Question 81

Capital market theory is least likely to assume that:

A)    investors can lend any amount of money at the risk-free rate.

B)   all investors desire to be the same location on the efficient frontier.

C)   all investors have the same one-period time horizon.

D)   it is possible to buy or sell fractional shares of an investment.

Question 82

An investor believes Stock M will rise from a current price of $20 per share to a price of $26 per share over the next year. The company is not expected to pay a dividend. The following information pertains:

• R_F = 8%

• ER_M = 16%

• Beta = 1.7

Should the investor purchase the stock?

A)    No, because it is undervalued.

B)   Yes, because it is overvalued.

C)   No, because it is overvalued.

D)   Yes, because it is undervalued.

Question 83

The covariance of rates of return on two securities is most accurately described as the correlation of the asset returns:

A)    divided by the product of the assets’ standard deviations of returns.

B)   multiplied by the product of the assets’ variances of returns.

C)   multiplied by the product of the assets’ standard deviations of returns.

D)   divided by the product of the assets’ variances of returns.

Question 84

Davis Samuel, CFA, is meeting with one of his portfolio management clients, Joseph Cardinal, to discuss Cardinal’s investment constraints. Samuel has established that:

• Cardinal plans to retire from his job as a bond salesman in 17 years, after which this portfolio will be his primary source of income.

• Cardinal has sufficient cash available that he will not need this portfolio to generate cash outflows until he retires.

• Cardinal, as a registered securities representative, is required to have Samuel send a copy of his account statements to the compliance officer at Cardinal’s employer.

• Cardinal opposes certain policies of the government of Lower Pannonia and does not wish to own any securities of companies that do business with its regime.

To complete his assessment of Cardinal’s investment constraints, Samuel still needs to inquire about Cardinal’s:

A)    liquidity needs.

B)   legal and regulatory factors.

C)   unique needs and preferences.

D)   tax concerns.

Question 85

Which of the following statements about short selling is least accurate?

A)    A short sale involves securities the investor does not own.

B)   A short seller loses if the price of the stock sold short decreases.

C)   If the stock pays a dividend, the short seller owes the dividend to the lender of the stock.

D)   A short seller is required to set up a margin account.

Capital market theory is least likely to assume that:

A)    investors can lend any amount of money at the risk-free rate.

B)   all investors desire to be the same location on the efficient frontier.

C)   all investors have the same one-period time horizon.

D)   it is possible to buy or sell fractional shares of an investment.

Question 82

An investor believes Stock M will rise from a current price of $20 per share to a price of $26 per share over the next year. The company is not expected to pay a dividend. The following information pertains:

• R_F = 8%

• ER_M = 16%

• Beta = 1.7

Should the investor purchase the stock?

A)    No, because it is undervalued.

B)   Yes, because it is overvalued.

C)   No, because it is overvalued.

D)   Yes, because it is undervalued.

Question 83

The covariance of rates of return on two securities is most accurately described as the correlation of the asset returns:

A)    divided by the product of the assets’ standard deviations of returns.

B)   multiplied by the product of the assets’ variances of returns.

C)   multiplied by the product of the assets’ standard deviations of returns.

D)   divided by the product of the assets’ variances of returns.

Question 84

Davis Samuel, CFA, is meeting with one of his portfolio management clients, Joseph Cardinal, to discuss Cardinal’s investment constraints. Samuel has established that:

• Cardinal plans to retire from his job as a bond salesman in 17 years, after which this portfolio will be his primary source of income.

• Cardinal has sufficient cash available that he will not need this portfolio to generate cash outflows until he retires.

• Cardinal, as a registered securities representative, is required to have Samuel send a copy of his account statements to the compliance officer at Cardinal’s employer.

• Cardinal opposes certain policies of the government of Lower Pannonia and does not wish to own any securities of companies that do business with its regime.

To complete his assessment of Cardinal’s investment constraints, Samuel still needs to inquire about Cardinal’s:

A)    liquidity needs.

B)   legal and regulatory factors.

C)   unique needs and preferences.

D)   tax concerns.

Question 85

Which of the following statements about short selling is least accurate?

A)    A short sale involves securities the investor does not own.

B)   A short seller loses if the price of the stock sold short decreases.

C)   If the stock pays a dividend, the short seller owes the dividend to the lender of the stock.

D)   A short seller is required to set up a margin account.

Question 81

Capital market theory is least likely to assume that:

A)    investors can lend any amount of money at the risk-free rate.

B)   all investors desire to be the same location on the efficient frontier.

C)   all investors have the same one-period time horizon.

D)   it is possible to buy or sell fractional shares of an investment.

Question 82

An investor believes Stock M will rise from a current price of $20 per share to a price of $26 per share over the next year. The company is not expected to pay a dividend. The following information pertains:

• R_F = 8%

• ER_M = 16%

• Beta = 1.7

Should the investor purchase the stock?

A)    No, because it is undervalued.

B)   Yes, because it is overvalued.

C)   No, because it is overvalued.

