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CFA-Level-III

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Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: TOPIC: ETHICAL AND PROFESSIONAL STANDARDS TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Edgar Somer, CFA, was recently hired as a portfolio manager at Karibe Investment Management. Somer previously worked at a rival firm where he produced an average annual return of 11% using a small-cap value strategy. On his first day at Karibe, the firm asks Somer to approve marketing materials that present the following performance disclosures. • Text which states: “Somer has generated average annual returns of 11%” • The 3-year performance of a composite of Karibe client accounts that follow a similar small-cap value strategy • A disclosure that the assumptions and calculations underlying the returns presented are publicly available on Karibe's public website To maintain relationships with clients and to attract prospective clients, Somer is active on social media. He posts a link to a news story about a famous athlete who recently paid substantial tax penalties after failing to properly report investment gains. In addition to the link Somer writes the comment: “A client of mine had similar gains, but because I kept proper records he faced no penalties. #HireAProfessional”. Some responses to the post suggest that readers mistakenly believe the athlete is Somer's client. Somer does not post a clarifying comment. Somer develops a new quantitative investment strategy that he describes in marketing materials. The description states that “the strategy is based on eight proven fundamental and technical factors, including well-known factors such as value and momentum as well as certain proprietary factors that have been back-tested. The strategy includes a dynamic weighting component to adjust the amount allocated to each factor based on prevailing market conditions.” The materials also highlight risks such as “the possibility that the model or its underlying factors may not work out of sample,” and “because the weight placed on various factors is dynamic, it may not be suitable for clients who seek steady exposure to certain factors.” One of Somer's clients agrees to use this strategy. When preparing the first performance report for this client, Somer discovers a coding error that reversed the client's weightings assigned to the value and momentum factors. Prior to joining Karibe, Somer purchased shares in a small-cap technology firm for his personal portfolio. When he started his new role Somers disclosed the position, which had quadrupled in value since the initial purchase and represented more than 5\% of his personal holdings. He had no intention to sell the shares and he recommended them to clients at Karibe, to whom he disclosed his ownership. After the successful launch of a new product resulted in additional large gains in the shares, Somer now recommends that clients place limit orders when purchasing the shares. Though he remains bullish on the stock he is concerned about the size of his personal position, which is now more than 15\% of his portfolio. One of his clients recently placed a limit order at $50 per share, which represents the highest bid in the market. The lowest offer is $52. Somer considers filling the client's order with some of his own shares at the $50 bid price.; Question:To best comply with the CFA Institute Standards of Professional Conduct (the Standards) related to performance presentation, Somer should modify the:; Answer Choices: A: text regarding Somer's investment returns., B: presentation of the performance for Karibe's representative composite., C: content of the disclosure statement related to assumptions and calculations.. Answer:

A

sample_test

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: TOPIC: ETHICAL AND PROFESSIONAL STANDARDS TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Edgar Somer, CFA, was recently hired as a portfolio manager at Karibe Investment Management. Somer previously worked at a rival firm where he produced an average annual return of 11% using a small-cap value strategy. On his first day at Karibe, the firm asks Somer to approve marketing materials that present the following performance disclosures. • Text which states: “Somer has generated average annual returns of 11%” • The 3-year performance of a composite of Karibe client accounts that follow a similar small-cap value strategy • A disclosure that the assumptions and calculations underlying the returns presented are publicly available on Karibe's public website To maintain relationships with clients and to attract prospective clients, Somer is active on social media. He posts a link to a news story about a famous athlete who recently paid substantial tax penalties after failing to properly report investment gains. In addition to the link Somer writes the comment: “A client of mine had similar gains, but because I kept proper records he faced no penalties. #HireAProfessional”. Some responses to the post suggest that readers mistakenly believe the athlete is Somer's client. Somer does not post a clarifying comment. Somer develops a new quantitative investment strategy that he describes in marketing materials. The description states that “the strategy is based on eight proven fundamental and technical factors, including well-known factors such as value and momentum as well as certain proprietary factors that have been back-tested. The strategy includes a dynamic weighting component to adjust the amount allocated to each factor based on prevailing market conditions.” The materials also highlight risks such as “the possibility that the model or its underlying factors may not work out of sample,” and “because the weight placed on various factors is dynamic, it may not be suitable for clients who seek steady exposure to certain factors.” One of Somer's clients agrees to use this strategy. When preparing the first performance report for this client, Somer discovers a coding error that reversed the client's weightings assigned to the value and momentum factors. Prior to joining Karibe, Somer purchased shares in a small-cap technology firm for his personal portfolio. When he started his new role Somers disclosed the position, which had quadrupled in value since the initial purchase and represented more than 5\% of his personal holdings. He had no intention to sell the shares and he recommended them to clients at Karibe, to whom he disclosed his ownership. After the successful launch of a new product resulted in additional large gains in the shares, Somer now recommends that clients place limit orders when purchasing the shares. Though he remains bullish on the stock he is concerned about the size of his personal position, which is now more than 15\% of his portfolio. One of his clients recently placed a limit order at $50 per share, which represents the highest bid in the market. The lowest offer is $52. Somer considers filling the client's order with some of his own shares at the $50 bid price.; Question:To best comply with the CFA Institute Standards of Professional Conduct (the Standards) related to performance presentation, Somer should modify the:; Answer Choices: A: text regarding Somer's investment returns., B: presentation of the performance for Karibe's representative composite., C: content of the disclosure statement related to assumptions and calculations.. Answer:

Scenario: TOPIC: ETHICAL AND PROFESSIONAL STANDARDS TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Edgar Somer, CFA, was recently hired as a portfolio manager at Karibe Investment Management. Somer previously worked at a rival firm where he produced an average annual return of 11% using a small-cap value strategy. On his first day at Karibe, the firm asks Somer to approve marketing materials that present the following performance disclosures. • Text which states: “Somer has generated average annual returns of 11%” • The 3-year performance of a composite of Karibe client accounts that follow a similar small-cap value strategy • A disclosure that the assumptions and calculations underlying the returns presented are publicly available on Karibe's public website To maintain relationships with clients and to attract prospective clients, Somer is active on social media. He posts a link to a news story about a famous athlete who recently paid substantial tax penalties after failing to properly report investment gains. In addition to the link Somer writes the comment: “A client of mine had similar gains, but because I kept proper records he faced no penalties. #HireAProfessional”. Some responses to the post suggest that readers mistakenly believe the athlete is Somer's client. Somer does not post a clarifying comment. Somer develops a new quantitative investment strategy that he describes in marketing materials. The description states that “the strategy is based on eight proven fundamental and technical factors, including well-known factors such as value and momentum as well as certain proprietary factors that have been back-tested. The strategy includes a dynamic weighting component to adjust the amount allocated to each factor based on prevailing market conditions.” The materials also highlight risks such as “the possibility that the model or its underlying factors may not work out of sample,” and “because the weight placed on various factors is dynamic, it may not be suitable for clients who seek steady exposure to certain factors.” One of Somer's clients agrees to use this strategy. When preparing the first performance report for this client, Somer discovers a coding error that reversed the client's weightings assigned to the value and momentum factors. Prior to joining Karibe, Somer purchased shares in a small-cap technology firm for his personal portfolio. When he started his new role Somers disclosed the position, which had quadrupled in value since the initial purchase and represented more than 5\% of his personal holdings. He had no intention to sell the shares and he recommended them to clients at Karibe, to whom he disclosed his ownership. After the successful launch of a new product resulted in additional large gains in the shares, Somer now recommends that clients place limit orders when purchasing the shares. Though he remains bullish on the stock he is concerned about the size of his personal position, which is now more than 15\% of his portfolio. One of his clients recently placed a limit order at $50 per share, which represents the highest bid in the market. The lowest offer is $52. Somer considers filling the client's order with some of his own shares at the $50 bid price. Question:To best comply with the CFA Institute Standards of Professional Conduct (the Standards) related to performance presentation, Somer should modify the: Choices: A: text regarding Somer's investment returns., B: presentation of the performance for Karibe's representative composite., C: content of the disclosure statement related to assumptions and calculations..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: TOPIC: ETHICAL AND PROFESSIONAL STANDARDS TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Edgar Somer, CFA, was recently hired as a portfolio manager at Karibe Investment Management. Somer previously worked at a rival firm where he produced an average annual return of 11% using a small-cap value strategy. On his first day at Karibe, the firm asks Somer to approve marketing materials that present the following performance disclosures. • Text which states: “Somer has generated average annual returns of 11%” • The 3-year performance of a composite of Karibe client accounts that follow a similar small-cap value strategy • A disclosure that the assumptions and calculations underlying the returns presented are publicly available on Karibe's public website To maintain relationships with clients and to attract prospective clients, Somer is active on social media. He posts a link to a news story about a famous athlete who recently paid substantial tax penalties after failing to properly report investment gains. In addition to the link Somer writes the comment: “A client of mine had similar gains, but because I kept proper records he faced no penalties. #HireAProfessional”. Some responses to the post suggest that readers mistakenly believe the athlete is Somer's client. Somer does not post a clarifying comment. Somer develops a new quantitative investment strategy that he describes in marketing materials. The description states that “the strategy is based on eight proven fundamental and technical factors, including well-known factors such as value and momentum as well as certain proprietary factors that have been back-tested. The strategy includes a dynamic weighting component to adjust the amount allocated to each factor based on prevailing market conditions.” The materials also highlight risks such as “the possibility that the model or its underlying factors may not work out of sample,” and “because the weight placed on various factors is dynamic, it may not be suitable for clients who seek steady exposure to certain factors.” One of Somer's clients agrees to use this strategy. When preparing the first performance report for this client, Somer discovers a coding error that reversed the client's weightings assigned to the value and momentum factors. Prior to joining Karibe, Somer purchased shares in a small-cap technology firm for his personal portfolio. When he started his new role Somers disclosed the position, which had quadrupled in value since the initial purchase and represented more than 5\% of his personal holdings. He had no intention to sell the shares and he recommended them to clients at Karibe, to whom he disclosed his ownership. After the successful launch of a new product resulted in additional large gains in the shares, Somer now recommends that clients place limit orders when purchasing the shares. Though he remains bullish on the stock he is concerned about the size of his personal position, which is now more than 15\% of his portfolio. One of his clients recently placed a limit order at $50 per share, which represents the highest bid in the market. The lowest offer is $52. Somer considers filling the client's order with some of his own shares at the $50 bid price.; Question:Does Somer's social media post result in a violation of the Standards?; Answer Choices: A: No, B: Yes, he violates the standard related to preservation of confidentiality, C: Yes, he violates the standard related to communication with clients and prospective clients. Answer:

A

sample_test

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: TOPIC: ETHICAL AND PROFESSIONAL STANDARDS TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Edgar Somer, CFA, was recently hired as a portfolio manager at Karibe Investment Management. Somer previously worked at a rival firm where he produced an average annual return of 11% using a small-cap value strategy. On his first day at Karibe, the firm asks Somer to approve marketing materials that present the following performance disclosures. • Text which states: “Somer has generated average annual returns of 11%” • The 3-year performance of a composite of Karibe client accounts that follow a similar small-cap value strategy • A disclosure that the assumptions and calculations underlying the returns presented are publicly available on Karibe's public website To maintain relationships with clients and to attract prospective clients, Somer is active on social media. He posts a link to a news story about a famous athlete who recently paid substantial tax penalties after failing to properly report investment gains. In addition to the link Somer writes the comment: “A client of mine had similar gains, but because I kept proper records he faced no penalties. #HireAProfessional”. Some responses to the post suggest that readers mistakenly believe the athlete is Somer's client. Somer does not post a clarifying comment. Somer develops a new quantitative investment strategy that he describes in marketing materials. The description states that “the strategy is based on eight proven fundamental and technical factors, including well-known factors such as value and momentum as well as certain proprietary factors that have been back-tested. The strategy includes a dynamic weighting component to adjust the amount allocated to each factor based on prevailing market conditions.” The materials also highlight risks such as “the possibility that the model or its underlying factors may not work out of sample,” and “because the weight placed on various factors is dynamic, it may not be suitable for clients who seek steady exposure to certain factors.” One of Somer's clients agrees to use this strategy. When preparing the first performance report for this client, Somer discovers a coding error that reversed the client's weightings assigned to the value and momentum factors. Prior to joining Karibe, Somer purchased shares in a small-cap technology firm for his personal portfolio. When he started his new role Somers disclosed the position, which had quadrupled in value since the initial purchase and represented more than 5\% of his personal holdings. He had no intention to sell the shares and he recommended them to clients at Karibe, to whom he disclosed his ownership. After the successful launch of a new product resulted in additional large gains in the shares, Somer now recommends that clients place limit orders when purchasing the shares. Though he remains bullish on the stock he is concerned about the size of his personal position, which is now more than 15\% of his portfolio. One of his clients recently placed a limit order at $50 per share, which represents the highest bid in the market. The lowest offer is $52. Somer considers filling the client's order with some of his own shares at the $50 bid price.; Question:Does Somer's social media post result in a violation of the Standards?; Answer Choices: A: No, B: Yes, he violates the standard related to preservation of confidentiality, C: Yes, he violates the standard related to communication with clients and prospective clients. Answer:

Scenario: TOPIC: ETHICAL AND PROFESSIONAL STANDARDS TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Edgar Somer, CFA, was recently hired as a portfolio manager at Karibe Investment Management. Somer previously worked at a rival firm where he produced an average annual return of 11% using a small-cap value strategy. On his first day at Karibe, the firm asks Somer to approve marketing materials that present the following performance disclosures. • Text which states: “Somer has generated average annual returns of 11%” • The 3-year performance of a composite of Karibe client accounts that follow a similar small-cap value strategy • A disclosure that the assumptions and calculations underlying the returns presented are publicly available on Karibe's public website To maintain relationships with clients and to attract prospective clients, Somer is active on social media. He posts a link to a news story about a famous athlete who recently paid substantial tax penalties after failing to properly report investment gains. In addition to the link Somer writes the comment: “A client of mine had similar gains, but because I kept proper records he faced no penalties. #HireAProfessional”. Some responses to the post suggest that readers mistakenly believe the athlete is Somer's client. Somer does not post a clarifying comment. Somer develops a new quantitative investment strategy that he describes in marketing materials. The description states that “the strategy is based on eight proven fundamental and technical factors, including well-known factors such as value and momentum as well as certain proprietary factors that have been back-tested. The strategy includes a dynamic weighting component to adjust the amount allocated to each factor based on prevailing market conditions.” The materials also highlight risks such as “the possibility that the model or its underlying factors may not work out of sample,” and “because the weight placed on various factors is dynamic, it may not be suitable for clients who seek steady exposure to certain factors.” One of Somer's clients agrees to use this strategy. When preparing the first performance report for this client, Somer discovers a coding error that reversed the client's weightings assigned to the value and momentum factors. Prior to joining Karibe, Somer purchased shares in a small-cap technology firm for his personal portfolio. When he started his new role Somers disclosed the position, which had quadrupled in value since the initial purchase and represented more than 5\% of his personal holdings. He had no intention to sell the shares and he recommended them to clients at Karibe, to whom he disclosed his ownership. After the successful launch of a new product resulted in additional large gains in the shares, Somer now recommends that clients place limit orders when purchasing the shares. Though he remains bullish on the stock he is concerned about the size of his personal position, which is now more than 15\% of his portfolio. One of his clients recently placed a limit order at $50 per share, which represents the highest bid in the market. The lowest offer is $52. Somer considers filling the client's order with some of his own shares at the $50 bid price. Question:Does Somer's social media post result in a violation of the Standards? Choices: A: No, B: Yes, he violates the standard related to preservation of confidentiality, C: Yes, he violates the standard related to communication with clients and prospective clients.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: TOPIC: ETHICAL AND PROFESSIONAL STANDARDS TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Edgar Somer, CFA, was recently hired as a portfolio manager at Karibe Investment Management. Somer previously worked at a rival firm where he produced an average annual return of 11% using a small-cap value strategy. On his first day at Karibe, the firm asks Somer to approve marketing materials that present the following performance disclosures. • Text which states: “Somer has generated average annual returns of 11%” • The 3-year performance of a composite of Karibe client accounts that follow a similar small-cap value strategy • A disclosure that the assumptions and calculations underlying the returns presented are publicly available on Karibe's public website To maintain relationships with clients and to attract prospective clients, Somer is active on social media. He posts a link to a news story about a famous athlete who recently paid substantial tax penalties after failing to properly report investment gains. In addition to the link Somer writes the comment: “A client of mine had similar gains, but because I kept proper records he faced no penalties. #HireAProfessional”. Some responses to the post suggest that readers mistakenly believe the athlete is Somer's client. Somer does not post a clarifying comment. Somer develops a new quantitative investment strategy that he describes in marketing materials. The description states that “the strategy is based on eight proven fundamental and technical factors, including well-known factors such as value and momentum as well as certain proprietary factors that have been back-tested. The strategy includes a dynamic weighting component to adjust the amount allocated to each factor based on prevailing market conditions.” The materials also highlight risks such as “the possibility that the model or its underlying factors may not work out of sample,” and “because the weight placed on various factors is dynamic, it may not be suitable for clients who seek steady exposure to certain factors.” One of Somer's clients agrees to use this strategy. When preparing the first performance report for this client, Somer discovers a coding error that reversed the client's weightings assigned to the value and momentum factors. Prior to joining Karibe, Somer purchased shares in a small-cap technology firm for his personal portfolio. When he started his new role Somers disclosed the position, which had quadrupled in value since the initial purchase and represented more than 5\% of his personal holdings. He had no intention to sell the shares and he recommended them to clients at Karibe, to whom he disclosed his ownership. After the successful launch of a new product resulted in additional large gains in the shares, Somer now recommends that clients place limit orders when purchasing the shares. Though he remains bullish on the stock he is concerned about the size of his personal position, which is now more than 15\% of his portfolio. One of his clients recently placed a limit order at $50 per share, which represents the highest bid in the market. The lowest offer is $52. Somer considers filling the client's order with some of his own shares at the $50 bid price.; Question:When preparing the marketing materials for the quantitative strategy, did Somer comply with the standard related to communication with clients and prospective clients?; Answer Choices: A: Yes, B: No, because he did not identify the risk of coding errors, C: No, because he did not describe the investment process in detail. Answer:

