Learning Outcome Statements (LOS)

Which of the following best describes the diversification ratio?

In the portfolio management process, the creation of an Investment Policy Statement (IPS) occurs during which step?

Which type of institutional investor typically has the longest investment horizon and the highest risk tolerance?

In a defined contribution pension plan, who assumes the investment risk?

Which of the following is a key characteristic of an open-end mutual fund?

An investor buys a stock for 50 EUR. One year later, it pays a dividend of 2 EUR and is sold for 55 EUR. What is the holding period return?

If returns are volatile, which of the following statements comparing the arithmetic mean and the geometric mean is correct?

Which return measure is most appropriate for evaluating the performance of a portfolio manager who has no control over the timing of cash flows into and out of the account?

What is the correlation coefficient if the covariance between two assets is zero?

Which of the following describes a risk-averse investor?

The set of portfolios that has the greatest expected return for each level of risk is known as the:

What is the result of combining a risky portfolio with a risk-free asset?

Under the assumption of homogeneous expectations, the optimal risky portfolio for all investors is:

The Capital Market Line (CML) uses which measure of risk on its horizontal axis?

Systematic risk is best defined as:

In the market model, Beta measures:

According to the CAPM, the expected return on a risky asset is equal to:

Which performance measure is defined as excess return per unit of systematic risk?

If a stock plots above the Security Market Line (SML), it is considered:

Which component of an Investment Policy Statement (IPS) describes the investor's liabilities and income stability?

An objective to 'not lose more than 5 percent of value in any 12-month period' is an example of:

Which factor determines an investor's ability to take risk?

The requirement to hold liquid assets to fund a specific future purchase is considered a:

Tactical asset allocation refers to:

Which of the following biases is considered a cognitive error?

An investor who holds onto a losing stock because selling it would mentally finalize the loss is exhibiting:

What is 'mental accounting'?

An analyst who refuses to update a forecast despite new contradictory information is likely suffering from:

Risk governance is best defined as:

Which of the following is considered a non-financial risk?

Value at Risk (VaR) measures:

Purchasing insurance is an example of which risk modification method?

Technical analysis assumes that:

In technical analysis, a 'head-and-shoulders' pattern is considered a:

Which technical indicator uses standard deviations to create bands around a moving average?

A 'golden cross' occurs when:

Which sentiment indicator is generally viewed as contrarian?

If two assets have a correlation of +1.0, what is the effect on portfolio standard deviation?

In a 2-asset portfolio, diversification benefits are maximized when the correlation between returns is:

The Capital Asset Pricing Model (CAPM) assumes that investors:

An endowment fund is defined as:

Which of the following describes 'risk budgeting'?

According to the Separation Theorem, all investors should hold a combination of:

Which type of risk can be reduced by diversification?

What is the slope of the Security Market Line (SML)?

If the risk-free rate is 3 percent, the market return is 8 percent, and a stock's beta is 1.5, what is the expected return according to CAPM?

Which bias involves putting undue emphasis on information that is readily available or easy to recall?

Which of the following is a Momentum Oscillator?

What is the primary difference between Defined Benefit (DB) and Defined Contribution (DC) pension plans regarding risk?

The diversification ratio of a portfolio is calculated as: