Question 1

According to Global Investment Performance Standards (GIPS), time-weighted rates of return must be used.

Accepted Answer

A) True 
 B)False

Question 2

The information ratio permits only relative assessments of performance for different portfolios in a style class.

Accepted Answer

A) True 
 B)False

Question 3

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information for four portfolios, the market, and the risk-free rate (RFR):
  
-Refer to Exhibit 18.6. Calculate the Sharpe Measure for each portfolio.

Accepted Answer

A)  A1 = 0.40, A2 = 0.31, A3 = 0.65, A4 = 0.66 
B)  A1 = 0.31, A2 = 0.66, A3 = 0.65, A4 = 0.40 
C)  A1 = 0.66, A2 = 0.65, A3 = 0.31, A4 = 0.40 
D)  A1 = 0.66, A2 = 0.31, A3 = 0.65, A4 = 0.40 
E)  A1 = 0.54, A2 = 0.68, A3 = 0.65, A4 = 0.40 
A)  A1 = 0.40, A2 = 0.31, A3 = 0.65, A4 = 0.66 
B)  A1 = 0.31, A2 = 0.66, A3 = 0.65, A4 = 0.40 
C)  A1 = 0.66, A2 = 0.65, A3 = 0.31, A4 = 0.40 
D)  A1 = 0.66, A2 = 0.31, A3 = 0.65, A4 = 0.40 
E)  A1 = 0.54, A2 = 0.68, A3 = 0.65, A4 = 0.40

Question 4

The portfolio performance measure that can be most affected by a benchmark error is the Sharpe measure.

Accepted Answer

A) True 
 B)False

Question 5

Global Investment Performance Standards (GIPS), were intended to accomplish which of the following goals?

Accepted Answer

A)  to assess the quality of services provided by money managers by looking at adjustments made to the content of their portfolios 
B)  to measure both unsystematic and systematic risk 
C)  to establish investment industry best practices for calculating and presenting investment performance that promote investor interests and instill investor confidence 
D)  to measure portfolio performance on the basis of return per unit of risk 
E)  to measure portfolio performance on the basis of historic average differential return per unit of historic variability of differential return 
A)  to assess the quality of services provided by money managers by looking at adjustments made to the content of their portfolios 
B)  to measure both unsystematic and systematic risk 
C)  to establish investment industry best practices for calculating and presenting investment performance that promote investor interests and instill investor confidence 
D)  to measure portfolio performance on the basis of return per unit of risk 
E)  to measure portfolio performance on the basis of historic average differential return per unit of historic variability of differential return

Question 6

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The last year's performance for four mutual funds is presented below. The market return was 10.70 percent, the standard deviation was 13.1 percent last year, and the risk-free rate of return was 5%.
  
-Refer to Exhibit 18.7. Based on the Treynor Measure, which portfolio preformed best?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
E)  market 
A)  A 
B)  B 
C)  C 
D)  D 
E)  market

Question 7

The two questions when assessing the performance measurement of an investment manager include:

Accepted Answer

A)  did the manager follow the client's policy statement? 
B)  did the manager completely diversify the portfolio to eliminate all unsystematic risk? 
C)  why did the portfolio manager perform as he or she did? 
D)  did the manager have the ability to derive above-average risk adjusted returns? 
E)  did the manager deliver on expectations and produce an additional alpha component? 
A)  did the manager follow the client's policy statement? 
B)  did the manager completely diversify the portfolio to eliminate all unsystematic risk? 
C)  why did the portfolio manager perform as he or she did? 
D)  did the manager have the ability to derive above-average risk adjusted returns? 
E)  did the manager deliver on expectations and produce an additional alpha component?

Question 8

When applying the Jensen's alpha measure, the alpha level and significance can vary greatly depending on the specification of the return-generating model.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements concerning performance measures is false?

Accepted Answer

A)  The Sharpe measure examines both unsystematic and systematic risk. 
B)  The Treynor measure examines systematic risk. 
C)  The Jensen measure examines systematic risk. 
D)  All three measures examine both unsystematic and systematic risk. 
E)  None of these are correct. 
A)  The Sharpe measure examines both unsystematic and systematic risk. 
B)  The Treynor measure examines systematic risk. 
C)  The Jensen measure examines systematic risk. 
D)  All three measures examine both unsystematic and systematic risk. 
E)  None of these are correct.

Question 10

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the data presented below on three mutual funds and the market.
  
-Refer to Exhibit 18.3. Compute the Treynor Measure for the CCC fund.