A

sample_test

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: TOPIC: ETHICAL AND PROFESSIONAL STANDARDS TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Edgar Somer, CFA, was recently hired as a portfolio manager at Karibe Investment Management. Somer previously worked at a rival firm where he produced an average annual return of 11% using a small-cap value strategy. On his first day at Karibe, the firm asks Somer to approve marketing materials that present the following performance disclosures. • Text which states: “Somer has generated average annual returns of 11%” • The 3-year performance of a composite of Karibe client accounts that follow a similar small-cap value strategy • A disclosure that the assumptions and calculations underlying the returns presented are publicly available on Karibe's public website To maintain relationships with clients and to attract prospective clients, Somer is active on social media. He posts a link to a news story about a famous athlete who recently paid substantial tax penalties after failing to properly report investment gains. In addition to the link Somer writes the comment: “A client of mine had similar gains, but because I kept proper records he faced no penalties. #HireAProfessional”. Some responses to the post suggest that readers mistakenly believe the athlete is Somer's client. Somer does not post a clarifying comment. Somer develops a new quantitative investment strategy that he describes in marketing materials. The description states that “the strategy is based on eight proven fundamental and technical factors, including well-known factors such as value and momentum as well as certain proprietary factors that have been back-tested. The strategy includes a dynamic weighting component to adjust the amount allocated to each factor based on prevailing market conditions.” The materials also highlight risks such as “the possibility that the model or its underlying factors may not work out of sample,” and “because the weight placed on various factors is dynamic, it may not be suitable for clients who seek steady exposure to certain factors.” One of Somer's clients agrees to use this strategy. When preparing the first performance report for this client, Somer discovers a coding error that reversed the client's weightings assigned to the value and momentum factors. Prior to joining Karibe, Somer purchased shares in a small-cap technology firm for his personal portfolio. When he started his new role Somers disclosed the position, which had quadrupled in value since the initial purchase and represented more than 5\% of his personal holdings. He had no intention to sell the shares and he recommended them to clients at Karibe, to whom he disclosed his ownership. After the successful launch of a new product resulted in additional large gains in the shares, Somer now recommends that clients place limit orders when purchasing the shares. Though he remains bullish on the stock he is concerned about the size of his personal position, which is now more than 15\% of his portfolio. One of his clients recently placed a limit order at $50 per share, which represents the highest bid in the market. The lowest offer is $52. Somer considers filling the client's order with some of his own shares at the $50 bid price.; Question:When preparing the marketing materials for the quantitative strategy, did Somer comply with the standard related to communication with clients and prospective clients?; Answer Choices: A: Yes, B: No, because he did not identify the risk of coding errors, C: No, because he did not describe the investment process in detail. Answer:

Scenario: TOPIC: ETHICAL AND PROFESSIONAL STANDARDS TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Edgar Somer, CFA, was recently hired as a portfolio manager at Karibe Investment Management. Somer previously worked at a rival firm where he produced an average annual return of 11% using a small-cap value strategy. On his first day at Karibe, the firm asks Somer to approve marketing materials that present the following performance disclosures. • Text which states: “Somer has generated average annual returns of 11%” • The 3-year performance of a composite of Karibe client accounts that follow a similar small-cap value strategy • A disclosure that the assumptions and calculations underlying the returns presented are publicly available on Karibe's public website To maintain relationships with clients and to attract prospective clients, Somer is active on social media. He posts a link to a news story about a famous athlete who recently paid substantial tax penalties after failing to properly report investment gains. In addition to the link Somer writes the comment: “A client of mine had similar gains, but because I kept proper records he faced no penalties. #HireAProfessional”. Some responses to the post suggest that readers mistakenly believe the athlete is Somer's client. Somer does not post a clarifying comment. Somer develops a new quantitative investment strategy that he describes in marketing materials. The description states that “the strategy is based on eight proven fundamental and technical factors, including well-known factors such as value and momentum as well as certain proprietary factors that have been back-tested. The strategy includes a dynamic weighting component to adjust the amount allocated to each factor based on prevailing market conditions.” The materials also highlight risks such as “the possibility that the model or its underlying factors may not work out of sample,” and “because the weight placed on various factors is dynamic, it may not be suitable for clients who seek steady exposure to certain factors.” One of Somer's clients agrees to use this strategy. When preparing the first performance report for this client, Somer discovers a coding error that reversed the client's weightings assigned to the value and momentum factors. Prior to joining Karibe, Somer purchased shares in a small-cap technology firm for his personal portfolio. When he started his new role Somers disclosed the position, which had quadrupled in value since the initial purchase and represented more than 5\% of his personal holdings. He had no intention to sell the shares and he recommended them to clients at Karibe, to whom he disclosed his ownership. After the successful launch of a new product resulted in additional large gains in the shares, Somer now recommends that clients place limit orders when purchasing the shares. Though he remains bullish on the stock he is concerned about the size of his personal position, which is now more than 15\% of his portfolio. One of his clients recently placed a limit order at $50 per share, which represents the highest bid in the market. The lowest offer is $52. Somer considers filling the client's order with some of his own shares at the $50 bid price. Question:When preparing the marketing materials for the quantitative strategy, did Somer comply with the standard related to communication with clients and prospective clients? Choices: A: Yes, B: No, because he did not identify the risk of coding errors, C: No, because he did not describe the investment process in detail.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: TOPIC: ETHICAL AND PROFESSIONAL STANDARDS TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Edgar Somer, CFA, was recently hired as a portfolio manager at Karibe Investment Management. Somer previously worked at a rival firm where he produced an average annual return of 11% using a small-cap value strategy. On his first day at Karibe, the firm asks Somer to approve marketing materials that present the following performance disclosures. • Text which states: “Somer has generated average annual returns of 11%” • The 3-year performance of a composite of Karibe client accounts that follow a similar small-cap value strategy • A disclosure that the assumptions and calculations underlying the returns presented are publicly available on Karibe's public website To maintain relationships with clients and to attract prospective clients, Somer is active on social media. He posts a link to a news story about a famous athlete who recently paid substantial tax penalties after failing to properly report investment gains. In addition to the link Somer writes the comment: “A client of mine had similar gains, but because I kept proper records he faced no penalties. #HireAProfessional”. Some responses to the post suggest that readers mistakenly believe the athlete is Somer's client. Somer does not post a clarifying comment. Somer develops a new quantitative investment strategy that he describes in marketing materials. The description states that “the strategy is based on eight proven fundamental and technical factors, including well-known factors such as value and momentum as well as certain proprietary factors that have been back-tested. The strategy includes a dynamic weighting component to adjust the amount allocated to each factor based on prevailing market conditions.” The materials also highlight risks such as “the possibility that the model or its underlying factors may not work out of sample,” and “because the weight placed on various factors is dynamic, it may not be suitable for clients who seek steady exposure to certain factors.” One of Somer's clients agrees to use this strategy. When preparing the first performance report for this client, Somer discovers a coding error that reversed the client's weightings assigned to the value and momentum factors. Prior to joining Karibe, Somer purchased shares in a small-cap technology firm for his personal portfolio. When he started his new role Somers disclosed the position, which had quadrupled in value since the initial purchase and represented more than 5\% of his personal holdings. He had no intention to sell the shares and he recommended them to clients at Karibe, to whom he disclosed his ownership. After the successful launch of a new product resulted in additional large gains in the shares, Somer now recommends that clients place limit orders when purchasing the shares. Though he remains bullish on the stock he is concerned about the size of his personal position, which is now more than 15\% of his portfolio. One of his clients recently placed a limit order at $50 per share, which represents the highest bid in the market. The lowest offer is $52. Somer considers filling the client's order with some of his own shares at the $50 bid price.; Question:If he fills the client's order for shares of the technology firm, would Somer violate the standard related to priority of transactions?; Answer Choices: A: No, B: Yes, because the client would be disadvantaged by the trade, C: Yes, because he would benefit personally from a trade undertaken for a client. Answer:

C

sample_test

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: TOPIC: ETHICAL AND PROFESSIONAL STANDARDS TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Edgar Somer, CFA, was recently hired as a portfolio manager at Karibe Investment Management. Somer previously worked at a rival firm where he produced an average annual return of 11% using a small-cap value strategy. On his first day at Karibe, the firm asks Somer to approve marketing materials that present the following performance disclosures. • Text which states: “Somer has generated average annual returns of 11%” • The 3-year performance of a composite of Karibe client accounts that follow a similar small-cap value strategy • A disclosure that the assumptions and calculations underlying the returns presented are publicly available on Karibe's public website To maintain relationships with clients and to attract prospective clients, Somer is active on social media. He posts a link to a news story about a famous athlete who recently paid substantial tax penalties after failing to properly report investment gains. In addition to the link Somer writes the comment: “A client of mine had similar gains, but because I kept proper records he faced no penalties. #HireAProfessional”. Some responses to the post suggest that readers mistakenly believe the athlete is Somer's client. Somer does not post a clarifying comment. Somer develops a new quantitative investment strategy that he describes in marketing materials. The description states that “the strategy is based on eight proven fundamental and technical factors, including well-known factors such as value and momentum as well as certain proprietary factors that have been back-tested. The strategy includes a dynamic weighting component to adjust the amount allocated to each factor based on prevailing market conditions.” The materials also highlight risks such as “the possibility that the model or its underlying factors may not work out of sample,” and “because the weight placed on various factors is dynamic, it may not be suitable for clients who seek steady exposure to certain factors.” One of Somer's clients agrees to use this strategy. When preparing the first performance report for this client, Somer discovers a coding error that reversed the client's weightings assigned to the value and momentum factors. Prior to joining Karibe, Somer purchased shares in a small-cap technology firm for his personal portfolio. When he started his new role Somers disclosed the position, which had quadrupled in value since the initial purchase and represented more than 5\% of his personal holdings. He had no intention to sell the shares and he recommended them to clients at Karibe, to whom he disclosed his ownership. After the successful launch of a new product resulted in additional large gains in the shares, Somer now recommends that clients place limit orders when purchasing the shares. Though he remains bullish on the stock he is concerned about the size of his personal position, which is now more than 15\% of his portfolio. One of his clients recently placed a limit order at $50 per share, which represents the highest bid in the market. The lowest offer is $52. Somer considers filling the client's order with some of his own shares at the $50 bid price.; Question:If he fills the client's order for shares of the technology firm, would Somer violate the standard related to priority of transactions?; Answer Choices: A: No, B: Yes, because the client would be disadvantaged by the trade, C: Yes, because he would benefit personally from a trade undertaken for a client. Answer:

Scenario: TOPIC: ETHICAL AND PROFESSIONAL STANDARDS TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Edgar Somer, CFA, was recently hired as a portfolio manager at Karibe Investment Management. Somer previously worked at a rival firm where he produced an average annual return of 11% using a small-cap value strategy. On his first day at Karibe, the firm asks Somer to approve marketing materials that present the following performance disclosures. • Text which states: “Somer has generated average annual returns of 11%” • The 3-year performance of a composite of Karibe client accounts that follow a similar small-cap value strategy • A disclosure that the assumptions and calculations underlying the returns presented are publicly available on Karibe's public website To maintain relationships with clients and to attract prospective clients, Somer is active on social media. He posts a link to a news story about a famous athlete who recently paid substantial tax penalties after failing to properly report investment gains. In addition to the link Somer writes the comment: “A client of mine had similar gains, but because I kept proper records he faced no penalties. #HireAProfessional”. Some responses to the post suggest that readers mistakenly believe the athlete is Somer's client. Somer does not post a clarifying comment. Somer develops a new quantitative investment strategy that he describes in marketing materials. The description states that “the strategy is based on eight proven fundamental and technical factors, including well-known factors such as value and momentum as well as certain proprietary factors that have been back-tested. The strategy includes a dynamic weighting component to adjust the amount allocated to each factor based on prevailing market conditions.” The materials also highlight risks such as “the possibility that the model or its underlying factors may not work out of sample,” and “because the weight placed on various factors is dynamic, it may not be suitable for clients who seek steady exposure to certain factors.” One of Somer's clients agrees to use this strategy. When preparing the first performance report for this client, Somer discovers a coding error that reversed the client's weightings assigned to the value and momentum factors. Prior to joining Karibe, Somer purchased shares in a small-cap technology firm for his personal portfolio. When he started his new role Somers disclosed the position, which had quadrupled in value since the initial purchase and represented more than 5\% of his personal holdings. He had no intention to sell the shares and he recommended them to clients at Karibe, to whom he disclosed his ownership. After the successful launch of a new product resulted in additional large gains in the shares, Somer now recommends that clients place limit orders when purchasing the shares. Though he remains bullish on the stock he is concerned about the size of his personal position, which is now more than 15\% of his portfolio. One of his clients recently placed a limit order at $50 per share, which represents the highest bid in the market. The lowest offer is $52. Somer considers filling the client's order with some of his own shares at the $50 bid price. Question:If he fills the client's order for shares of the technology firm, would Somer violate the standard related to priority of transactions? Choices: A: No, B: Yes, because the client would be disadvantaged by the trade, C: Yes, because he would benefit personally from a trade undertaken for a client.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: TOPIC: FIXED INCOME TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Alexander Apollo manages bond portfolios for high-net-worth clients. He is reviewing the corporate bond holdings in the following three portfolios: Portfolio 1: Investment-grade, non-callable, fixed-rate bonds Portfolio 2: Investment-grade, floating-rate bonds Portfolio 3: High-yield bonds with diversified call and coupon features Apollo calculates the expected 6-month excess return for corporate Bond A using information from Exhibit 1. He assumes the current spread duration will not change. |Exhibit 1| |Current OAS|120 bps| |Expected OAS in 6 months|130 bps| |Expected annual credit loss|0.30%| |Spread duration|2.0| Apollo invests globally in the high-yield credit markets. He can hedge clients' foreign exchange exposure into their domestic currency at minimal cost. He compares the credit markets shown in Exhibit 2 to evaluate expected performance in a near-term bullish global environment. |Exhibit 2| |Market 1||Market 2|Market 3| |Credit quality of outstanding high-yield bonds||High concentration of CCC-rated bonds| High concentration of BB-rated bonds|High concentration of CCC-rated bonds| |Expected supply of newly issued high-yield bonds|High|Low|Low| One of Apollo's clients prefers to invest in a structured product that offers exposure to financial sector debt and has more than one source of credit protection. He evaluates the appropriateness of the following three structured financial instruments: covered bonds, assetbacked securities, and collateralized debt obligations.; Question:For which portfolio is the spread duration likely to be closest to the modified duration?; Answer Choices: A: Portfolio 1, B: Portfolio 2, C: Portfolio 3. Answer:

A

sample_test

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: TOPIC: FIXED INCOME TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Alexander Apollo manages bond portfolios for high-net-worth clients. He is reviewing the corporate bond holdings in the following three portfolios: Portfolio 1: Investment-grade, non-callable, fixed-rate bonds Portfolio 2: Investment-grade, floating-rate bonds Portfolio 3: High-yield bonds with diversified call and coupon features Apollo calculates the expected 6-month excess return for corporate Bond A using information from Exhibit 1. He assumes the current spread duration will not change. |Exhibit 1| |Current OAS|120 bps| |Expected OAS in 6 months|130 bps| |Expected annual credit loss|0.30%| |Spread duration|2.0| Apollo invests globally in the high-yield credit markets. He can hedge clients' foreign exchange exposure into their domestic currency at minimal cost. He compares the credit markets shown in Exhibit 2 to evaluate expected performance in a near-term bullish global environment. |Exhibit 2| |Market 1||Market 2|Market 3| |Credit quality of outstanding high-yield bonds||High concentration of CCC-rated bonds| High concentration of BB-rated bonds|High concentration of CCC-rated bonds| |Expected supply of newly issued high-yield bonds|High|Low|Low| One of Apollo's clients prefers to invest in a structured product that offers exposure to financial sector debt and has more than one source of credit protection. He evaluates the appropriateness of the following three structured financial instruments: covered bonds, assetbacked securities, and collateralized debt obligations.; Question:For which portfolio is the spread duration likely to be closest to the modified duration?; Answer Choices: A: Portfolio 1, B: Portfolio 2, C: Portfolio 3. Answer:

Scenario: TOPIC: FIXED INCOME TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Alexander Apollo manages bond portfolios for high-net-worth clients. He is reviewing the corporate bond holdings in the following three portfolios: Portfolio 1: Investment-grade, non-callable, fixed-rate bonds Portfolio 2: Investment-grade, floating-rate bonds Portfolio 3: High-yield bonds with diversified call and coupon features Apollo calculates the expected 6-month excess return for corporate Bond A using information from Exhibit 1. He assumes the current spread duration will not change. |Exhibit 1| |Current OAS|120 bps| |Expected OAS in 6 months|130 bps| |Expected annual credit loss|0.30%| |Spread duration|2.0| Apollo invests globally in the high-yield credit markets. He can hedge clients' foreign exchange exposure into their domestic currency at minimal cost. He compares the credit markets shown in Exhibit 2 to evaluate expected performance in a near-term bullish global environment. |Exhibit 2| |Market 1||Market 2|Market 3| |Credit quality of outstanding high-yield bonds||High concentration of CCC-rated bonds| High concentration of BB-rated bonds|High concentration of CCC-rated bonds| |Expected supply of newly issued high-yield bonds|High|Low|Low| One of Apollo's clients prefers to invest in a structured product that offers exposure to financial sector debt and has more than one source of credit protection. He evaluates the appropriateness of the following three structured financial instruments: covered bonds, assetbacked securities, and collateralized debt obligations. Question:For which portfolio is the spread duration likely to be closest to the modified duration? Choices: A: Portfolio 1, B: Portfolio 2, C: Portfolio 3.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: TOPIC: FIXED INCOME TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Alexander Apollo manages bond portfolios for high-net-worth clients. He is reviewing the corporate bond holdings in the following three portfolios: Portfolio 1: Investment-grade, non-callable, fixed-rate bonds Portfolio 2: Investment-grade, floating-rate bonds Portfolio 3: High-yield bonds with diversified call and coupon features Apollo calculates the expected 6-month excess return for corporate Bond A using information from Exhibit 1. He assumes the current spread duration will not change. |Exhibit 1| |Current OAS|120 bps| |Expected OAS in 6 months|130 bps| |Expected annual credit loss|0.30%| |Spread duration|2.0| Apollo invests globally in the high-yield credit markets. He can hedge clients' foreign exchange exposure into their domestic currency at minimal cost. He compares the credit markets shown in Exhibit 2 to evaluate expected performance in a near-term bullish global environment. |Exhibit 2| |Market 1||Market 2|Market 3| |Credit quality of outstanding high-yield bonds||High concentration of CCC-rated bonds| High concentration of BB-rated bonds|High concentration of CCC-rated bonds| |Expected supply of newly issued high-yield bonds|High|Low|Low| One of Apollo's clients prefers to invest in a structured product that offers exposure to financial sector debt and has more than one source of credit protection. He evaluates the appropriateness of the following three structured financial instruments: covered bonds, assetbacked securities, and collateralized debt obligations.; Question:The expected 6-month excess return for Bond A is closest to:; Answer Choices: A: -0.05%., B: 0.25%., C: 0.65%.. Answer:

B

sample_test

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: TOPIC: FIXED INCOME TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Alexander Apollo manages bond portfolios for high-net-worth clients. He is reviewing the corporate bond holdings in the following three portfolios: Portfolio 1: Investment-grade, non-callable, fixed-rate bonds Portfolio 2: Investment-grade, floating-rate bonds Portfolio 3: High-yield bonds with diversified call and coupon features Apollo calculates the expected 6-month excess return for corporate Bond A using information from Exhibit 1. He assumes the current spread duration will not change. |Exhibit 1| |Current OAS|120 bps| |Expected OAS in 6 months|130 bps| |Expected annual credit loss|0.30%| |Spread duration|2.0| Apollo invests globally in the high-yield credit markets. He can hedge clients' foreign exchange exposure into their domestic currency at minimal cost. He compares the credit markets shown in Exhibit 2 to evaluate expected performance in a near-term bullish global environment. |Exhibit 2| |Market 1||Market 2|Market 3| |Credit quality of outstanding high-yield bonds||High concentration of CCC-rated bonds| High concentration of BB-rated bonds|High concentration of CCC-rated bonds| |Expected supply of newly issued high-yield bonds|High|Low|Low| One of Apollo's clients prefers to invest in a structured product that offers exposure to financial sector debt and has more than one source of credit protection. He evaluates the appropriateness of the following three structured financial instruments: covered bonds, assetbacked securities, and collateralized debt obligations.; Question:The expected 6-month excess return for Bond A is closest to:; Answer Choices: A: -0.05%., B: 0.25%., C: 0.65%.. Answer:

Scenario: TOPIC: FIXED INCOME TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Alexander Apollo manages bond portfolios for high-net-worth clients. He is reviewing the corporate bond holdings in the following three portfolios: Portfolio 1: Investment-grade, non-callable, fixed-rate bonds Portfolio 2: Investment-grade, floating-rate bonds Portfolio 3: High-yield bonds with diversified call and coupon features Apollo calculates the expected 6-month excess return for corporate Bond A using information from Exhibit 1. He assumes the current spread duration will not change. |Exhibit 1| |Current OAS|120 bps| |Expected OAS in 6 months|130 bps| |Expected annual credit loss|0.30%| |Spread duration|2.0| Apollo invests globally in the high-yield credit markets. He can hedge clients' foreign exchange exposure into their domestic currency at minimal cost. He compares the credit markets shown in Exhibit 2 to evaluate expected performance in a near-term bullish global environment. |Exhibit 2| |Market 1||Market 2|Market 3| |Credit quality of outstanding high-yield bonds||High concentration of CCC-rated bonds| High concentration of BB-rated bonds|High concentration of CCC-rated bonds| |Expected supply of newly issued high-yield bonds|High|Low|Low| One of Apollo's clients prefers to invest in a structured product that offers exposure to financial sector debt and has more than one source of credit protection. He evaluates the appropriateness of the following three structured financial instruments: covered bonds, assetbacked securities, and collateralized debt obligations. Question:The expected 6-month excess return for Bond A is closest to: Choices: A: -0.05%., B: 0.25%., C: 0.65%..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: TOPIC: FIXED INCOME TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Alexander Apollo manages bond portfolios for high-net-worth clients. He is reviewing the corporate bond holdings in the following three portfolios: Portfolio 1: Investment-grade, non-callable, fixed-rate bonds Portfolio 2: Investment-grade, floating-rate bonds Portfolio 3: High-yield bonds with diversified call and coupon features Apollo calculates the expected 6-month excess return for corporate Bond A using information from Exhibit 1. He assumes the current spread duration will not change. |Exhibit 1| |Current OAS|120 bps| |Expected OAS in 6 months|130 bps| |Expected annual credit loss|0.30%| |Spread duration|2.0| Apollo invests globally in the high-yield credit markets. He can hedge clients' foreign exchange exposure into their domestic currency at minimal cost. He compares the credit markets shown in Exhibit 2 to evaluate expected performance in a near-term bullish global environment. |Exhibit 2| |Market 1||Market 2|Market 3| |Credit quality of outstanding high-yield bonds||High concentration of CCC-rated bonds| High concentration of BB-rated bonds|High concentration of CCC-rated bonds| |Expected supply of newly issued high-yield bonds|High|Low|Low| One of Apollo's clients prefers to invest in a structured product that offers exposure to financial sector debt and has more than one source of credit protection. He evaluates the appropriateness of the following three structured financial instruments: covered bonds, assetbacked securities, and collateralized debt obligations.; Question:Which high-yield credit market in Exhibit 2 would be expected to perform best in the near term?; Answer Choices: A: Market 1, B: Market 2, C: Market 3. Answer:

C

sample_test

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: TOPIC: FIXED INCOME TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Alexander Apollo manages bond portfolios for high-net-worth clients. He is reviewing the corporate bond holdings in the following three portfolios: Portfolio 1: Investment-grade, non-callable, fixed-rate bonds Portfolio 2: Investment-grade, floating-rate bonds Portfolio 3: High-yield bonds with diversified call and coupon features Apollo calculates the expected 6-month excess return for corporate Bond A using information from Exhibit 1. He assumes the current spread duration will not change. |Exhibit 1| |Current OAS|120 bps| |Expected OAS in 6 months|130 bps| |Expected annual credit loss|0.30%| |Spread duration|2.0| Apollo invests globally in the high-yield credit markets. He can hedge clients' foreign exchange exposure into their domestic currency at minimal cost. He compares the credit markets shown in Exhibit 2 to evaluate expected performance in a near-term bullish global environment. |Exhibit 2| |Market 1||Market 2|Market 3| |Credit quality of outstanding high-yield bonds||High concentration of CCC-rated bonds| High concentration of BB-rated bonds|High concentration of CCC-rated bonds| |Expected supply of newly issued high-yield bonds|High|Low|Low| One of Apollo's clients prefers to invest in a structured product that offers exposure to financial sector debt and has more than one source of credit protection. He evaluates the appropriateness of the following three structured financial instruments: covered bonds, assetbacked securities, and collateralized debt obligations.; Question:Which high-yield credit market in Exhibit 2 would be expected to perform best in the near term?; Answer Choices: A: Market 1, B: Market 2, C: Market 3. Answer:

Scenario: TOPIC: FIXED INCOME TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Alexander Apollo manages bond portfolios for high-net-worth clients. He is reviewing the corporate bond holdings in the following three portfolios: Portfolio 1: Investment-grade, non-callable, fixed-rate bonds Portfolio 2: Investment-grade, floating-rate bonds Portfolio 3: High-yield bonds with diversified call and coupon features Apollo calculates the expected 6-month excess return for corporate Bond A using information from Exhibit 1. He assumes the current spread duration will not change. |Exhibit 1| |Current OAS|120 bps| |Expected OAS in 6 months|130 bps| |Expected annual credit loss|0.30%| |Spread duration|2.0| Apollo invests globally in the high-yield credit markets. He can hedge clients' foreign exchange exposure into their domestic currency at minimal cost. He compares the credit markets shown in Exhibit 2 to evaluate expected performance in a near-term bullish global environment. |Exhibit 2| |Market 1||Market 2|Market 3| |Credit quality of outstanding high-yield bonds||High concentration of CCC-rated bonds| High concentration of BB-rated bonds|High concentration of CCC-rated bonds| |Expected supply of newly issued high-yield bonds|High|Low|Low| One of Apollo's clients prefers to invest in a structured product that offers exposure to financial sector debt and has more than one source of credit protection. He evaluates the appropriateness of the following three structured financial instruments: covered bonds, assetbacked securities, and collateralized debt obligations. Question:Which high-yield credit market in Exhibit 2 would be expected to perform best in the near term? Choices: A: Market 1, B: Market 2, C: Market 3.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: TOPIC: FIXED INCOME TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Alexander Apollo manages bond portfolios for high-net-worth clients. He is reviewing the corporate bond holdings in the following three portfolios: Portfolio 1: Investment-grade, non-callable, fixed-rate bonds Portfolio 2: Investment-grade, floating-rate bonds Portfolio 3: High-yield bonds with diversified call and coupon features Apollo calculates the expected 6-month excess return for corporate Bond A using information from Exhibit 1. He assumes the current spread duration will not change. |Exhibit 1| |Current OAS|120 bps| |Expected OAS in 6 months|130 bps| |Expected annual credit loss|0.30%| |Spread duration|2.0| Apollo invests globally in the high-yield credit markets. He can hedge clients' foreign exchange exposure into their domestic currency at minimal cost. He compares the credit markets shown in Exhibit 2 to evaluate expected performance in a near-term bullish global environment. |Exhibit 2| |Market 1||Market 2|Market 3| |Credit quality of outstanding high-yield bonds||High concentration of CCC-rated bonds| High concentration of BB-rated bonds|High concentration of CCC-rated bonds| |Expected supply of newly issued high-yield bonds|High|Low|Low| One of Apollo's clients prefers to invest in a structured product that offers exposure to financial sector debt and has more than one source of credit protection. He evaluates the appropriateness of the following three structured financial instruments: covered bonds, assetbacked securities, and collateralized debt obligations.; Question:Which of the following structured financial instruments would best address the preferences of Apollo's client?; Answer Choices: A: Covered bonds, B: Asset-backed securities, C: Collateralized debt obligations. Answer:

A

sample_test

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: TOPIC: FIXED INCOME TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Alexander Apollo manages bond portfolios for high-net-worth clients. He is reviewing the corporate bond holdings in the following three portfolios: Portfolio 1: Investment-grade, non-callable, fixed-rate bonds Portfolio 2: Investment-grade, floating-rate bonds Portfolio 3: High-yield bonds with diversified call and coupon features Apollo calculates the expected 6-month excess return for corporate Bond A using information from Exhibit 1. He assumes the current spread duration will not change. |Exhibit 1| |Current OAS|120 bps| |Expected OAS in 6 months|130 bps| |Expected annual credit loss|0.30%| |Spread duration|2.0| Apollo invests globally in the high-yield credit markets. He can hedge clients' foreign exchange exposure into their domestic currency at minimal cost. He compares the credit markets shown in Exhibit 2 to evaluate expected performance in a near-term bullish global environment. |Exhibit 2| |Market 1||Market 2|Market 3| |Credit quality of outstanding high-yield bonds||High concentration of CCC-rated bonds| High concentration of BB-rated bonds|High concentration of CCC-rated bonds| |Expected supply of newly issued high-yield bonds|High|Low|Low| One of Apollo's clients prefers to invest in a structured product that offers exposure to financial sector debt and has more than one source of credit protection. He evaluates the appropriateness of the following three structured financial instruments: covered bonds, assetbacked securities, and collateralized debt obligations.; Question:Which of the following structured financial instruments would best address the preferences of Apollo's client?; Answer Choices: A: Covered bonds, B: Asset-backed securities, C: Collateralized debt obligations. Answer:

Scenario: TOPIC: FIXED INCOME TOTAL POINT VALUE OF THIS QUESTION SET IS 12 POINTS Alexander Apollo manages bond portfolios for high-net-worth clients. He is reviewing the corporate bond holdings in the following three portfolios: Portfolio 1: Investment-grade, non-callable, fixed-rate bonds Portfolio 2: Investment-grade, floating-rate bonds Portfolio 3: High-yield bonds with diversified call and coupon features Apollo calculates the expected 6-month excess return for corporate Bond A using information from Exhibit 1. He assumes the current spread duration will not change. |Exhibit 1| |Current OAS|120 bps| |Expected OAS in 6 months|130 bps| |Expected annual credit loss|0.30%| |Spread duration|2.0| Apollo invests globally in the high-yield credit markets. He can hedge clients' foreign exchange exposure into their domestic currency at minimal cost. He compares the credit markets shown in Exhibit 2 to evaluate expected performance in a near-term bullish global environment. |Exhibit 2| |Market 1||Market 2|Market 3| |Credit quality of outstanding high-yield bonds||High concentration of CCC-rated bonds| High concentration of BB-rated bonds|High concentration of CCC-rated bonds| |Expected supply of newly issued high-yield bonds|High|Low|Low| One of Apollo's clients prefers to invest in a structured product that offers exposure to financial sector debt and has more than one source of credit protection. He evaluates the appropriateness of the following three structured financial instruments: covered bonds, assetbacked securities, and collateralized debt obligations. Question:Which of the following structured financial instruments would best address the preferences of Apollo's client? Choices: A: Covered bonds, B: Asset-backed securities, C: Collateralized debt obligations.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. ; Question:To comply with CFA Institute Standards, when invited to attend the all-expenses paid seminar as a guest of Randolph Enterprises, McDougal should:; Answer Choices: A: not attend the seminar, B: accept Randolph's offer, C: decline Randolph's offer and attend the seminar as originally planned.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. ; Question:To comply with CFA Institute Standards, when invited to attend the all-expenses paid seminar as a guest of Randolph Enterprises, McDougal should:; Answer Choices: A: not attend the seminar, B: accept Randolph's offer, C: decline Randolph's offer and attend the seminar as originally planned.. Answer:

Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. Question:To comply with CFA Institute Standards, when invited to attend the all-expenses paid seminar as a guest of Randolph Enterprises, McDougal should: Choices: A: not attend the seminar, B: accept Randolph's offer, C: decline Randolph's offer and attend the seminar as originally planned..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. ; Question:To comply with CFA Institute Standards, McDougal's responsibility regarding Turkell's offer in Statement 1 is to:; Answer Choices: A: receive permission from the CFA Institute before she accepts the assignment., B: accept the assignment as there is no conflict of interest., C: obtain the employer's permission before accepting the referral fee arrangement.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. ; Question:To comply with CFA Institute Standards, McDougal's responsibility regarding Turkell's offer in Statement 1 is to:; Answer Choices: A: receive permission from the CFA Institute before she accepts the assignment., B: accept the assignment as there is no conflict of interest., C: obtain the employer's permission before accepting the referral fee arrangement.. Answer:

Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. Question:To comply with CFA Institute Standards, McDougal's responsibility regarding Turkell's offer in Statement 1 is to: Choices: A: receive permission from the CFA Institute before she accepts the assignment., B: accept the assignment as there is no conflict of interest., C: obtain the employer's permission before accepting the referral fee arrangement..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. ; Question:Did McDougal violate CFA Institute Standards when she changed her recommendation on Randolph Enterprises from a buy to a sell based on the conversations she overheard at the seminar?; Answer Choices: A: No., B: Yes, because she did not disclose that some of the analysis was opinion., C: Yes, because she did not have a reasonable basis for her recommendation.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. ; Question:Did McDougal violate CFA Institute Standards when she changed her recommendation on Randolph Enterprises from a buy to a sell based on the conversations she overheard at the seminar?; Answer Choices: A: No., B: Yes, because she did not disclose that some of the analysis was opinion., C: Yes, because she did not have a reasonable basis for her recommendation.. Answer:

Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. Question:Did McDougal violate CFA Institute Standards when she changed her recommendation on Randolph Enterprises from a buy to a sell based on the conversations she overheard at the seminar? Choices: A: No., B: Yes, because she did not disclose that some of the analysis was opinion., C: Yes, because she did not have a reasonable basis for her recommendation..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. ; Question:The portfolio managers who traded Randolph Enterprises based on the content of McDougal's report most likely violated which Standards?; Answer Choices: A: Fair Dealing., B: Priority of Transactions., C: Diligence and Reasonable Basis.. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. ; Question:The portfolio managers who traded Randolph Enterprises based on the content of McDougal's report most likely violated which Standards?; Answer Choices: A: Fair Dealing., B: Priority of Transactions., C: Diligence and Reasonable Basis.. Answer:

Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. Question:The portfolio managers who traded Randolph Enterprises based on the content of McDougal's report most likely violated which Standards? Choices: A: Fair Dealing., B: Priority of Transactions., C: Diligence and Reasonable Basis..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. ; Question:The purpose of Standard VI(C) Referral Fees is to help clients:; Answer Choices: A: evaluate the transparency of the compliance system., B: assess any conflicts of interest the fees may cause and evaluate the transparency of the compliance system., C: assess any conflicts of interest the fees may cause and evaluate the full cost of the services.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. ; Question:The purpose of Standard VI(C) Referral Fees is to help clients:; Answer Choices: A: evaluate the transparency of the compliance system., B: assess any conflicts of interest the fees may cause and evaluate the transparency of the compliance system., C: assess any conflicts of interest the fees may cause and evaluate the full cost of the services.. Answer:

Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. Question:The purpose of Standard VI(C) Referral Fees is to help clients: Choices: A: evaluate the transparency of the compliance system., B: assess any conflicts of interest the fees may cause and evaluate the transparency of the compliance system., C: assess any conflicts of interest the fees may cause and evaluate the full cost of the services..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. ; Question:If McDougal is found to be in serious violation of the Code and Standards and is sanctioned by the CFA Institute, she can be penalized by:; Answer Choices: A: a monetary fine., B: a monetary fine and/or private censure., C: private censure and/or suspension.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. ; Question:If McDougal is found to be in serious violation of the Code and Standards and is sanctioned by the CFA Institute, she can be penalized by:; Answer Choices: A: a monetary fine., B: a monetary fine and/or private censure., C: private censure and/or suspension.. Answer:

Scenario: Ruth McDougal, CFA, is a vice president of research with Cratter Finance, which covers the healthcare and medical device industry and specializes in research and valuation services. One of the companies McDougal follows, Randolph Enterprises, has developed a new treatment for a brain disorder associated with memory loss. The treatment has been in late-stage clinical trials for the last year. The majority of analysts who follow Randolph Enterprises believe that the new treatment, which uses a proprietary drug, will be successful. This consensus has caused the stock price of Randolph Enterprises to trade at a historical high. McDougal agrees with the prevailing sentiment, resulting in a strong buy recommendation on the company. McDougal plans to attend an industry seminar sponsored by the Institute on Aging. Randolph Industries invites her to attend as its guest with all expenses paid by Randolph. At the seminar, McDougal noted that the CEO of Turkell-Young, a public company and a major competitor of Randolph, is in attendance. While McDougal was familiar with Turkell-Young, it was not one of the firms that she actively covers. McDougal was introduced to Jay Turkell, the CEO of Turkell-Young. Turkell tells her that he was aggressively seeking acquisitions and offers to pay McDougal a referral fee for any recommendations she made that resulted in an acquisition for Turkell-Young. At a seminar gathering, McDougal overheard some attendees at another table mention that the results of the late-stage clinical trial for Randolph Enterprises, although not yet public, were disappointing. McDougal knew that if this news became public, Randolph Enterprises' stock price would fall, and Randolph Enterprises would then become a potential acquisition target for Turkell-Young. When McDougal returns to the office, she completes a research report on Randolph Enterprises that summarized the information she gathered at the seminar. She recommends that investors sell Randolph Enterprises shares and supports her conclusion with her opinion that too much value has been attributed to the outcome of the clinical trial for the new proprietary drug. McDougal circulates the Randolph Enterprises report internally for review. Upon reading the Randolph Enterprises draft report, two portfolio managers cancel their buy orders on Randolph Enterprises on behalf of important Cratter Finance clients. Later, McDougal's report on Randolph Enterprises is released to Cratter Finance's clients. The following day, it is publicly reported that Randolph Enterprises' late-stage clinical trial is not meeting expectations. McDougal's report is picked up in the press. The CEO of Turkell-Young calls McDougal and congratulates her on her work. Turkell asks if Turkell-Young could engage Cratter Finance for a special assignment to do a more in-depth analysis on Randolph Enterprises. Turkell says he is trying to assess the potential synergies Turkell-Young might have with Randolph Enterprises. Turkell executes an engagement letter with McDougal, who says she will complete the analysis in the next few weeks. Turkell-Young's engagement letter with Cratter Finance stipulates that if Turkell-Young acquires Randolph Enterprises based on McDougal's analysis, a referral fee will be paid directly to McDougal. McDougal is concerned about revealing the referral fee that she could receive from Turkell-Young to her supervisor. Cratter Finance might assume that her recent buy recommendation on Turkell-Young was biased. McDougal decides to remain silent about the arrangement. McDougal justifies her actions as she does not want her colleagues to doubt her independence and objectivity. Question:If McDougal is found to be in serious violation of the Code and Standards and is sanctioned by the CFA Institute, she can be penalized by: Choices: A: a monetary fine., B: a monetary fine and/or private censure., C: private censure and/or suspension..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. ; Question:Do the statements made by Ariusu and Tami comply with CFA Institute Standards?; Answer Choices: A: Yes., B: No, Statement 1 is not compliant., C: No, Statement 2 is not compliant.. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. ; Question:Do the statements made by Ariusu and Tami comply with CFA Institute Standards?; Answer Choices: A: Yes., B: No, Statement 1 is not compliant., C: No, Statement 2 is not compliant.. Answer:

Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. Question:Do the statements made by Ariusu and Tami comply with CFA Institute Standards? Choices: A: Yes., B: No, Statement 1 is not compliant., C: No, Statement 2 is not compliant..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. ; Question:Does Ariusu's calculation of the real estate investment group's performance since the inception of the fund comply with CFA Institute Standards?; Answer Choices: A: Yes., B: No; ignoring the lower performance since Ariusu's arrival does not provide a fair and complete presentation of investment performance., C: No; it would be considered false and misleading not to provide the risk-adjusted performance results since Ariusu's arrival.. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. ; Question:Does Ariusu's calculation of the real estate investment group's performance since the inception of the fund comply with CFA Institute Standards?; Answer Choices: A: Yes., B: No; ignoring the lower performance since Ariusu's arrival does not provide a fair and complete presentation of investment performance., C: No; it would be considered false and misleading not to provide the risk-adjusted performance results since Ariusu's arrival.. Answer:

Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. Question:Does Ariusu's calculation of the real estate investment group's performance since the inception of the fund comply with CFA Institute Standards? Choices: A: Yes., B: No; ignoring the lower performance since Ariusu's arrival does not provide a fair and complete presentation of investment performance., C: No; it would be considered false and misleading not to provide the risk-adjusted performance results since Ariusu's arrival..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. ; Question:Was Ariusu's presentation to Wheeler of the real estate fund's simulated investment returns in compliance with CFA Institute Standards?; Answer Choices: A: Yes., B: No, because reporting simulated returns does not provide a fair and complete presentation of performance information., C: No; CFA Institute Standards allow for simulated investment results only if the simulation is applied retroactively to investment performance.. Answer:

B

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. ; Question:Was Ariusu's presentation to Wheeler of the real estate fund's simulated investment returns in compliance with CFA Institute Standards?; Answer Choices: A: Yes., B: No, because reporting simulated returns does not provide a fair and complete presentation of performance information., C: No; CFA Institute Standards allow for simulated investment results only if the simulation is applied retroactively to investment performance.. Answer:

Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. Question:Was Ariusu's presentation to Wheeler of the real estate fund's simulated investment returns in compliance with CFA Institute Standards? Choices: A: Yes., B: No, because reporting simulated returns does not provide a fair and complete presentation of performance information., C: No; CFA Institute Standards allow for simulated investment results only if the simulation is applied retroactively to investment performance..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. ; Question:Is Ariusu's use of real estate performance data in his discussion with Wheeler in compliance with CFA Institute Standards?; Answer Choices: A: No., B: Yes, because Wheeler received permission from Tami to use the information., C: Yes, because CFA Institute Standards allow for knowledge gained at one employer to be used in discussions with other firms.. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. ; Question:Is Ariusu's use of real estate performance data in his discussion with Wheeler in compliance with CFA Institute Standards?; Answer Choices: A: No., B: Yes, because Wheeler received permission from Tami to use the information., C: Yes, because CFA Institute Standards allow for knowledge gained at one employer to be used in discussions with other firms.. Answer:

Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. Question:Is Ariusu's use of real estate performance data in his discussion with Wheeler in compliance with CFA Institute Standards? Choices: A: No., B: Yes, because Wheeler received permission from Tami to use the information., C: Yes, because CFA Institute Standards allow for knowledge gained at one employer to be used in discussions with other firms..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. ; Question:Would Wheeler's use of performance information to market Scrimm Capital's real estate fund to potential investors be in compliance with CFA Institute Standards?; Answer Choices: A: No., B: Yes, because Wheeler received permission from Tami to use the information., C: Yes, because Ariusu recommended the investments included in the performance data.. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. ; Question:Would Wheeler's use of performance information to market Scrimm Capital's real estate fund to potential investors be in compliance with CFA Institute Standards?; Answer Choices: A: No., B: Yes, because Wheeler received permission from Tami to use the information., C: Yes, because Ariusu recommended the investments included in the performance data.. Answer:

Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. Question:Would Wheeler's use of performance information to market Scrimm Capital's real estate fund to potential investors be in compliance with CFA Institute Standards? Choices: A: No., B: Yes, because Wheeler received permission from Tami to use the information., C: Yes, because Ariusu recommended the investments included in the performance data..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. ; Question:Regarding Tami's offer to Wheeler of additional compensation for soliciting investors for Scrimm Capital's real estate fund: To be in compliance with CFA Institute Standards, Wheeler most likely would need to:; Answer Choices: A: decline any additional compensation arrangements., B: decline any additional compensation arrangements and inform potential Pam Capital investors of the fee arrangement., C: inform potential Pam Capital investors of the fee arrangement and obtain permission from Pam Capital prior to accepting additional compensation from Tami.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. ; Question:Regarding Tami's offer to Wheeler of additional compensation for soliciting investors for Scrimm Capital's real estate fund: To be in compliance with CFA Institute Standards, Wheeler most likely would need to:; Answer Choices: A: decline any additional compensation arrangements., B: decline any additional compensation arrangements and inform potential Pam Capital investors of the fee arrangement., C: inform potential Pam Capital investors of the fee arrangement and obtain permission from Pam Capital prior to accepting additional compensation from Tami.. Answer:

Scenario: Rejie Ariusu recently passed Level II of the CFA exam. His firm, Scrimm Capital, is an asset manager for several closed-end, pooled investment funds for institutional investors. Ariusu works in the real estate investment division, identifying real estate investment opportunities that are presented to Scrimm Capital's real estate investment committee for approval. Other groups within the firm include a high-yield loan group and a small-cap equity growth fund. Scrimm Capital was founded in 2010. All three funds were established and started trading in that year. Ariusu joined the firm in 2013. Lahi Tami is the supervisor of the real estate investment group. Tami championed the adoption of the Global Investment Performance Standards (GIPS) for the real estate group, which promotes its adherence to GIPS in its marketing materials. Ariusu made the following statement to Tami: Statement 1: Scrimm Capital cannot claim compliance with GIPS standards for only certain asset classes that fall within the definition of the firm. Tami replied: Statement 2: The real estate investment group claims GIPS compliance because it is a distinct business entity. Tami requests the returns for each investment fund as of December 31, 2019, for an upcoming request for proposals from a large public pension plan. Ariusu calculates the investment performance of the real estate group and determines that the performance results are better when calculated over the lifetime of the fund (since 2010) than when calculated since his arrival to the group in 2013. Ariusu is concerned that the performance of the real estate investment group has declined since he joined the firm, and due to this, elects to report the performance of the real estate investment group since the fund's inception. At a professional networking event, Ariusu discusses the investment environment with Vert Wheeler of Pam Capital, an asset management firm in the same city as Scrimm. Ariusu describes to Wheeler the performance of the Scrimm real estate fund using investments he recommended, but not approved by the real estate investment committee. Wheeler does not know that the investment performance described by Ariusu is simulated. Wheeler is interested in Ariusu's investment ideas and invites him to share his work over dinner, where Ariusu shares the simulated investment returns for the Scrimm Capital real estate fund. Ariusu states that the real estate portfolio can be easily replicated by Pam Capital, showing Wheeler all of the investment positions held by the real estate fund, including those Ariusu recommended, but were not approved. Wheeler calls Tami the following day to propose a potential joint marketing opportunity, and to discuss his previous night's dinner conversation with Ariusu. Wheeler does not want to interfere with Pam Capital and asks for Tami's permission to use the investment information provided by Ariusu as a way to market the real estate investment vehicle to existing investors of Pam Capital with the potential for them to invest with Scrimm Capital. Tami tells Wheeler that Scrimm will pay a solicitation fee for each new investor Wheeler brings. Since Tami is eager to attract new investors, she agrees to share the investment performance information with Wheeler. Question:Regarding Tami's offer to Wheeler of additional compensation for soliciting investors for Scrimm Capital's real estate fund: To be in compliance with CFA Institute Standards, Wheeler most likely would need to: Choices: A: decline any additional compensation arrangements., B: decline any additional compensation arrangements and inform potential Pam Capital investors of the fee arrangement., C: inform potential Pam Capital investors of the fee arrangement and obtain permission from Pam Capital prior to accepting additional compensation from Tami..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% ; Question:Are Knight's statements regarding negative short-term rates correct?; Answer Choices: A: Yes., B: No, Statement 1 is incorrect., C: No, Statement 2 is incorrect.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% ; Question:Are Knight's statements regarding negative short-term rates correct?; Answer Choices: A: Yes., B: No, Statement 1 is incorrect., C: No, Statement 2 is incorrect.. Answer:

Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% Question:Are Knight's statements regarding negative short-term rates correct? Choices: A: Yes., B: No, Statement 1 is incorrect., C: No, Statement 2 is incorrect..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% ; Question:The target nominal policy rate for Sweden, as calculated using the Taylor rule, is closest to:; Answer Choices: A: 1.95%, B: 2.45%, C: 2.95%. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% ; Question:The target nominal policy rate for Sweden, as calculated using the Taylor rule, is closest to:; Answer Choices: A: 1.95%, B: 2.45%, C: 2.95%. Answer:

Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% Question:The target nominal policy rate for Sweden, as calculated using the Taylor rule, is closest to: Choices: A: 1.95%, B: 2.45%, C: 2.95%.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% ; Question:The total risk premium for the five-year US government bonds is closest to:; Answer Choices: A: 75 bps., B: 295 bps., C: 375 bps.. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% ; Question:The total risk premium for the five-year US government bonds is closest to:; Answer Choices: A: 75 bps., B: 295 bps., C: 375 bps.. Answer:

Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% Question:The total risk premium for the five-year US government bonds is closest to: Choices: A: 75 bps., B: 295 bps., C: 375 bps..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% ; Question:Perumal's disclosure concerning unique investment risks in emerging market bonds should include higher:; Answer Choices: A: interest rate volatility only., B: likelihood of default only., C: interest rate volatility and higher likelihood of default.. Answer:

B

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% ; Question:Perumal's disclosure concerning unique investment risks in emerging market bonds should include higher:; Answer Choices: A: interest rate volatility only., B: likelihood of default only., C: interest rate volatility and higher likelihood of default.. Answer:

Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% Question:Perumal's disclosure concerning unique investment risks in emerging market bonds should include higher: Choices: A: interest rate volatility only., B: likelihood of default only., C: interest rate volatility and higher likelihood of default..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% ; Question:The unsmoothed standard deviation for multifamily properties for the investment period is closest to:; Answer Choices: A: 12, B: 18, C: 24. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% ; Question:The unsmoothed standard deviation for multifamily properties for the investment period is closest to:; Answer Choices: A: 12, B: 18, C: 24. Answer:

Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% Question:The unsmoothed standard deviation for multifamily properties for the investment period is closest to: Choices: A: 12, B: 18, C: 24.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% ; Question:The expected return for a Multifamily Suburban Class C property is closest to:; Answer Choices: A: 8.7%, B: 9.9%, C: 12.1%. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% ; Question:The expected return for a Multifamily Suburban Class C property is closest to:; Answer Choices: A: 8.7%, B: 9.9%, C: 12.1%. Answer:

Scenario: Oxford Investments is a multinational investment management company that specializes in fixed income and real estate investments. Ron Perumal, a capital market analyst at Oxford, is helping to prepare the annual capital market outlook for clients. Perumal's task is to provide an investment outlook on five asset classes: 1) Danish bonds, 2) Swedish bonds, 3) US bonds, 4) emerging market bonds, and 5) direct real estate. Danish Bonds In forecasting the Danish bonds' expected rate of return, Perumal notices that Denmark is facing negative short-term rates. He wonders if negative short-term rates will impact market relationships and complicate traditional ways of forecasting rates. Perumal consults Josh Knight, a senior rate strategist at the firm. Knight makes the following general statements about negative interest rates and their implications. Statement 1: To calculate the expected rate of return of Danish bonds, the observed negative short-term rates shouldn't be used as the risk-free rate. Statement 2: For countries facing negative short-term rates, market relationships (e.g., the yield curve) are unlikely to be distorted by other concurrent monetary policy measures. Swedish Bonds To forecast Swedish bond return expectations, Perumal uses the Taylor rule and the data in Exhibit 1 to estimate the target nominal policy rate. Exhibit 1 Neutral real policy rate at trend growth and target inflation|1.2% Target inflation rate|0.5% Expected inflation rate|1.0% Trend real GDP growth rate|1.0% Expected real GDP growth rate|2.0% US Bonds Perumal then shifts his attention to forecasting US bond return expectations and begins estimating the risk premia for five-year US intermediate-term bonds using the data in Exhibit 2. Exhibit 2 One-year nominal risk-free interest rate|2.2% Term premium (five-year vs. one-year US government bond)|75 bps Five-year BB credit premium (over five-year US government bond)|50 bps Estimated liquidity premium on five-year corporate bonds|30 bps Emerging Market Bonds Perumal forecasts the expected return of emerging market bonds and identifies the unique risks of investing in these instruments. Direct Real Estate Lastly, Perumal forecasts the expected returns of investing in direct real estate. He analyzes the previous ten years of multifamily residential real estate returns data. He is concerned that the volatility of the observed returns reflects smoothing. Perumal uses a publicly traded REIT index to unsmooth the return stream and appropriately reflect the risk (as measured by standard deviation) of investing in multifamily residential real estate (the variance of the REIT index for the measurement period is 16; where λ equals 0.8. The data now unsmoothed, Perumal forecasts the expected rate of return over the next year for investing in multifamily residential real estate. He uses the information shown in Exhibit 3. Exhibit 3 Current cap rate for multifamily properties|5.5% NOI growth rate (real)|1.0% Inflation expectation|2.0% Expected cap rate for multifamily properties at end of period|5.3% Question:The expected return for a Multifamily Suburban Class C property is closest to: Choices: A: 8.7%, B: 9.9%, C: 12.1%.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Angelica Mukasa was recently hired as the CFO of Channel, a leading property and casualty insurer based in a developed European country. Channel is financially strong and the industry outlook is stable. Channel's profitability is high, primarily driven by robust underwriting results and favorable investment returns on its large reserve of assets. Channel's investment group is focused on matching premium reserve assets to projected policyholder claims, investing excess assets for growth. The reserve currently has sufficient surplus to support its liabilities. Regulators impose a maximum limit of 10% of total reserve assets (which include matched and excess assets) on non-publicly-traded securities. Mukasa's new assistant, Samiah Pai, presents three possible allocation options for total reserve assets, as shown in Exhibit 1. Exhibit 1 Asset Class Allocation 1 Allocation 2 Allocation 3 Equity|10%|25%|50% Fixed income|75%|50%|30% Real estate|5%|10%|0% Private equity|5%|10%|0% Cash|5%|5%|20% Total|100%|100%|100% Mukasa also serves as a trustee of Channel's defined-benefit pension plan. The plan is legally distinct from Channel's assets. The company has made contributions sufficient to maintain a fully funded status. It is a tax-exempt fund and must hold 20% of its assets in domestic government bonds in order to maintain its tax-exempt status. The plan's key objective is to meet current and future pension obligations. The plan's current allocation is 60% global equities, 20% domestic government bonds, 15% domestic corporate bonds, and 5% cash. Mukasa is considering adding a new asset class to Channel's pension fund to improve expected returns. Pai compiles data for three possible new asset classes in Exhibit 2. Exhibit 2 Asset Class|Sharpe Ratio|Correlation with Current Portfolio| Global real estate (REITs)|1.40|0.70 Emerging markets equities|1.75|0.70 Global high-yield corporate bonds|0.75|0.55 Several years later, Channel's pension plan has grown to over EUR 5 billion in assets. During that time period, the fund's allocation to illiquid assets (which includes direct real estate, private equity and infrastructure) increased to 30%. Channel maintains its leading position in the insurance industry and its balance sheet remains healthy. However, given heightened competition and increasingly soft pricing conditions, Channel staff members are researching possible cost-saving strategies for management consideration. While viewed as an unlikely choice by Mukasa, reducing Channel's cash contributions to its pension plan is among them. The plan is currently 90% funded. Pai reviews key benefits and constraints of large institutional investors in asset allocation that may be relevant to Channel's pension plan. He makes the following statements. Statement 1: A substantial allocation to illiquid assets may be inappropriate for Channel's pension plan if there is a significant probability of Channel lowering its contributions to the plan. Statement 2: Large institutional investors, such as Channel's pension plan, will likely benefit from deploying active equity strategies, due to manager access, liquidity, and trading cost advantages. Statement 3: Channel's pension fund may rebalance portfolio weights from the strategic allocation in order to exploit perceived opportunities based on its latest five-year capital market expectations. ; Question:Which allocation in Exhibit 1 is most appropriate for Channel's insurance reserve assets?; Answer Choices: A: Allocation 1., B: Allocation 2., C: Allocation 3.. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Angelica Mukasa was recently hired as the CFO of Channel, a leading property and casualty insurer based in a developed European country. Channel is financially strong and the industry outlook is stable. Channel's profitability is high, primarily driven by robust underwriting results and favorable investment returns on its large reserve of assets. Channel's investment group is focused on matching premium reserve assets to projected policyholder claims, investing excess assets for growth. The reserve currently has sufficient surplus to support its liabilities. Regulators impose a maximum limit of 10% of total reserve assets (which include matched and excess assets) on non-publicly-traded securities. Mukasa's new assistant, Samiah Pai, presents three possible allocation options for total reserve assets, as shown in Exhibit 1. Exhibit 1 Asset Class Allocation 1 Allocation 2 Allocation 3 Equity|10%|25%|50% Fixed income|75%|50%|30% Real estate|5%|10%|0% Private equity|5%|10%|0% Cash|5%|5%|20% Total|100%|100%|100% Mukasa also serves as a trustee of Channel's defined-benefit pension plan. The plan is legally distinct from Channel's assets. The company has made contributions sufficient to maintain a fully funded status. It is a tax-exempt fund and must hold 20% of its assets in domestic government bonds in order to maintain its tax-exempt status. The plan's key objective is to meet current and future pension obligations. The plan's current allocation is 60% global equities, 20% domestic government bonds, 15% domestic corporate bonds, and 5% cash. Mukasa is considering adding a new asset class to Channel's pension fund to improve expected returns. Pai compiles data for three possible new asset classes in Exhibit 2. Exhibit 2 Asset Class|Sharpe Ratio|Correlation with Current Portfolio| Global real estate (REITs)|1.40|0.70 Emerging markets equities|1.75|0.70 Global high-yield corporate bonds|0.75|0.55 Several years later, Channel's pension plan has grown to over EUR 5 billion in assets. During that time period, the fund's allocation to illiquid assets (which includes direct real estate, private equity and infrastructure) increased to 30%. Channel maintains its leading position in the insurance industry and its balance sheet remains healthy. However, given heightened competition and increasingly soft pricing conditions, Channel staff members are researching possible cost-saving strategies for management consideration. While viewed as an unlikely choice by Mukasa, reducing Channel's cash contributions to its pension plan is among them. The plan is currently 90% funded. Pai reviews key benefits and constraints of large institutional investors in asset allocation that may be relevant to Channel's pension plan. He makes the following statements. Statement 1: A substantial allocation to illiquid assets may be inappropriate for Channel's pension plan if there is a significant probability of Channel lowering its contributions to the plan. Statement 2: Large institutional investors, such as Channel's pension plan, will likely benefit from deploying active equity strategies, due to manager access, liquidity, and trading cost advantages. Statement 3: Channel's pension fund may rebalance portfolio weights from the strategic allocation in order to exploit perceived opportunities based on its latest five-year capital market expectations. ; Question:Which allocation in Exhibit 1 is most appropriate for Channel's insurance reserve assets?; Answer Choices: A: Allocation 1., B: Allocation 2., C: Allocation 3.. Answer:

Scenario: Angelica Mukasa was recently hired as the CFO of Channel, a leading property and casualty insurer based in a developed European country. Channel is financially strong and the industry outlook is stable. Channel's profitability is high, primarily driven by robust underwriting results and favorable investment returns on its large reserve of assets. Channel's investment group is focused on matching premium reserve assets to projected policyholder claims, investing excess assets for growth. The reserve currently has sufficient surplus to support its liabilities. Regulators impose a maximum limit of 10% of total reserve assets (which include matched and excess assets) on non-publicly-traded securities. Mukasa's new assistant, Samiah Pai, presents three possible allocation options for total reserve assets, as shown in Exhibit 1. Exhibit 1 Asset Class Allocation 1 Allocation 2 Allocation 3 Equity|10%|25%|50% Fixed income|75%|50%|30% Real estate|5%|10%|0% Private equity|5%|10%|0% Cash|5%|5%|20% Total|100%|100%|100% Mukasa also serves as a trustee of Channel's defined-benefit pension plan. The plan is legally distinct from Channel's assets. The company has made contributions sufficient to maintain a fully funded status. It is a tax-exempt fund and must hold 20% of its assets in domestic government bonds in order to maintain its tax-exempt status. The plan's key objective is to meet current and future pension obligations. The plan's current allocation is 60% global equities, 20% domestic government bonds, 15% domestic corporate bonds, and 5% cash. Mukasa is considering adding a new asset class to Channel's pension fund to improve expected returns. Pai compiles data for three possible new asset classes in Exhibit 2. Exhibit 2 Asset Class|Sharpe Ratio|Correlation with Current Portfolio| Global real estate (REITs)|1.40|0.70 Emerging markets equities|1.75|0.70 Global high-yield corporate bonds|0.75|0.55 Several years later, Channel's pension plan has grown to over EUR 5 billion in assets. During that time period, the fund's allocation to illiquid assets (which includes direct real estate, private equity and infrastructure) increased to 30%. Channel maintains its leading position in the insurance industry and its balance sheet remains healthy. However, given heightened competition and increasingly soft pricing conditions, Channel staff members are researching possible cost-saving strategies for management consideration. While viewed as an unlikely choice by Mukasa, reducing Channel's cash contributions to its pension plan is among them. The plan is currently 90% funded. Pai reviews key benefits and constraints of large institutional investors in asset allocation that may be relevant to Channel's pension plan. He makes the following statements. Statement 1: A substantial allocation to illiquid assets may be inappropriate for Channel's pension plan if there is a significant probability of Channel lowering its contributions to the plan. Statement 2: Large institutional investors, such as Channel's pension plan, will likely benefit from deploying active equity strategies, due to manager access, liquidity, and trading cost advantages. Statement 3: Channel's pension fund may rebalance portfolio weights from the strategic allocation in order to exploit perceived opportunities based on its latest five-year capital market expectations. Question:Which allocation in Exhibit 1 is most appropriate for Channel's insurance reserve assets? Choices: A: Allocation 1., B: Allocation 2., C: Allocation 3..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Angelica Mukasa was recently hired as the CFO of Channel, a leading property and casualty insurer based in a developed European country. Channel is financially strong and the industry outlook is stable. Channel's profitability is high, primarily driven by robust underwriting results and favorable investment returns on its large reserve of assets. Channel's investment group is focused on matching premium reserve assets to projected policyholder claims, investing excess assets for growth. The reserve currently has sufficient surplus to support its liabilities. Regulators impose a maximum limit of 10% of total reserve assets (which include matched and excess assets) on non-publicly-traded securities. Mukasa's new assistant, Samiah Pai, presents three possible allocation options for total reserve assets, as shown in Exhibit 1. Exhibit 1 Asset Class Allocation 1 Allocation 2 Allocation 3 Equity|10%|25%|50% Fixed income|75%|50%|30% Real estate|5%|10%|0% Private equity|5%|10%|0% Cash|5%|5%|20% Total|100%|100%|100% Mukasa also serves as a trustee of Channel's defined-benefit pension plan. The plan is legally distinct from Channel's assets. The company has made contributions sufficient to maintain a fully funded status. It is a tax-exempt fund and must hold 20% of its assets in domestic government bonds in order to maintain its tax-exempt status. The plan's key objective is to meet current and future pension obligations. The plan's current allocation is 60% global equities, 20% domestic government bonds, 15% domestic corporate bonds, and 5% cash. Mukasa is considering adding a new asset class to Channel's pension fund to improve expected returns. Pai compiles data for three possible new asset classes in Exhibit 2. Exhibit 2 Asset Class|Sharpe Ratio|Correlation with Current Portfolio| Global real estate (REITs)|1.40|0.70 Emerging markets equities|1.75|0.70 Global high-yield corporate bonds|0.75|0.55 Several years later, Channel's pension plan has grown to over EUR 5 billion in assets. During that time period, the fund's allocation to illiquid assets (which includes direct real estate, private equity and infrastructure) increased to 30%. Channel maintains its leading position in the insurance industry and its balance sheet remains healthy. However, given heightened competition and increasingly soft pricing conditions, Channel staff members are researching possible cost-saving strategies for management consideration. While viewed as an unlikely choice by Mukasa, reducing Channel's cash contributions to its pension plan is among them. The plan is currently 90% funded. Pai reviews key benefits and constraints of large institutional investors in asset allocation that may be relevant to Channel's pension plan. He makes the following statements. Statement 1: A substantial allocation to illiquid assets may be inappropriate for Channel's pension plan if there is a significant probability of Channel lowering its contributions to the plan. Statement 2: Large institutional investors, such as Channel's pension plan, will likely benefit from deploying active equity strategies, due to manager access, liquidity, and trading cost advantages. Statement 3: Channel's pension fund may rebalance portfolio weights from the strategic allocation in order to exploit perceived opportunities based on its latest five-year capital market expectations. ; Question:Which approach is least relevant to a strategic allocation for Channel's pension plan?; Answer Choices: A: Shortfall risk., B: Heuristic approach., C: Surplus optimization.. Answer:

B

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Angelica Mukasa was recently hired as the CFO of Channel, a leading property and casualty insurer based in a developed European country. Channel is financially strong and the industry outlook is stable. Channel's profitability is high, primarily driven by robust underwriting results and favorable investment returns on its large reserve of assets. Channel's investment group is focused on matching premium reserve assets to projected policyholder claims, investing excess assets for growth. The reserve currently has sufficient surplus to support its liabilities. Regulators impose a maximum limit of 10% of total reserve assets (which include matched and excess assets) on non-publicly-traded securities. Mukasa's new assistant, Samiah Pai, presents three possible allocation options for total reserve assets, as shown in Exhibit 1. Exhibit 1 Asset Class Allocation 1 Allocation 2 Allocation 3 Equity|10%|25%|50% Fixed income|75%|50%|30% Real estate|5%|10%|0% Private equity|5%|10%|0% Cash|5%|5%|20% Total|100%|100%|100% Mukasa also serves as a trustee of Channel's defined-benefit pension plan. The plan is legally distinct from Channel's assets. The company has made contributions sufficient to maintain a fully funded status. It is a tax-exempt fund and must hold 20% of its assets in domestic government bonds in order to maintain its tax-exempt status. The plan's key objective is to meet current and future pension obligations. The plan's current allocation is 60% global equities, 20% domestic government bonds, 15% domestic corporate bonds, and 5% cash. Mukasa is considering adding a new asset class to Channel's pension fund to improve expected returns. Pai compiles data for three possible new asset classes in Exhibit 2. Exhibit 2 Asset Class|Sharpe Ratio|Correlation with Current Portfolio| Global real estate (REITs)|1.40|0.70 Emerging markets equities|1.75|0.70 Global high-yield corporate bonds|0.75|0.55 Several years later, Channel's pension plan has grown to over EUR 5 billion in assets. During that time period, the fund's allocation to illiquid assets (which includes direct real estate, private equity and infrastructure) increased to 30%. Channel maintains its leading position in the insurance industry and its balance sheet remains healthy. However, given heightened competition and increasingly soft pricing conditions, Channel staff members are researching possible cost-saving strategies for management consideration. While viewed as an unlikely choice by Mukasa, reducing Channel's cash contributions to its pension plan is among them. The plan is currently 90% funded. Pai reviews key benefits and constraints of large institutional investors in asset allocation that may be relevant to Channel's pension plan. He makes the following statements. Statement 1: A substantial allocation to illiquid assets may be inappropriate for Channel's pension plan if there is a significant probability of Channel lowering its contributions to the plan. Statement 2: Large institutional investors, such as Channel's pension plan, will likely benefit from deploying active equity strategies, due to manager access, liquidity, and trading cost advantages. Statement 3: Channel's pension fund may rebalance portfolio weights from the strategic allocation in order to exploit perceived opportunities based on its latest five-year capital market expectations. ; Question:Which approach is least relevant to a strategic allocation for Channel's pension plan?; Answer Choices: A: Shortfall risk., B: Heuristic approach., C: Surplus optimization.. Answer:

