unit 20 series 65
An investment adviser representative is evaluating DEF stock to see if it is a good fit for a client's portfolio. Using the security market line (SML), what is the expected return for DEF when the return on the market is 8%, the 91-day Treasury bill is yielding 6%, DEF's beta is 1.50, and the inflation rate, as measured by the CPI, is 4%?
9%
Your customer, age 29, is seeking a long-term growth investment, is concerned about the loss of purchasing power as a result of inflation, and often complains about high commissions that reduce his investment returns. When he was in college, he took a few economics courses and firmly believes that securities analysts cannot consistently outperform the overall market. Which of the following mutual funds is the most suitable for the customer?
ARG Stock Index Fund
The capital asset pricing model (CAPM) is used by many to assess the expected return of a security. If the current risk-free rate is 2%, the current return on the market is 10%, and a particular stock's beta is 1.5 with a standard deviation of 3.2, the expected return would be
14%
Based on the following information, which stock is most attractive to a value investor?
Book Value of $22 per share, current market value of $17 per share
Riley, as an investor, prefers to be on the lower end of the efficient frontier. We would expect to see which of the following risk and return combinations?
Low risk and low return
Which of the following is the form of portfolio management that rotates between sectors based on changes to the business cycle?
Segment rotation
The management style that is most similar to buy and hold is
Strategic management
The bond strategy used most often by those with a target goal is
The bullet strategy
High-tech Industries (HTI) went public 4 years ago by issuing 100 million shares of common stock at $1 per share. HTI's earnings have soared and the stock is now selling for $13 per share. HTI would be considered
a small-cap stock.
A probable return is
an estimate of all of the possible returns an investment is expected to yield
In the field of portfolio management, there are a number of different management styles. One of those styles involves committing additional capital to the market when others are reducing their exposure, or eliminating positions while others are increasing theirs. This style is generally referred to as
contrarian
The chief analyst at your firm suggests that some of the IARs add emerging market securities to some client's portfolios. Among the benefits of doing so would be
diversification
An investor diversifying a corporate bond portfolio does NOT consider
domicile of the investor
An increase in the earnings per share growth rate from one reporting period to the next is called
earnings momentum.
An efficient portfolio is one that offers I. the most return for a given amount of risk II. the least risk for a given amount of return III. the least return for a given amount of risk IV. the most risk for a given amount of return
I or II
A well-diversified investor following a rebalancing portfolio strategy in a rising market will most likely
sell part of the stock in the portfolio
A portfolio manager using index options is trying to hedge which of the following types of risks?
systematic
Investment advisers who preach the benefits of strategic asset allocation do so because they believe
the market is perfectly efficient because stock prices reflect all available information
The purpose of portfolio rebalancing is used to make sure that
the percentage of the portfolio invested in various asset classes remains constant
Phocine and Ursus, LLC, a covered investment adviser, has a client with a large short position in PQR common stock. Their chief analyst believes that PQR is an attractive target for an acquisition. Based on this information, it might be wise for the firm to suggest this client
purchase call options on PQR.