Accepted Answer

A)  14.7 
B)  15.3 
C)  19.1 
D)  17.0 
E)  12.7 
A)  14.7 
B)  15.3 
C)  19.1 
D)  17.0 
E)  12.7

Question 11

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The data presented below has been collected at this point in time.
  
-Refer to Exhibit 18.4. Compute the Jensen Measure for the BBB fund.

Accepted Answer

A)  2.10 
B)  2.74 
C)  5.43 
D)  2.00 
E)  1.65 
A)  2.10 
B)  2.74 
C)  5.43 
D)  2.00 
E)  1.65

Question 12

In the evaluation of bond portfolio performance, the analysis effect refers to

Accepted Answer

A)  the difference in portfolio duration and index duration. 
B)  the extra return attributable to acquiring bonds that are temporarily mispriced relative to risk. 
C)  short-run changes in the portfolio during a specific period. 
D)  the differential return from changing duration of the portfolio during a specific period. 
E)  None of these are correct. 
A)  the difference in portfolio duration and index duration. 
B)  the extra return attributable to acquiring bonds that are temporarily mispriced relative to risk. 
C)  short-run changes in the portfolio during a specific period. 
D)  the differential return from changing duration of the portfolio during a specific period. 
E)  None of these are correct.

Question 13

The ranking differences between the Sharpe, Treynor, and Jensen performance measures occur because of the differences in diversification.

Accepted Answer

A) True 
 B)False

Question 14

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The last year's performance for four mutual funds is presented below. The market return was 10.70 percent, the standard deviation was 13.1 percent last year, and the risk-free rate of return was 5%.
  
-Refer to Exhibit 18.7. Compute the Jensen Measure for the B fund.

Accepted Answer

A)  1.16% 
B)  2.31% 
C)  6.90% 
D)  9.60% 
E)  10.13% 
A)  1.16% 
B)  2.31% 
C)  6.90% 
D)  9.60% 
E)  10.13%

Question 15

Overall performance is the total return above the risk-free rate.

Accepted Answer

A) True 
 B)False

Question 16

A portfolio manager has the following sequence of cash flows over a two-year period:   Calculate the portfolio manager's time weighted return.

Accepted Answer

A)  13.56 percent 
B)  11.48 percent 
C)  15.50 percent 
D)  8.75 percent 
E)  10.67 percent 
A)  13.56 percent 
B)  11.48 percent 
C)  15.50 percent 
D)  8.75 percent 
E)  10.67 percent

Question 17

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Given the following information evaluate the performance of Cloud Incorporated (CI).
  
-Refer to Exhibit 18.9. Calculate CI's selectivity.

Accepted Answer

A)  0.1225 
B)  0.1000 
C)  0.0525 
D)  0.0475 
E)  0.0325 
A)  0.1225 
B)  0.1000 
C)  0.0525 
D)  0.0475 
E)  0.0325

Question 18

Under the performance attribution analysis method, the ____ measures the manager's ability to form specific market segment portfolios that generate superior returns relative to the way in which the comparable market segment is defined in the benchmark portfolio weighted by the manager's actual market segment investment proportions.

Accepted Answer

A)  selection effect 
B)  allocation effect 
C)  distribution effect 
D)  diversification effect 
E)  attribution effect 
A)  selection effect 
B)  allocation effect 
C)  distribution effect 
D)  diversification effect 
E)  attribution effect

Question 19

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
An analyst is considering investing in funds A, B, C, and D. The market portfolio, M, is expected to be 11 percent next period, and the risk-free rate of return is 3 percent. The market portfolio had a standard deviation over the past ten years of 0.20. The analyst gathered the following information on the four funds.
  
-Refer to Exhibit 18.8. Rank the four funds and market portfolio in order from highest to lowest based on their Treynor performance measures.

Accepted Answer

A)  A, B, C, D, M 
B)  B, C, M, D, A 
C)  C, A, M, D, B 
D)  D, A, B, M, C 
E)  D, B, A, C, M 
A)  A, B, C, D, M 
B)  B, C, M, D, A 
C)  C, A, M, D, B 
D)  D, A, B, M, C 
E)  D, B, A, C, M

Question 20

The advantage of evaluating a fund's alpha using a multifactor approach is that it is designed to control for market style (SMB and HML) and momentum (MOM) risk.

Accepted Answer

A) True 
 B)False

According to Global Investment Performance Standards (GIPS), time-weighted rates of return must be used.

The information ratio permits only relative assessments of performance for different portfolios in a style class.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Consider the following information for four portfolios, the market, and the risk-free rate (RFR): -Refer to Exhibit 18.6. Calculate the Sharpe Measure for each portfolio.

