Exhibit 15-1 USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION(S) A portfolio manager is trying to establish a strategic asset allocation for two different clients, Bob Bowman and Tom Luck. Bob Bowman has a risk tolerance factor of 22 and Tom Luck has a risk tolerance factor of 6. The characteristics of the three model portfolios under consideration are provided in the table below. \[\begin{array}{c} \underline {\text { Asset Mix }}\quad\quad\quad\quad\quad\quad\\ \begin{array} { c c c c c } \text { Partfalia } & \text { Stack } & \text { Bond } & \begin{array} { c } \text { Exgected } \\ \text { Retun } \end{array} & \text { Variance } \\ \hline \text { A } & 0.75 & 0.25 & 0.12 & 0.45 \\ \text { B } & 0.4 & 0.6 & 0.08 & 0.16 \\ \text { C } & 0.3 & 0.7 & 0.05 & 0.06 \end{array} \end{array}\] -An active portfolio manager sold $90 million of stocks in a year. If the portfolio had an average value of $110 million in assets under management, what is the portfolio turnover ratio?

A) 22.2% B) 81.8% C) 90.0% D) 110.0% E) 122.2% A) 22.2% B) 81.8% C) 90.0% D) 110.0% E) 122.2%

The table below provides returns on a portfolio along with returns for the corresponding benchmark index for the past eight quarters. The table also provides the difference between portfolio returns and the benchmark index, the average of these differences over the past eight quarters and the standard deviation of these differences. $\begin{array}{cccc} \text { Period } & \text { Portfolio } & \text { Index } & \text { Difference } \\ \hline 1 & 0.05 & 0.027 & 0.023 \\ 2 & -0.036 & -0.046 & 0.010 \\ 3 & 0.022 & 0.019 & 0.003 \\ 4 & 0.012 & 0.022 & -0.010 \\ 5 & -0.003 & -0.001 & -0.002 \\ 6 & -0.023 & -0.03 & 0.007 \\ 7 & 0.089 & 0.081 & 0.008 \\ 8 & -0.008 & 0.006 & -0.014\\ \text { Average } &&& 0.003\\ \mathrm{SD} &&&0.011789\\ \end{array}$ The annualized tracking error for this period is

A) 2.36% B) 4.08% C) 2.89% D) 3.33% E) 1.18% A) 2.36% B) 4.08% C) 2.89% D) 3.33% E) 1.18%

Exam 15: Equity Portfolio Management Strategies

A portfolio management strategy that overweights a particular industry, relative to the benchmark portfolio, based on the next expected phase of the business cycle is called

(Multiple Choice)

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Question 41

Value stocks would have the following characteristics

(Multiple Choice)

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Question 42

Exhibit 15-1 USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION(S) A portfolio manager is trying to establish a strategic asset allocation for two different clients, Bob Bowman and Tom Luck. Bob Bowman has a risk tolerance factor of 22 and Tom Luck has a risk tolerance factor of 6. The characteristics of the three model portfolios under consideration are provided in the table below. Partfalia Stack Bond Exgected Retun Variance A 0.75 0.25 0.12 0.45 B 0.4 0.6 0.08 0.16 C 0.3 0.7 0.05 0.06 -An active portfolio manager sold $90 million of stocks in a year. If the portfolio had an average value of $110 million in assets under management, what is the portfolio turnover ratio?

(Multiple Choice)

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Question 43

The table below provides returns on a portfolio along with returns for the corresponding benchmark index for the past eight quarters. The table also provides the difference between portfolio returns and the benchmark index, the average of these differences over the past eight quarters and the standard deviation of these differences. Period Portfolio Index Difference 1 0.05 0.027 0.023 2 -0.036 -0.046 0.010 3 0.022 0.019 0.003 4 0.012 0.022 -0.010 5 -0.003 -0.001 -0.002 6 -0.023 -0.03 0.007 7 0.089 0.081 0.008 8 -0.008 0.006 -0.014 Average 0.003 0.011789 The annualized tracking error for this period is

(Multiple Choice)

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Question 44

Growth stocks consistently outperform value stocks.

(True/False)

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Question 45

The following are ways to implement index portfolio investing

(Multiple Choice)

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Question 46

Style investing allows control of the total portfolio to be shared between investment managers and pension fund managers.

(True/False)

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Question 47

Exhibit 15-1 USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION(S) A portfolio manager is trying to establish a strategic asset allocation for two different clients, Bob Bowman and Tom Luck. Bob Bowman has a risk tolerance factor of 22 and Tom Luck has a risk tolerance factor of 6. The characteristics of the three model portfolios under consideration are provided in the table below. Partfalia Stack Bond Exgected Retun Variance A 0.75 0.25 0.12 0.45 B 0.4 0.6 0.08 0.16 C 0.3 0.7 0.05 0.06 -Refer to Exhibit 15-1. The recommended portfolio for Bob Bowman is

(Multiple Choice)

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Question 48

In ____ strategy, certain economic sectors or industries are overweighted relative to the benchmark in anticipation of the next phase of the business cycle.

(Multiple Choice)

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Question 49

Which of the following is not considered an asset allocation strategy?

(Multiple Choice)

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Question 50

Which of the following statements about investment style is false?

(Multiple Choice)

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Question 51

In returns-based style analysis a coefficient of determination of 95% would suggest that

(Multiple Choice)

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Question 52

The three basic techniques for constructing a passive index are: full replication, sampling and linear programming.

(True/False)

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Question 53

If you have a portfolio with a market value of $100 million and a beta (measured against the S&P 500) of 1.5, then if the market rises by 10%, what value would you expect your portfolio to have?

(Multiple Choice)

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Question 54

A portfolio management strategy that overweights a particular industry, relative to the benchmark portfolio, based on the next expected phase of the business cycle is called

Value stocks would have the following characteristics

Growth stocks consistently outperform value stocks.

The following are ways to implement index portfolio investing

Style investing allows control of the total portfolio to be shared between investment managers and pension fund managers.

In ____ strategy, certain economic sectors or industries are overweighted relative to the benchmark in anticipation of the next phase of the business cycle.

Which of the following is not considered an asset allocation strategy?

Which of the following statements about investment style is false?

In returns-based style analysis a coefficient of determination of 95% would suggest that

The three basic techniques for constructing a passive index are: full replication, sampling and linear programming.

If you have a portfolio with a market value of $100 million and a beta (measured against the S&P 500) of 1.5, then if the market rises by 10%, what value would you expect your portfolio to have?

The Investment Setting

The Asset Allocation Decision

Selecting Investments in a Global Market

Securities Markets and the Economy

Efficient Capital Markets

An Introduction to Portfolio Management

Asset Pricing Models: Capm and Apt

Economic and Industry Analysis

Company Analysis and Stock Valuation

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

An Introduction to Derivative Markets and Securities

Derivatives: Analysis and Valuation

Bond Portfolio Management Strategies

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Analysis of Financial Statements

An Introduction to Security Valuation

Web Appendix: A Review of Statistics and the Security Market Line

Web Appendix: A Review of Statistics and the Security Market Line

Appendix: Objectives and Constraints of Institutional Investors

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