding how a return was earned is very important so that the manager can know if the fund had the correct exposures as specified in the IPS.

With respect to the level of return and how the return was earned, performance evaluation should:
A)
give an indication of both the level of return and how the return was earned.
B)
not give an indication of either the level of return or how the return was earned.
C)
give an indication of the level of return but not how the return was earned.



Performance evaluation is more than a simple exercise in calculating rates of return. Rather, it provides an exhaustive “quality control” check, emphasizing not only the performance of the fund and its constituent parts relative to objectives, but the sources of that relative performance as well.

TOP

In the management of a fund, performance evaluation is part of:
A)
the feedback step of the investment management process.
B)
the strategic decision-making step of the investment management process.
C)
the compensation computation of the investment management process.



Performance valuation is part of the feedback step.

TOP

In global performance evaluation, performance attribution seeks to:
A)
differentiate whether returns come from a manager’s luck or skill.
B)
identify the sources of difference between portfolio and benchmark return.
C)
measure the risk and return of the portfolio.



Performance attribution seeks to identify the sources of difference between portfolio and benchmark return. Note that performance measurement involves the calculation of risk and return, while performance appraisal seeks to identify whether returns are a result of a manager’s luck or skill.

TOP

What is the goal of performance appraisal?
A)
Interpretation of performance attribution.
B)
Identification of the sources of differences between portfolio and benchmark risk and return.
C)
Identification of overall risk and return.



Performance appraisal involves the interpretation of performance attribution. A judgment is made about manager’s decisions and skill, in an effort to differentiate between returns attributable to luck and those attributable to skill.

TOP

Which of the following is the most likely impact of receiving a contribution into an account at the beginning of the period as opposed to the end of the month?
A)
Return will be unaffected at the impact of the contribution has an equal impact on the numerator and denominator.
B)
Return will be lower because the impact on the numerator outweighs the impact of the contribution on the denominator.
C)
Return will be lower because the contribution is added to the assets in the denominator and reduces the size of the numerator.



If you consider the calculation of return when a contribution is received at the beginning of the period, it is added to the opening market value. This increases the denominator, which is now opening market value plus the contribution. In the numerator, the addition of the contribution to the opening market value reduces the difference between this value and the closing value at the end of the month. There is a larger denominator and a smaller numerator. Therefore, return must be reduced.

TOP

The Campbell account is $5,000,000 at the beginning of January and $5,200,000 at the end of the month. During the month a contribution of $60,000 was received. What would be the rate of return on the account if the contribution was received on January 1, what would it be if the contribution was received on January 31?
January 1January 31
A)
2.77%2.80%
B)
2.77%4.00%
C)
4.00%2.80%



If the receipt was at the beginning of the period then:


If the receipt was at the end of the period then:

TOP

Which of the following formulas would represent an appropriate calculation of the rate of return earned by a fund when the fund receives an external cash flow at the beginning of a period?
A)
B)
C)



If an external cash flow is received at the beginning of a period then the market value at this point is adjusted to include that cash flow, it is added to the opening market value of the fund and it is added to the denominator. In this way, the return measure reflects the return on the funds under management during the measurement period.

TOP

Tom Stovall is a portfolio manager who tracks the Wilshire 5000 Index. He received a large cash inflow from a client prior to a bull market. Which of the following most accurately characterizes the relationship for the time-weighted return and the money-weighted return for Tom? The time-weighted return will be:
A)
inflated by the timing of the cash inflow and the time-weighted return will be larger than the money-weighted return.
B)
unaffected by the timing of the cash inflow and the time-weighted return will be larger than the money-weighted return.
C)
unaffected by the timing of the cash inflow and the time-weighted return will be smaller than the money-weighted return.



If a manager receives a large cash inflow from a client prior to a bull market, the money-weighted return will be higher than the time-weighted return. The time-weighted return will be unaffected by the timing of the cash inflow.

TOP

The money-weighted return measures the:
A)
return on the average investment during the period.
B)
total return during the period.
C)
return per unit of domestic currency.



The money-weighted return measures the return on the average investment during a specific time period. The money-weighted return computation uses the concept of an internal rate of return.

TOP

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