The portfolio performance measure that can be most affected by a benchmark error is the Sharpe measure.

Global Investment Performance Standards (GIPS), were intended to accomplish which of the following goals?

The two questions when assessing the performance measurement of an investment manager include:

When applying the Jensen's alpha measure, the alpha level and significance can vary greatly depending on the specification of the return-generating model.

Which of the following statements concerning performance measures is false?

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Consider the data presented below on three mutual funds and the market. -Refer to Exhibit 18.3. Compute the Treynor Measure for the CCC fund.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The data presented below has been collected at this point in time. -Refer to Exhibit 18.4. Compute the Jensen Measure for the BBB fund.

In the evaluation of bond portfolio performance, the analysis effect refers to

The ranking differences between the Sharpe, Treynor, and Jensen performance measures occur because of the differences in diversification.

Overall performance is the total return above the risk-free rate.

A portfolio manager has the following sequence of cash flows over a two-year period: Calculate the portfolio manager's time weighted return.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Given the following information evaluate the performance of Cloud Incorporated (CI). -Refer to Exhibit 18.9. Calculate CI's selectivity.

The advantage of evaluating a fund's alpha using a multifactor approach is that it is designed to control for market style (SMB and HML) and momentum (MOM) risk.

The Investment Setting

The Investment Setting: Part A

Asset Allocation and Security Selection

Asset Allocation and Security Selection: Part A

Organization and Functioning of Securities Markets

Security Market Indexes and Index Funds

Efficient Capital Markets, Behavioral Finance, and Technical Analysis

An Introduction to Portfolio Management

An Introduction to Portfolio Management: Part A

An Introduction to Portfolio Management: Part B

Asset Pricing Models

Equity Valuation

The Top-Down Approach to Market, Industry, and Company Analysis

The Practice of Fundamental Investing

Equity Portfolio Management Strategies

Bond Fundamentals and Valuation

Bond Analysis and Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward, Futures, and Swap Contracts

Option Contracts

Professional Money Management, Alternative Assets, and Industry Ethics

Filters

Exam 18: Evaluation of Portfolio Performance

According to Global Investment Performance Standards (GIPS), time-weighted rates of return must be used.

The information ratio permits only relative assessments of performance for different portfolios in a style class.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Consider the following information for four portfolios, the market, and the risk-free rate (RFR): -Refer to Exhibit 18.6. Calculate the Sharpe Measure for each portfolio.

The portfolio performance measure that can be most affected by a benchmark error is the Sharpe measure.

Global Investment Performance Standards (GIPS), were intended to accomplish which of the following goals?

The two questions when assessing the performance measurement of an investment manager include:

When applying the Jensen's alpha measure, the alpha level and significance can vary greatly depending on the specification of the return-generating model.

Which of the following statements concerning performance measures is false?

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Consider the data presented below on three mutual funds and the market. -Refer to Exhibit 18.3. Compute the Treynor Measure for the CCC fund.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The data presented below has been collected at this point in time. -Refer to Exhibit 18.4. Compute the Jensen Measure for the BBB fund.

In the evaluation of bond portfolio performance, the analysis effect refers to

The ranking differences between the Sharpe, Treynor, and Jensen performance measures occur because of the differences in diversification.

Overall performance is the total return above the risk-free rate.

A portfolio manager has the following sequence of cash flows over a two-year period: Calculate the portfolio manager's time weighted return.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Given the following information evaluate the performance of Cloud Incorporated (CI). -Refer to Exhibit 18.9. Calculate CI's selectivity.

The advantage of evaluating a fund's alpha using a multifactor approach is that it is designed to control for market style (SMB and HML) and momentum (MOM) risk.

The Investment Setting

The Investment Setting: Part A

Asset Allocation and Security Selection

Asset Allocation and Security Selection: Part A

Organization and Functioning of Securities Markets

Security Market Indexes and Index Funds

Efficient Capital Markets, Behavioral Finance, and Technical Analysis

An Introduction to Portfolio Management

An Introduction to Portfolio Management: Part A

An Introduction to Portfolio Management: Part B

Asset Pricing Models

Equity Valuation

The Top-Down Approach to Market, Industry, and Company Analysis

The Practice of Fundamental Investing

Equity Portfolio Management Strategies

Bond Fundamentals and Valuation

Bond Analysis and Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward, Futures, and Swap Contracts

Option Contracts

Professional Money Management, Alternative Assets, and Industry Ethics

Filters