D)   Yes, because it is undervalued.

Question 83

The covariance of rates of return on two securities is most accurately described as the correlation of the asset returns:

A)    divided by the product of the assets’ standard deviations of returns.

B)   multiplied by the product of the assets’ variances of returns.

C)   multiplied by the product of the assets’ standard deviations of returns.

D)   divided by the product of the assets’ variances of returns.

Question 84

Davis Samuel, CFA, is meeting with one of his portfolio management clients, Joseph Cardinal, to discuss Cardinal’s investment constraints. Samuel has established that:

• Cardinal plans to retire from his job as a bond salesman in 17 years, after which this portfolio will be his primary source of income.

• Cardinal has sufficient cash available that he will not need this portfolio to generate cash outflows until he retires.

• Cardinal, as a registered securities representative, is required to have Samuel send a copy of his account statements to the compliance officer at Cardinal’s employer.

• Cardinal opposes certain policies of the government of Lower Pannonia and does not wish to own any securities of companies that do business with its regime.

To complete his assessment of Cardinal’s investment constraints, Samuel still needs to inquire about Cardinal’s:

A)    liquidity needs.

B)   legal and regulatory factors.

C)   unique needs and preferences.

D)   tax concerns.

Question 85

Which of the following statements about short selling is least accurate?

A)    A short sale involves securities the investor does not own.

B)   A short seller loses if the price of the stock sold short decreases.

C)   If the stock pays a dividend, the short seller owes the dividend to the lender of the stock.

D)   A short seller is required to set up a margin account.

Capital market theory is least likely to assume that:

A)    investors can lend any amount of money at the risk-free rate.

B)   all investors desire to be the same location on the efficient frontier.

C)   all investors have the same one-period time horizon.

D)   it is possible to buy or sell fractional shares of an investment.

Question 82

An investor believes Stock M will rise from a current price of $20 per share to a price of $26 per share over the next year. The company is not expected to pay a dividend. The following information pertains:

• R_F = 8%

• ER_M = 16%

• Beta = 1.7

Should the investor purchase the stock?

A)    No, because it is undervalued.

B)   Yes, because it is overvalued.

C)   No, because it is overvalued.

D)   Yes, because it is undervalued.

Question 83

The covariance of rates of return on two securities is most accurately described as the correlation of the asset returns:

A)    divided by the product of the assets’ standard deviations of returns.

B)   multiplied by the product of the assets’ variances of returns.

C)   multiplied by the product of the assets’ standard deviations of returns.

D)   divided by the product of the assets’ variances of returns.

Question 84

Davis Samuel, CFA, is meeting with one of his portfolio management clients, Joseph Cardinal, to discuss Cardinal’s investment constraints. Samuel has established that:

• Cardinal plans to retire from his job as a bond salesman in 17 years, after which this portfolio will be his primary source of income.

• Cardinal has sufficient cash available that he will not need this portfolio to generate cash outflows until he retires.

• Cardinal, as a registered securities representative, is required to have Samuel send a copy of his account statements to the compliance officer at Cardinal’s employer.

• Cardinal opposes certain policies of the government of Lower Pannonia and does not wish to own any securities of companies that do business with its regime.

To complete his assessment of Cardinal’s investment constraints, Samuel still needs to inquire about Cardinal’s:

A)    liquidity needs.

B)   legal and regulatory factors.

C)   unique needs and preferences.

D)   tax concerns.

Question 85

Which of the following statements about short selling is least accurate?

A)    A short sale involves securities the investor does not own.

B)   A short seller loses if the price of the stock sold short decreases.

C)   If the stock pays a dividend, the short seller owes the dividend to the lender of the stock.

D)   A short seller is required to set up a margin account.

Question 81

Capital market theory is least likely to assume that:

A)    investors can lend any amount of money at the risk-free rate.

B)   all investors desire to be the same location on the efficient frontier.

C)   all investors have the same one-period time horizon.

D)   it is possible to buy or sell fractional shares of an investment.

Question 82

An investor believes Stock M will rise from a current price of $20 per share to a price of $26 per share over the next year. The company is not expected to pay a dividend. The following information pertains:

• R_F = 8%

• ER_M = 16%

• Beta = 1.7

Should the investor purchase the stock?

A)    No, because it is undervalued.

B)   Yes, because it is overvalued.

C)   No, because it is overvalued.

D)   Yes, because it is undervalued.

Question 83

The covariance of rates of return on two securities is most accurately described as the correlation of the asset returns:

A)    divided by the product of the assets’ standard deviations of returns.

B)   multiplied by the product of the assets’ variances of returns.

C)   multiplied by the product of the assets’ standard deviations of returns.

D)   divided by the product of the assets’ variances of returns.

Question 84

Davis Samuel, CFA, is meeting with one of his portfolio management clients, Joseph Cardinal, to discuss Cardinal’s investment constraints. Samuel has established that:

• Cardinal plans to retire from his job as a bond salesman in 17 years, after which this portfolio will be his primary source of income.

• Cardinal has sufficient cash available that he will not need this portfolio to generate cash outflows until he retires.

• Cardinal, as a registered securities representative, is required to have Samuel send a copy of his account statements to the compliance officer at Cardinal’s employer.

• Cardinal opposes certain policies of the government of Lower Pannonia and does not wish to own any securities of companies that do business with its regime.

To complete his assessment of Cardinal’s investment constraints, Samuel still needs to inquire about Cardinal’s:

A)    liquidity needs.

B)   legal and regulatory factors.

C)   unique needs and preferences.

D)   tax concerns.

Question 85

Which of the following statements about short selling is least accurate?

A)    A short sale involves securities the investor does not own.

B)   A short seller loses if the price of the stock sold short decreases.

C)   If the stock pays a dividend, the short seller owes the dividend to the lender of the stock.

D)   A short seller is required to set up a margin account.

[此贴子已经被作者于2008-11-8 9:46:42编辑过]

答案和详解如下！

Question 81

Capital market theory is least likely to assume that:

A)    investors can lend any amount of money at the risk-free rate.

B)   all investors desire to be the same location on the efficient frontier.

C)   all investors have the same one-period time horizon.

D)   it is possible to buy or sell fractional shares of an investment.

The correct answer was B) all investors desire to be the same location on the efficient frontier.

Capital market theory assumes that all investors want to be on the efficient frontier, but the exact location on the efficient frontier for each investor will depend on that investor’s risk-return utility function.

This question tested from Session 12, Reading 51, LOS a, (Part 1)

Question 82

An investor believes Stock M will rise from a current price of $20 per share to a price of $26 per share over the next year. The company is not expected to pay a dividend. The following information pertains:

• R_F = 8%

• ER_M = 16%

• Beta = 1.7

Should the investor purchase the stock?

A)    No, because it is undervalued.

B)   Yes, because it is overvalued.

C)   No, because it is overvalued.

D)   Yes, because it is undervalued.

The correct answer was D) Yes, because it is undervalued.

In the context of the SML, a security is underpriced if the required return is less than the holding period (or expected) return, is overpriced if the required return is greater the holding period (or expected) return, and is correctly priced if the required return equals the holding period (or expected) return.

Here, the holding period (or expected) return is calculated as: (ending price – beginning price + any cash flows/dividends) / beginning price. The required return uses the equation of the SML: risk free rate + Beta * (expected market rate - risk free rate).

ER = (26 − 20) / 20 = 0.30 or 30%, RR = 8 + (16 − 8) × 1.7 = 21.6%. The stock is underpriced therefore purchase.

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

Question 83

The covariance of rates of return on two securities is most accurately described as the correlation of the asset returns:

A)    divided by the product of the assets’ standard deviations of returns.

B)   multiplied by the product of the assets’ variances of returns.

C)   multiplied by the product of the assets’ standard deviations of returns.

D)   divided by the product of the assets’ variances of returns.

The correct answer was C) multiplied by the product of the assets’ standard deviations of returns.

The covariance of asset returns is given by the formula: Cov_1,2 = σ₁σ₂ρ_1,2, where σ₁ is the standard deviation of returns for asset 1, σ₂ is the standard deviation of returns for asset 2, and ρ_1,2 is the correlation of returns for assets 1 and 2.

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

Question 84

Davis Samuel, CFA, is meeting with one of his portfolio management clients, Joseph Cardinal, to discuss Cardinal’s investment constraints. Samuel has established that:

• Cardinal plans to retire from his job as a bond salesman in 17 years, after which this portfolio will be his primary source of income.

• Cardinal has sufficient cash available that he will not need this portfolio to generate cash outflows until he retires.

• Cardinal, as a registered securities representative, is required to have Samuel send a copy of his account statements to the compliance officer at Cardinal’s employer.

• Cardinal opposes certain policies of the government of Lower Pannonia and does not wish to own any securities of companies that do business with its regime.

To complete his assessment of Cardinal’s investment constraints, Samuel still needs to inquire about Cardinal’s:

A)    liquidity needs.

B)   legal and regulatory factors.

C)   unique needs and preferences.

D)   tax concerns.

The correct answer was D) tax concerns.

Of the five categories of investment constraints, the four matters listed are related to Cardinal’s time horizon (years to retirement), liquidity needs (available cash), legal and regulatory factors (required copies of account statements to his compliance officer), and unique needs and preferences (no investments in Lower Pannonia). None of these constraints address Cardinal’s tax situation or the taxable status of the investment account.

This question tested from Session 12, Reading 49, LOS d

Question 85

Which of the following statements about short selling is least accurate?

A)    A short sale involves securities the investor does not own.

B)   A short seller loses if the price of the stock sold short decreases.

C)   If the stock pays a dividend, the short seller owes the dividend to the lender of the stock.

D)   A short seller is required to set up a margin account.

The correct answer was B) A short seller loses if the price of the stock sold short decreases.

A short seller loses if the stock price increases. The other choices are true.

This question tested from Session 13, Reading 52, LOS f

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