Scenario: Angelica Mukasa was recently hired as the CFO of Channel, a leading property and casualty insurer based in a developed European country. Channel is financially strong and the industry outlook is stable. Channel's profitability is high, primarily driven by robust underwriting results and favorable investment returns on its large reserve of assets. Channel's investment group is focused on matching premium reserve assets to projected policyholder claims, investing excess assets for growth. The reserve currently has sufficient surplus to support its liabilities. Regulators impose a maximum limit of 10% of total reserve assets (which include matched and excess assets) on non-publicly-traded securities. Mukasa's new assistant, Samiah Pai, presents three possible allocation options for total reserve assets, as shown in Exhibit 1. Exhibit 1 Asset Class Allocation 1 Allocation 2 Allocation 3 Equity|10%|25%|50% Fixed income|75%|50%|30% Real estate|5%|10%|0% Private equity|5%|10%|0% Cash|5%|5%|20% Total|100%|100%|100% Mukasa also serves as a trustee of Channel's defined-benefit pension plan. The plan is legally distinct from Channel's assets. The company has made contributions sufficient to maintain a fully funded status. It is a tax-exempt fund and must hold 20% of its assets in domestic government bonds in order to maintain its tax-exempt status. The plan's key objective is to meet current and future pension obligations. The plan's current allocation is 60% global equities, 20% domestic government bonds, 15% domestic corporate bonds, and 5% cash. Mukasa is considering adding a new asset class to Channel's pension fund to improve expected returns. Pai compiles data for three possible new asset classes in Exhibit 2. Exhibit 2 Asset Class|Sharpe Ratio|Correlation with Current Portfolio| Global real estate (REITs)|1.40|0.70 Emerging markets equities|1.75|0.70 Global high-yield corporate bonds|0.75|0.55 Several years later, Channel's pension plan has grown to over EUR 5 billion in assets. During that time period, the fund's allocation to illiquid assets (which includes direct real estate, private equity and infrastructure) increased to 30%. Channel maintains its leading position in the insurance industry and its balance sheet remains healthy. However, given heightened competition and increasingly soft pricing conditions, Channel staff members are researching possible cost-saving strategies for management consideration. While viewed as an unlikely choice by Mukasa, reducing Channel's cash contributions to its pension plan is among them. The plan is currently 90% funded. Pai reviews key benefits and constraints of large institutional investors in asset allocation that may be relevant to Channel's pension plan. He makes the following statements. Statement 1: A substantial allocation to illiquid assets may be inappropriate for Channel's pension plan if there is a significant probability of Channel lowering its contributions to the plan. Statement 2: Large institutional investors, such as Channel's pension plan, will likely benefit from deploying active equity strategies, due to manager access, liquidity, and trading cost advantages. Statement 3: Channel's pension fund may rebalance portfolio weights from the strategic allocation in order to exploit perceived opportunities based on its latest five-year capital market expectations. Question:Which approach is least relevant to a strategic allocation for Channel's pension plan? Choices: A: Shortfall risk., B: Heuristic approach., C: Surplus optimization..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Angelica Mukasa was recently hired as the CFO of Channel, a leading property and casualty insurer based in a developed European country. Channel is financially strong and the industry outlook is stable. Channel's profitability is high, primarily driven by robust underwriting results and favorable investment returns on its large reserve of assets. Channel's investment group is focused on matching premium reserve assets to projected policyholder claims, investing excess assets for growth. The reserve currently has sufficient surplus to support its liabilities. Regulators impose a maximum limit of 10% of total reserve assets (which include matched and excess assets) on non-publicly-traded securities. Mukasa's new assistant, Samiah Pai, presents three possible allocation options for total reserve assets, as shown in Exhibit 1. Exhibit 1 Asset Class Allocation 1 Allocation 2 Allocation 3 Equity|10%|25%|50% Fixed income|75%|50%|30% Real estate|5%|10%|0% Private equity|5%|10%|0% Cash|5%|5%|20% Total|100%|100%|100% Mukasa also serves as a trustee of Channel's defined-benefit pension plan. The plan is legally distinct from Channel's assets. The company has made contributions sufficient to maintain a fully funded status. It is a tax-exempt fund and must hold 20% of its assets in domestic government bonds in order to maintain its tax-exempt status. The plan's key objective is to meet current and future pension obligations. The plan's current allocation is 60% global equities, 20% domestic government bonds, 15% domestic corporate bonds, and 5% cash. Mukasa is considering adding a new asset class to Channel's pension fund to improve expected returns. Pai compiles data for three possible new asset classes in Exhibit 2. Exhibit 2 Asset Class|Sharpe Ratio|Correlation with Current Portfolio| Global real estate (REITs)|1.40|0.70 Emerging markets equities|1.75|0.70 Global high-yield corporate bonds|0.75|0.55 Several years later, Channel's pension plan has grown to over EUR 5 billion in assets. During that time period, the fund's allocation to illiquid assets (which includes direct real estate, private equity and infrastructure) increased to 30%. Channel maintains its leading position in the insurance industry and its balance sheet remains healthy. However, given heightened competition and increasingly soft pricing conditions, Channel staff members are researching possible cost-saving strategies for management consideration. While viewed as an unlikely choice by Mukasa, reducing Channel's cash contributions to its pension plan is among them. The plan is currently 90% funded. Pai reviews key benefits and constraints of large institutional investors in asset allocation that may be relevant to Channel's pension plan. He makes the following statements. Statement 1: A substantial allocation to illiquid assets may be inappropriate for Channel's pension plan if there is a significant probability of Channel lowering its contributions to the plan. Statement 2: Large institutional investors, such as Channel's pension plan, will likely benefit from deploying active equity strategies, due to manager access, liquidity, and trading cost advantages. Statement 3: Channel's pension fund may rebalance portfolio weights from the strategic allocation in order to exploit perceived opportunities based on its latest five-year capital market expectations. ; Question:Which asset class in Exhibit 2 is most appropriate for inclusion by Channel's pension plan?; Answer Choices: A: Global real estate (REITs)., B: Emerging markets equities., C: Global high-yield corporate bonds.. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Angelica Mukasa was recently hired as the CFO of Channel, a leading property and casualty insurer based in a developed European country. Channel is financially strong and the industry outlook is stable. Channel's profitability is high, primarily driven by robust underwriting results and favorable investment returns on its large reserve of assets. Channel's investment group is focused on matching premium reserve assets to projected policyholder claims, investing excess assets for growth. The reserve currently has sufficient surplus to support its liabilities. Regulators impose a maximum limit of 10% of total reserve assets (which include matched and excess assets) on non-publicly-traded securities. Mukasa's new assistant, Samiah Pai, presents three possible allocation options for total reserve assets, as shown in Exhibit 1. Exhibit 1 Asset Class Allocation 1 Allocation 2 Allocation 3 Equity|10%|25%|50% Fixed income|75%|50%|30% Real estate|5%|10%|0% Private equity|5%|10%|0% Cash|5%|5%|20% Total|100%|100%|100% Mukasa also serves as a trustee of Channel's defined-benefit pension plan. The plan is legally distinct from Channel's assets. The company has made contributions sufficient to maintain a fully funded status. It is a tax-exempt fund and must hold 20% of its assets in domestic government bonds in order to maintain its tax-exempt status. The plan's key objective is to meet current and future pension obligations. The plan's current allocation is 60% global equities, 20% domestic government bonds, 15% domestic corporate bonds, and 5% cash. Mukasa is considering adding a new asset class to Channel's pension fund to improve expected returns. Pai compiles data for three possible new asset classes in Exhibit 2. Exhibit 2 Asset Class|Sharpe Ratio|Correlation with Current Portfolio| Global real estate (REITs)|1.40|0.70 Emerging markets equities|1.75|0.70 Global high-yield corporate bonds|0.75|0.55 Several years later, Channel's pension plan has grown to over EUR 5 billion in assets. During that time period, the fund's allocation to illiquid assets (which includes direct real estate, private equity and infrastructure) increased to 30%. Channel maintains its leading position in the insurance industry and its balance sheet remains healthy. However, given heightened competition and increasingly soft pricing conditions, Channel staff members are researching possible cost-saving strategies for management consideration. While viewed as an unlikely choice by Mukasa, reducing Channel's cash contributions to its pension plan is among them. The plan is currently 90% funded. Pai reviews key benefits and constraints of large institutional investors in asset allocation that may be relevant to Channel's pension plan. He makes the following statements. Statement 1: A substantial allocation to illiquid assets may be inappropriate for Channel's pension plan if there is a significant probability of Channel lowering its contributions to the plan. Statement 2: Large institutional investors, such as Channel's pension plan, will likely benefit from deploying active equity strategies, due to manager access, liquidity, and trading cost advantages. Statement 3: Channel's pension fund may rebalance portfolio weights from the strategic allocation in order to exploit perceived opportunities based on its latest five-year capital market expectations. ; Question:Which asset class in Exhibit 2 is most appropriate for inclusion by Channel's pension plan?; Answer Choices: A: Global real estate (REITs)., B: Emerging markets equities., C: Global high-yield corporate bonds.. Answer:

Scenario: Angelica Mukasa was recently hired as the CFO of Channel, a leading property and casualty insurer based in a developed European country. Channel is financially strong and the industry outlook is stable. Channel's profitability is high, primarily driven by robust underwriting results and favorable investment returns on its large reserve of assets. Channel's investment group is focused on matching premium reserve assets to projected policyholder claims, investing excess assets for growth. The reserve currently has sufficient surplus to support its liabilities. Regulators impose a maximum limit of 10% of total reserve assets (which include matched and excess assets) on non-publicly-traded securities. Mukasa's new assistant, Samiah Pai, presents three possible allocation options for total reserve assets, as shown in Exhibit 1. Exhibit 1 Asset Class Allocation 1 Allocation 2 Allocation 3 Equity|10%|25%|50% Fixed income|75%|50%|30% Real estate|5%|10%|0% Private equity|5%|10%|0% Cash|5%|5%|20% Total|100%|100%|100% Mukasa also serves as a trustee of Channel's defined-benefit pension plan. The plan is legally distinct from Channel's assets. The company has made contributions sufficient to maintain a fully funded status. It is a tax-exempt fund and must hold 20% of its assets in domestic government bonds in order to maintain its tax-exempt status. The plan's key objective is to meet current and future pension obligations. The plan's current allocation is 60% global equities, 20% domestic government bonds, 15% domestic corporate bonds, and 5% cash. Mukasa is considering adding a new asset class to Channel's pension fund to improve expected returns. Pai compiles data for three possible new asset classes in Exhibit 2. Exhibit 2 Asset Class|Sharpe Ratio|Correlation with Current Portfolio| Global real estate (REITs)|1.40|0.70 Emerging markets equities|1.75|0.70 Global high-yield corporate bonds|0.75|0.55 Several years later, Channel's pension plan has grown to over EUR 5 billion in assets. During that time period, the fund's allocation to illiquid assets (which includes direct real estate, private equity and infrastructure) increased to 30%. Channel maintains its leading position in the insurance industry and its balance sheet remains healthy. However, given heightened competition and increasingly soft pricing conditions, Channel staff members are researching possible cost-saving strategies for management consideration. While viewed as an unlikely choice by Mukasa, reducing Channel's cash contributions to its pension plan is among them. The plan is currently 90% funded. Pai reviews key benefits and constraints of large institutional investors in asset allocation that may be relevant to Channel's pension plan. He makes the following statements. Statement 1: A substantial allocation to illiquid assets may be inappropriate for Channel's pension plan if there is a significant probability of Channel lowering its contributions to the plan. Statement 2: Large institutional investors, such as Channel's pension plan, will likely benefit from deploying active equity strategies, due to manager access, liquidity, and trading cost advantages. Statement 3: Channel's pension fund may rebalance portfolio weights from the strategic allocation in order to exploit perceived opportunities based on its latest five-year capital market expectations. Question:Which asset class in Exhibit 2 is most appropriate for inclusion by Channel's pension plan? Choices: A: Global real estate (REITs)., B: Emerging markets equities., C: Global high-yield corporate bonds..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Angelica Mukasa was recently hired as the CFO of Channel, a leading property and casualty insurer based in a developed European country. Channel is financially strong and the industry outlook is stable. Channel's profitability is high, primarily driven by robust underwriting results and favorable investment returns on its large reserve of assets. Channel's investment group is focused on matching premium reserve assets to projected policyholder claims, investing excess assets for growth. The reserve currently has sufficient surplus to support its liabilities. Regulators impose a maximum limit of 10% of total reserve assets (which include matched and excess assets) on non-publicly-traded securities. Mukasa's new assistant, Samiah Pai, presents three possible allocation options for total reserve assets, as shown in Exhibit 1. Exhibit 1 Asset Class Allocation 1 Allocation 2 Allocation 3 Equity|10%|25%|50% Fixed income|75%|50%|30% Real estate|5%|10%|0% Private equity|5%|10%|0% Cash|5%|5%|20% Total|100%|100%|100% Mukasa also serves as a trustee of Channel's defined-benefit pension plan. The plan is legally distinct from Channel's assets. The company has made contributions sufficient to maintain a fully funded status. It is a tax-exempt fund and must hold 20% of its assets in domestic government bonds in order to maintain its tax-exempt status. The plan's key objective is to meet current and future pension obligations. The plan's current allocation is 60% global equities, 20% domestic government bonds, 15% domestic corporate bonds, and 5% cash. Mukasa is considering adding a new asset class to Channel's pension fund to improve expected returns. Pai compiles data for three possible new asset classes in Exhibit 2. Exhibit 2 Asset Class|Sharpe Ratio|Correlation with Current Portfolio| Global real estate (REITs)|1.40|0.70 Emerging markets equities|1.75|0.70 Global high-yield corporate bonds|0.75|0.55 Several years later, Channel's pension plan has grown to over EUR 5 billion in assets. During that time period, the fund's allocation to illiquid assets (which includes direct real estate, private equity and infrastructure) increased to 30%. Channel maintains its leading position in the insurance industry and its balance sheet remains healthy. However, given heightened competition and increasingly soft pricing conditions, Channel staff members are researching possible cost-saving strategies for management consideration. While viewed as an unlikely choice by Mukasa, reducing Channel's cash contributions to its pension plan is among them. The plan is currently 90% funded. Pai reviews key benefits and constraints of large institutional investors in asset allocation that may be relevant to Channel's pension plan. He makes the following statements. Statement 1: A substantial allocation to illiquid assets may be inappropriate for Channel's pension plan if there is a significant probability of Channel lowering its contributions to the plan. Statement 2: Large institutional investors, such as Channel's pension plan, will likely benefit from deploying active equity strategies, due to manager access, liquidity, and trading cost advantages. Statement 3: Channel's pension fund may rebalance portfolio weights from the strategic allocation in order to exploit perceived opportunities based on its latest five-year capital market expectations. ; Question:Which of Pai's statements is most appropriate for the pension plan, given Channel's current market circumstances?; Answer Choices: A: Statement 1., B: Statement 2., C: Statement 3.. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Angelica Mukasa was recently hired as the CFO of Channel, a leading property and casualty insurer based in a developed European country. Channel is financially strong and the industry outlook is stable. Channel's profitability is high, primarily driven by robust underwriting results and favorable investment returns on its large reserve of assets. Channel's investment group is focused on matching premium reserve assets to projected policyholder claims, investing excess assets for growth. The reserve currently has sufficient surplus to support its liabilities. Regulators impose a maximum limit of 10% of total reserve assets (which include matched and excess assets) on non-publicly-traded securities. Mukasa's new assistant, Samiah Pai, presents three possible allocation options for total reserve assets, as shown in Exhibit 1. Exhibit 1 Asset Class Allocation 1 Allocation 2 Allocation 3 Equity|10%|25%|50% Fixed income|75%|50%|30% Real estate|5%|10%|0% Private equity|5%|10%|0% Cash|5%|5%|20% Total|100%|100%|100% Mukasa also serves as a trustee of Channel's defined-benefit pension plan. The plan is legally distinct from Channel's assets. The company has made contributions sufficient to maintain a fully funded status. It is a tax-exempt fund and must hold 20% of its assets in domestic government bonds in order to maintain its tax-exempt status. The plan's key objective is to meet current and future pension obligations. The plan's current allocation is 60% global equities, 20% domestic government bonds, 15% domestic corporate bonds, and 5% cash. Mukasa is considering adding a new asset class to Channel's pension fund to improve expected returns. Pai compiles data for three possible new asset classes in Exhibit 2. Exhibit 2 Asset Class|Sharpe Ratio|Correlation with Current Portfolio| Global real estate (REITs)|1.40|0.70 Emerging markets equities|1.75|0.70 Global high-yield corporate bonds|0.75|0.55 Several years later, Channel's pension plan has grown to over EUR 5 billion in assets. During that time period, the fund's allocation to illiquid assets (which includes direct real estate, private equity and infrastructure) increased to 30%. Channel maintains its leading position in the insurance industry and its balance sheet remains healthy. However, given heightened competition and increasingly soft pricing conditions, Channel staff members are researching possible cost-saving strategies for management consideration. While viewed as an unlikely choice by Mukasa, reducing Channel's cash contributions to its pension plan is among them. The plan is currently 90% funded. Pai reviews key benefits and constraints of large institutional investors in asset allocation that may be relevant to Channel's pension plan. He makes the following statements. Statement 1: A substantial allocation to illiquid assets may be inappropriate for Channel's pension plan if there is a significant probability of Channel lowering its contributions to the plan. Statement 2: Large institutional investors, such as Channel's pension plan, will likely benefit from deploying active equity strategies, due to manager access, liquidity, and trading cost advantages. Statement 3: Channel's pension fund may rebalance portfolio weights from the strategic allocation in order to exploit perceived opportunities based on its latest five-year capital market expectations. ; Question:Which of Pai's statements is most appropriate for the pension plan, given Channel's current market circumstances?; Answer Choices: A: Statement 1., B: Statement 2., C: Statement 3.. Answer:

Scenario: Angelica Mukasa was recently hired as the CFO of Channel, a leading property and casualty insurer based in a developed European country. Channel is financially strong and the industry outlook is stable. Channel's profitability is high, primarily driven by robust underwriting results and favorable investment returns on its large reserve of assets. Channel's investment group is focused on matching premium reserve assets to projected policyholder claims, investing excess assets for growth. The reserve currently has sufficient surplus to support its liabilities. Regulators impose a maximum limit of 10% of total reserve assets (which include matched and excess assets) on non-publicly-traded securities. Mukasa's new assistant, Samiah Pai, presents three possible allocation options for total reserve assets, as shown in Exhibit 1. Exhibit 1 Asset Class Allocation 1 Allocation 2 Allocation 3 Equity|10%|25%|50% Fixed income|75%|50%|30% Real estate|5%|10%|0% Private equity|5%|10%|0% Cash|5%|5%|20% Total|100%|100%|100% Mukasa also serves as a trustee of Channel's defined-benefit pension plan. The plan is legally distinct from Channel's assets. The company has made contributions sufficient to maintain a fully funded status. It is a tax-exempt fund and must hold 20% of its assets in domestic government bonds in order to maintain its tax-exempt status. The plan's key objective is to meet current and future pension obligations. The plan's current allocation is 60% global equities, 20% domestic government bonds, 15% domestic corporate bonds, and 5% cash. Mukasa is considering adding a new asset class to Channel's pension fund to improve expected returns. Pai compiles data for three possible new asset classes in Exhibit 2. Exhibit 2 Asset Class|Sharpe Ratio|Correlation with Current Portfolio| Global real estate (REITs)|1.40|0.70 Emerging markets equities|1.75|0.70 Global high-yield corporate bonds|0.75|0.55 Several years later, Channel's pension plan has grown to over EUR 5 billion in assets. During that time period, the fund's allocation to illiquid assets (which includes direct real estate, private equity and infrastructure) increased to 30%. Channel maintains its leading position in the insurance industry and its balance sheet remains healthy. However, given heightened competition and increasingly soft pricing conditions, Channel staff members are researching possible cost-saving strategies for management consideration. While viewed as an unlikely choice by Mukasa, reducing Channel's cash contributions to its pension plan is among them. The plan is currently 90% funded. Pai reviews key benefits and constraints of large institutional investors in asset allocation that may be relevant to Channel's pension plan. He makes the following statements. Statement 1: A substantial allocation to illiquid assets may be inappropriate for Channel's pension plan if there is a significant probability of Channel lowering its contributions to the plan. Statement 2: Large institutional investors, such as Channel's pension plan, will likely benefit from deploying active equity strategies, due to manager access, liquidity, and trading cost advantages. Statement 3: Channel's pension fund may rebalance portfolio weights from the strategic allocation in order to exploit perceived opportunities based on its latest five-year capital market expectations. Question:Which of Pai's statements is most appropriate for the pension plan, given Channel's current market circumstances? Choices: A: Statement 1., B: Statement 2., C: Statement 3..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Greta Carson is a financial consultant for high-net-worth clients. Carson meets with prospective clients Nick and Hamidah Johnson. They are married, both 50 years old, and working full-time as physicians. The couple has two children, both of whom are grown and financially independent. The Johnsons plan to retire at age 65. Their investment assets total USD 5 million and are held in a combination of taxable and tax-advantaged accounts. Carson conducts a detailed interview with the Johnsons and developed an assessment of their risk preference and capacity for risk. She estimated the risk aversion coefficients (λ) as: +6 for Nick and -2 for Hamidah. She used the following utility function to determine a preferred asset allocation for each of them. Um = E(Rm) - 0.005λσ^2 Carson's assistant, Kei Osaka, compiles expected return and risk for three possible portfolios shown in Exhibit 1. In addition, he calculates perceived investor's utility based on three risk profiles and adds the results to Exhibit 1. Exhibit 1 Three Portfolio Options and Investor's Utility Portfolio|Expected Return|Standard Deviation of Return|Utility 1 (λ = -2)|Utility 2 (λ =+2)|Utility 3 (λ =+6) A|10.0%|20.0%|14.00%|6.00%|-2.00% B|8.0%|12.0%|9.44%|6.56%|3.68% C|5.0%|3.0%|5.09%|4.91%|4.73% Osaka listens to a podcast series on asset allocation. He writes down a few key criticisms of the traditional mean-variance optimization (MVO) approach in Exhibit 2 and plans to show how they have been addressed in practice. Exhibit 2 Criticisms of Traditional MVO Approach in Asset-Only Asset Allocation • High sensitivity to inputs Highly concentrated allocations • Non-normal distribution • Single-period framework • Trade/rebalancing costs and taxes Carson carefully reviews the Johnsons' existing IPS, which was prepared by their previous adviser. She determines that their current asset allocation is appropriate for them. Because no rebalancing policy was documented, she prepares three possible approaches. The allocation and potential options are presented in Exhibit 3. Exhibit 3 Possible Rebalancing Options Strategic Allocation|Fixed Width Ranges (+/-5%)|Proportional Ranges (+/- 1,000 bps)|Cost-Benefit Analysis Domestic equity|45%|40%-50%|40.5%-49.5%|42%-48% International equity|20%|15%-25%|18%-22%|17%-23% Emerging markets equity|5%|0%-10%|4.5%-5.5%|4%-6% Fixed income|30%|25%-35%|27%-33%|28%-32% Total|100% Osaka makes the following statements about portfolio rebalancing: Statement 1: An investor's beliefs in momentum and mean reversion may favor wider rebalancing ranges. Statement 2: Taxes and transaction costs often lead to wider rebalancing ranges in taxable accounts than in tax-advantaged accounts. Statement 3: Due to the high volatility and low correlation with the rest of the portfolio, and the Johnsons' moderate to high risk tolerance, the fixed income rebalancing range is narrower than the other asset classes based on the cost-benefit approach shown in Exhibit 3. A few months later, Carson receives a phone call from Hamidah, who is now on the board of trustees of the Arctic Foundation for Medical Research (AFMR). AFMR was established to support various medical research initiatives. Hamidah is very excited and asks Carson to help identify the return objective of AFMR's portfolio. Osaka notes the following: • AFMR's overall investment objective is to maintain its portfolio's real purchasing power after distributions. • The risk-free rate is 4.0%. • An expected inflation rate is 3.5%. • The portfolio's standard deviation is 15.0%. • The cost of earning investment returns is 50 bp. • AFMR targets a 5.5% annual distribution of assets. ; Question:Which portfolios would be most appropriate for Nick and Hamidah separately, based solely on the information presented in Exhibit 1?; Answer Choices: A: Nick Johnson: Portfolio A; Hamidah Johnson: Portfolio B, B: Nick Johnson: Portfolio B; Hamidah Johnson: Portfolio C, C: Nick Johnson: Portfolio C; Hamidah Johnson: Portfolio A. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Greta Carson is a financial consultant for high-net-worth clients. Carson meets with prospective clients Nick and Hamidah Johnson. They are married, both 50 years old, and working full-time as physicians. The couple has two children, both of whom are grown and financially independent. The Johnsons plan to retire at age 65. Their investment assets total USD 5 million and are held in a combination of taxable and tax-advantaged accounts. Carson conducts a detailed interview with the Johnsons and developed an assessment of their risk preference and capacity for risk. She estimated the risk aversion coefficients (λ) as: +6 for Nick and -2 for Hamidah. She used the following utility function to determine a preferred asset allocation for each of them. Um = E(Rm) - 0.005λσ^2 Carson's assistant, Kei Osaka, compiles expected return and risk for three possible portfolios shown in Exhibit 1. In addition, he calculates perceived investor's utility based on three risk profiles and adds the results to Exhibit 1. Exhibit 1 Three Portfolio Options and Investor's Utility Portfolio|Expected Return|Standard Deviation of Return|Utility 1 (λ = -2)|Utility 2 (λ =+2)|Utility 3 (λ =+6) A|10.0%|20.0%|14.00%|6.00%|-2.00% B|8.0%|12.0%|9.44%|6.56%|3.68% C|5.0%|3.0%|5.09%|4.91%|4.73% Osaka listens to a podcast series on asset allocation. He writes down a few key criticisms of the traditional mean-variance optimization (MVO) approach in Exhibit 2 and plans to show how they have been addressed in practice. Exhibit 2 Criticisms of Traditional MVO Approach in Asset-Only Asset Allocation • High sensitivity to inputs Highly concentrated allocations • Non-normal distribution • Single-period framework • Trade/rebalancing costs and taxes Carson carefully reviews the Johnsons' existing IPS, which was prepared by their previous adviser. She determines that their current asset allocation is appropriate for them. Because no rebalancing policy was documented, she prepares three possible approaches. The allocation and potential options are presented in Exhibit 3. Exhibit 3 Possible Rebalancing Options Strategic Allocation|Fixed Width Ranges (+/-5%)|Proportional Ranges (+/- 1,000 bps)|Cost-Benefit Analysis Domestic equity|45%|40%-50%|40.5%-49.5%|42%-48% International equity|20%|15%-25%|18%-22%|17%-23% Emerging markets equity|5%|0%-10%|4.5%-5.5%|4%-6% Fixed income|30%|25%-35%|27%-33%|28%-32% Total|100% Osaka makes the following statements about portfolio rebalancing: Statement 1: An investor's beliefs in momentum and mean reversion may favor wider rebalancing ranges. Statement 2: Taxes and transaction costs often lead to wider rebalancing ranges in taxable accounts than in tax-advantaged accounts. Statement 3: Due to the high volatility and low correlation with the rest of the portfolio, and the Johnsons' moderate to high risk tolerance, the fixed income rebalancing range is narrower than the other asset classes based on the cost-benefit approach shown in Exhibit 3. A few months later, Carson receives a phone call from Hamidah, who is now on the board of trustees of the Arctic Foundation for Medical Research (AFMR). AFMR was established to support various medical research initiatives. Hamidah is very excited and asks Carson to help identify the return objective of AFMR's portfolio. Osaka notes the following: • AFMR's overall investment objective is to maintain its portfolio's real purchasing power after distributions. • The risk-free rate is 4.0%. • An expected inflation rate is 3.5%. • The portfolio's standard deviation is 15.0%. • The cost of earning investment returns is 50 bp. • AFMR targets a 5.5% annual distribution of assets. ; Question:Which portfolios would be most appropriate for Nick and Hamidah separately, based solely on the information presented in Exhibit 1?; Answer Choices: A: Nick Johnson: Portfolio A; Hamidah Johnson: Portfolio B, B: Nick Johnson: Portfolio B; Hamidah Johnson: Portfolio C, C: Nick Johnson: Portfolio C; Hamidah Johnson: Portfolio A. Answer:

Scenario: Greta Carson is a financial consultant for high-net-worth clients. Carson meets with prospective clients Nick and Hamidah Johnson. They are married, both 50 years old, and working full-time as physicians. The couple has two children, both of whom are grown and financially independent. The Johnsons plan to retire at age 65. Their investment assets total USD 5 million and are held in a combination of taxable and tax-advantaged accounts. Carson conducts a detailed interview with the Johnsons and developed an assessment of their risk preference and capacity for risk. She estimated the risk aversion coefficients (λ) as: +6 for Nick and -2 for Hamidah. She used the following utility function to determine a preferred asset allocation for each of them. Um = E(Rm) - 0.005λσ^2 Carson's assistant, Kei Osaka, compiles expected return and risk for three possible portfolios shown in Exhibit 1. In addition, he calculates perceived investor's utility based on three risk profiles and adds the results to Exhibit 1. Exhibit 1 Three Portfolio Options and Investor's Utility Portfolio|Expected Return|Standard Deviation of Return|Utility 1 (λ = -2)|Utility 2 (λ =+2)|Utility 3 (λ =+6) A|10.0%|20.0%|14.00%|6.00%|-2.00% B|8.0%|12.0%|9.44%|6.56%|3.68% C|5.0%|3.0%|5.09%|4.91%|4.73% Osaka listens to a podcast series on asset allocation. He writes down a few key criticisms of the traditional mean-variance optimization (MVO) approach in Exhibit 2 and plans to show how they have been addressed in practice. Exhibit 2 Criticisms of Traditional MVO Approach in Asset-Only Asset Allocation • High sensitivity to inputs Highly concentrated allocations • Non-normal distribution • Single-period framework • Trade/rebalancing costs and taxes Carson carefully reviews the Johnsons' existing IPS, which was prepared by their previous adviser. She determines that their current asset allocation is appropriate for them. Because no rebalancing policy was documented, she prepares three possible approaches. The allocation and potential options are presented in Exhibit 3. Exhibit 3 Possible Rebalancing Options Strategic Allocation|Fixed Width Ranges (+/-5%)|Proportional Ranges (+/- 1,000 bps)|Cost-Benefit Analysis Domestic equity|45%|40%-50%|40.5%-49.5%|42%-48% International equity|20%|15%-25%|18%-22%|17%-23% Emerging markets equity|5%|0%-10%|4.5%-5.5%|4%-6% Fixed income|30%|25%-35%|27%-33%|28%-32% Total|100% Osaka makes the following statements about portfolio rebalancing: Statement 1: An investor's beliefs in momentum and mean reversion may favor wider rebalancing ranges. Statement 2: Taxes and transaction costs often lead to wider rebalancing ranges in taxable accounts than in tax-advantaged accounts. Statement 3: Due to the high volatility and low correlation with the rest of the portfolio, and the Johnsons' moderate to high risk tolerance, the fixed income rebalancing range is narrower than the other asset classes based on the cost-benefit approach shown in Exhibit 3. A few months later, Carson receives a phone call from Hamidah, who is now on the board of trustees of the Arctic Foundation for Medical Research (AFMR). AFMR was established to support various medical research initiatives. Hamidah is very excited and asks Carson to help identify the return objective of AFMR's portfolio. Osaka notes the following: • AFMR's overall investment objective is to maintain its portfolio's real purchasing power after distributions. • The risk-free rate is 4.0%. • An expected inflation rate is 3.5%. • The portfolio's standard deviation is 15.0%. • The cost of earning investment returns is 50 bp. • AFMR targets a 5.5% annual distribution of assets. Question:Which portfolios would be most appropriate for Nick and Hamidah separately, based solely on the information presented in Exhibit 1? Choices: A: Nick Johnson: Portfolio A; Hamidah Johnson: Portfolio B, B: Nick Johnson: Portfolio B; Hamidah Johnson: Portfolio C, C: Nick Johnson: Portfolio C; Hamidah Johnson: Portfolio A.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Greta Carson is a financial consultant for high-net-worth clients. Carson meets with prospective clients Nick and Hamidah Johnson. They are married, both 50 years old, and working full-time as physicians. The couple has two children, both of whom are grown and financially independent. The Johnsons plan to retire at age 65. Their investment assets total USD 5 million and are held in a combination of taxable and tax-advantaged accounts. Carson conducts a detailed interview with the Johnsons and developed an assessment of their risk preference and capacity for risk. She estimated the risk aversion coefficients (λ) as: +6 for Nick and -2 for Hamidah. She used the following utility function to determine a preferred asset allocation for each of them. Um = E(Rm) - 0.005λσ^2 Carson's assistant, Kei Osaka, compiles expected return and risk for three possible portfolios shown in Exhibit 1. In addition, he calculates perceived investor's utility based on three risk profiles and adds the results to Exhibit 1. Exhibit 1 Three Portfolio Options and Investor's Utility Portfolio|Expected Return|Standard Deviation of Return|Utility 1 (λ = -2)|Utility 2 (λ =+2)|Utility 3 (λ =+6) A|10.0%|20.0%|14.00%|6.00%|-2.00% B|8.0%|12.0%|9.44%|6.56%|3.68% C|5.0%|3.0%|5.09%|4.91%|4.73% Osaka listens to a podcast series on asset allocation. He writes down a few key criticisms of the traditional mean-variance optimization (MVO) approach in Exhibit 2 and plans to show how they have been addressed in practice. Exhibit 2 Criticisms of Traditional MVO Approach in Asset-Only Asset Allocation • High sensitivity to inputs Highly concentrated allocations • Non-normal distribution • Single-period framework • Trade/rebalancing costs and taxes Carson carefully reviews the Johnsons' existing IPS, which was prepared by their previous adviser. She determines that their current asset allocation is appropriate for them. Because no rebalancing policy was documented, she prepares three possible approaches. The allocation and potential options are presented in Exhibit 3. Exhibit 3 Possible Rebalancing Options Strategic Allocation|Fixed Width Ranges (+/-5%)|Proportional Ranges (+/- 1,000 bps)|Cost-Benefit Analysis Domestic equity|45%|40%-50%|40.5%-49.5%|42%-48% International equity|20%|15%-25%|18%-22%|17%-23% Emerging markets equity|5%|0%-10%|4.5%-5.5%|4%-6% Fixed income|30%|25%-35%|27%-33%|28%-32% Total|100% Osaka makes the following statements about portfolio rebalancing: Statement 1: An investor's beliefs in momentum and mean reversion may favor wider rebalancing ranges. Statement 2: Taxes and transaction costs often lead to wider rebalancing ranges in taxable accounts than in tax-advantaged accounts. Statement 3: Due to the high volatility and low correlation with the rest of the portfolio, and the Johnsons' moderate to high risk tolerance, the fixed income rebalancing range is narrower than the other asset classes based on the cost-benefit approach shown in Exhibit 3. A few months later, Carson receives a phone call from Hamidah, who is now on the board of trustees of the Arctic Foundation for Medical Research (AFMR). AFMR was established to support various medical research initiatives. Hamidah is very excited and asks Carson to help identify the return objective of AFMR's portfolio. Osaka notes the following: • AFMR's overall investment objective is to maintain its portfolio's real purchasing power after distributions. • The risk-free rate is 4.0%. • An expected inflation rate is 3.5%. • The portfolio's standard deviation is 15.0%. • The cost of earning investment returns is 50 bp. • AFMR targets a 5.5% annual distribution of assets. ; Question:The most appropriate technique for Osaka to consider in addressing the criticisms of MVO stated in Exhibit 2 is:; Answer Choices: A: Risk budgeting., B: Surplus optimization., C: Monte Carlo simulation.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Greta Carson is a financial consultant for high-net-worth clients. Carson meets with prospective clients Nick and Hamidah Johnson. They are married, both 50 years old, and working full-time as physicians. The couple has two children, both of whom are grown and financially independent. The Johnsons plan to retire at age 65. Their investment assets total USD 5 million and are held in a combination of taxable and tax-advantaged accounts. Carson conducts a detailed interview with the Johnsons and developed an assessment of their risk preference and capacity for risk. She estimated the risk aversion coefficients (λ) as: +6 for Nick and -2 for Hamidah. She used the following utility function to determine a preferred asset allocation for each of them. Um = E(Rm) - 0.005λσ^2 Carson's assistant, Kei Osaka, compiles expected return and risk for three possible portfolios shown in Exhibit 1. In addition, he calculates perceived investor's utility based on three risk profiles and adds the results to Exhibit 1. Exhibit 1 Three Portfolio Options and Investor's Utility Portfolio|Expected Return|Standard Deviation of Return|Utility 1 (λ = -2)|Utility 2 (λ =+2)|Utility 3 (λ =+6) A|10.0%|20.0%|14.00%|6.00%|-2.00% B|8.0%|12.0%|9.44%|6.56%|3.68% C|5.0%|3.0%|5.09%|4.91%|4.73% Osaka listens to a podcast series on asset allocation. He writes down a few key criticisms of the traditional mean-variance optimization (MVO) approach in Exhibit 2 and plans to show how they have been addressed in practice. Exhibit 2 Criticisms of Traditional MVO Approach in Asset-Only Asset Allocation • High sensitivity to inputs Highly concentrated allocations • Non-normal distribution • Single-period framework • Trade/rebalancing costs and taxes Carson carefully reviews the Johnsons' existing IPS, which was prepared by their previous adviser. She determines that their current asset allocation is appropriate for them. Because no rebalancing policy was documented, she prepares three possible approaches. The allocation and potential options are presented in Exhibit 3. Exhibit 3 Possible Rebalancing Options Strategic Allocation|Fixed Width Ranges (+/-5%)|Proportional Ranges (+/- 1,000 bps)|Cost-Benefit Analysis Domestic equity|45%|40%-50%|40.5%-49.5%|42%-48% International equity|20%|15%-25%|18%-22%|17%-23% Emerging markets equity|5%|0%-10%|4.5%-5.5%|4%-6% Fixed income|30%|25%-35%|27%-33%|28%-32% Total|100% Osaka makes the following statements about portfolio rebalancing: Statement 1: An investor's beliefs in momentum and mean reversion may favor wider rebalancing ranges. Statement 2: Taxes and transaction costs often lead to wider rebalancing ranges in taxable accounts than in tax-advantaged accounts. Statement 3: Due to the high volatility and low correlation with the rest of the portfolio, and the Johnsons' moderate to high risk tolerance, the fixed income rebalancing range is narrower than the other asset classes based on the cost-benefit approach shown in Exhibit 3. A few months later, Carson receives a phone call from Hamidah, who is now on the board of trustees of the Arctic Foundation for Medical Research (AFMR). AFMR was established to support various medical research initiatives. Hamidah is very excited and asks Carson to help identify the return objective of AFMR's portfolio. Osaka notes the following: • AFMR's overall investment objective is to maintain its portfolio's real purchasing power after distributions. • The risk-free rate is 4.0%. • An expected inflation rate is 3.5%. • The portfolio's standard deviation is 15.0%. • The cost of earning investment returns is 50 bp. • AFMR targets a 5.5% annual distribution of assets. ; Question:The most appropriate technique for Osaka to consider in addressing the criticisms of MVO stated in Exhibit 2 is:; Answer Choices: A: Risk budgeting., B: Surplus optimization., C: Monte Carlo simulation.. Answer:

Scenario: Greta Carson is a financial consultant for high-net-worth clients. Carson meets with prospective clients Nick and Hamidah Johnson. They are married, both 50 years old, and working full-time as physicians. The couple has two children, both of whom are grown and financially independent. The Johnsons plan to retire at age 65. Their investment assets total USD 5 million and are held in a combination of taxable and tax-advantaged accounts. Carson conducts a detailed interview with the Johnsons and developed an assessment of their risk preference and capacity for risk. She estimated the risk aversion coefficients (λ) as: +6 for Nick and -2 for Hamidah. She used the following utility function to determine a preferred asset allocation for each of them. Um = E(Rm) - 0.005λσ^2 Carson's assistant, Kei Osaka, compiles expected return and risk for three possible portfolios shown in Exhibit 1. In addition, he calculates perceived investor's utility based on three risk profiles and adds the results to Exhibit 1. Exhibit 1 Three Portfolio Options and Investor's Utility Portfolio|Expected Return|Standard Deviation of Return|Utility 1 (λ = -2)|Utility 2 (λ =+2)|Utility 3 (λ =+6) A|10.0%|20.0%|14.00%|6.00%|-2.00% B|8.0%|12.0%|9.44%|6.56%|3.68% C|5.0%|3.0%|5.09%|4.91%|4.73% Osaka listens to a podcast series on asset allocation. He writes down a few key criticisms of the traditional mean-variance optimization (MVO) approach in Exhibit 2 and plans to show how they have been addressed in practice. Exhibit 2 Criticisms of Traditional MVO Approach in Asset-Only Asset Allocation • High sensitivity to inputs Highly concentrated allocations • Non-normal distribution • Single-period framework • Trade/rebalancing costs and taxes Carson carefully reviews the Johnsons' existing IPS, which was prepared by their previous adviser. She determines that their current asset allocation is appropriate for them. Because no rebalancing policy was documented, she prepares three possible approaches. The allocation and potential options are presented in Exhibit 3. Exhibit 3 Possible Rebalancing Options Strategic Allocation|Fixed Width Ranges (+/-5%)|Proportional Ranges (+/- 1,000 bps)|Cost-Benefit Analysis Domestic equity|45%|40%-50%|40.5%-49.5%|42%-48% International equity|20%|15%-25%|18%-22%|17%-23% Emerging markets equity|5%|0%-10%|4.5%-5.5%|4%-6% Fixed income|30%|25%-35%|27%-33%|28%-32% Total|100% Osaka makes the following statements about portfolio rebalancing: Statement 1: An investor's beliefs in momentum and mean reversion may favor wider rebalancing ranges. Statement 2: Taxes and transaction costs often lead to wider rebalancing ranges in taxable accounts than in tax-advantaged accounts. Statement 3: Due to the high volatility and low correlation with the rest of the portfolio, and the Johnsons' moderate to high risk tolerance, the fixed income rebalancing range is narrower than the other asset classes based on the cost-benefit approach shown in Exhibit 3. A few months later, Carson receives a phone call from Hamidah, who is now on the board of trustees of the Arctic Foundation for Medical Research (AFMR). AFMR was established to support various medical research initiatives. Hamidah is very excited and asks Carson to help identify the return objective of AFMR's portfolio. Osaka notes the following: • AFMR's overall investment objective is to maintain its portfolio's real purchasing power after distributions. • The risk-free rate is 4.0%. • An expected inflation rate is 3.5%. • The portfolio's standard deviation is 15.0%. • The cost of earning investment returns is 50 bp. • AFMR targets a 5.5% annual distribution of assets. Question:The most appropriate technique for Osaka to consider in addressing the criticisms of MVO stated in Exhibit 2 is: Choices: A: Risk budgeting., B: Surplus optimization., C: Monte Carlo simulation..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Greta Carson is a financial consultant for high-net-worth clients. Carson meets with prospective clients Nick and Hamidah Johnson. They are married, both 50 years old, and working full-time as physicians. The couple has two children, both of whom are grown and financially independent. The Johnsons plan to retire at age 65. Their investment assets total USD 5 million and are held in a combination of taxable and tax-advantaged accounts. Carson conducts a detailed interview with the Johnsons and developed an assessment of their risk preference and capacity for risk. She estimated the risk aversion coefficients (λ) as: +6 for Nick and -2 for Hamidah. She used the following utility function to determine a preferred asset allocation for each of them. Um = E(Rm) - 0.005λσ^2 Carson's assistant, Kei Osaka, compiles expected return and risk for three possible portfolios shown in Exhibit 1. In addition, he calculates perceived investor's utility based on three risk profiles and adds the results to Exhibit 1. Exhibit 1 Three Portfolio Options and Investor's Utility Portfolio|Expected Return|Standard Deviation of Return|Utility 1 (λ = -2)|Utility 2 (λ =+2)|Utility 3 (λ =+6) A|10.0%|20.0%|14.00%|6.00%|-2.00% B|8.0%|12.0%|9.44%|6.56%|3.68% C|5.0%|3.0%|5.09%|4.91%|4.73% Osaka listens to a podcast series on asset allocation. He writes down a few key criticisms of the traditional mean-variance optimization (MVO) approach in Exhibit 2 and plans to show how they have been addressed in practice. Exhibit 2 Criticisms of Traditional MVO Approach in Asset-Only Asset Allocation • High sensitivity to inputs Highly concentrated allocations • Non-normal distribution • Single-period framework • Trade/rebalancing costs and taxes Carson carefully reviews the Johnsons' existing IPS, which was prepared by their previous adviser. She determines that their current asset allocation is appropriate for them. Because no rebalancing policy was documented, she prepares three possible approaches. The allocation and potential options are presented in Exhibit 3. Exhibit 3 Possible Rebalancing Options Strategic Allocation|Fixed Width Ranges (+/-5%)|Proportional Ranges (+/- 1,000 bps)|Cost-Benefit Analysis Domestic equity|45%|40%-50%|40.5%-49.5%|42%-48% International equity|20%|15%-25%|18%-22%|17%-23% Emerging markets equity|5%|0%-10%|4.5%-5.5%|4%-6% Fixed income|30%|25%-35%|27%-33%|28%-32% Total|100% Osaka makes the following statements about portfolio rebalancing: Statement 1: An investor's beliefs in momentum and mean reversion may favor wider rebalancing ranges. Statement 2: Taxes and transaction costs often lead to wider rebalancing ranges in taxable accounts than in tax-advantaged accounts. Statement 3: Due to the high volatility and low correlation with the rest of the portfolio, and the Johnsons' moderate to high risk tolerance, the fixed income rebalancing range is narrower than the other asset classes based on the cost-benefit approach shown in Exhibit 3. A few months later, Carson receives a phone call from Hamidah, who is now on the board of trustees of the Arctic Foundation for Medical Research (AFMR). AFMR was established to support various medical research initiatives. Hamidah is very excited and asks Carson to help identify the return objective of AFMR's portfolio. Osaka notes the following: • AFMR's overall investment objective is to maintain its portfolio's real purchasing power after distributions. • The risk-free rate is 4.0%. • An expected inflation rate is 3.5%. • The portfolio's standard deviation is 15.0%. • The cost of earning investment returns is 50 bp. • AFMR targets a 5.5% annual distribution of assets. ; Question:Which of Osaka's statements about portfolio rebalancing is correct?; Answer Choices: A: Statement 1., B: Statement 2., C: Statement 3.. Answer:

B

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Greta Carson is a financial consultant for high-net-worth clients. Carson meets with prospective clients Nick and Hamidah Johnson. They are married, both 50 years old, and working full-time as physicians. The couple has two children, both of whom are grown and financially independent. The Johnsons plan to retire at age 65. Their investment assets total USD 5 million and are held in a combination of taxable and tax-advantaged accounts. Carson conducts a detailed interview with the Johnsons and developed an assessment of their risk preference and capacity for risk. She estimated the risk aversion coefficients (λ) as: +6 for Nick and -2 for Hamidah. She used the following utility function to determine a preferred asset allocation for each of them. Um = E(Rm) - 0.005λσ^2 Carson's assistant, Kei Osaka, compiles expected return and risk for three possible portfolios shown in Exhibit 1. In addition, he calculates perceived investor's utility based on three risk profiles and adds the results to Exhibit 1. Exhibit 1 Three Portfolio Options and Investor's Utility Portfolio|Expected Return|Standard Deviation of Return|Utility 1 (λ = -2)|Utility 2 (λ =+2)|Utility 3 (λ =+6) A|10.0%|20.0%|14.00%|6.00%|-2.00% B|8.0%|12.0%|9.44%|6.56%|3.68% C|5.0%|3.0%|5.09%|4.91%|4.73% Osaka listens to a podcast series on asset allocation. He writes down a few key criticisms of the traditional mean-variance optimization (MVO) approach in Exhibit 2 and plans to show how they have been addressed in practice. Exhibit 2 Criticisms of Traditional MVO Approach in Asset-Only Asset Allocation • High sensitivity to inputs Highly concentrated allocations • Non-normal distribution • Single-period framework • Trade/rebalancing costs and taxes Carson carefully reviews the Johnsons' existing IPS, which was prepared by their previous adviser. She determines that their current asset allocation is appropriate for them. Because no rebalancing policy was documented, she prepares three possible approaches. The allocation and potential options are presented in Exhibit 3. Exhibit 3 Possible Rebalancing Options Strategic Allocation|Fixed Width Ranges (+/-5%)|Proportional Ranges (+/- 1,000 bps)|Cost-Benefit Analysis Domestic equity|45%|40%-50%|40.5%-49.5%|42%-48% International equity|20%|15%-25%|18%-22%|17%-23% Emerging markets equity|5%|0%-10%|4.5%-5.5%|4%-6% Fixed income|30%|25%-35%|27%-33%|28%-32% Total|100% Osaka makes the following statements about portfolio rebalancing: Statement 1: An investor's beliefs in momentum and mean reversion may favor wider rebalancing ranges. Statement 2: Taxes and transaction costs often lead to wider rebalancing ranges in taxable accounts than in tax-advantaged accounts. Statement 3: Due to the high volatility and low correlation with the rest of the portfolio, and the Johnsons' moderate to high risk tolerance, the fixed income rebalancing range is narrower than the other asset classes based on the cost-benefit approach shown in Exhibit 3. A few months later, Carson receives a phone call from Hamidah, who is now on the board of trustees of the Arctic Foundation for Medical Research (AFMR). AFMR was established to support various medical research initiatives. Hamidah is very excited and asks Carson to help identify the return objective of AFMR's portfolio. Osaka notes the following: • AFMR's overall investment objective is to maintain its portfolio's real purchasing power after distributions. • The risk-free rate is 4.0%. • An expected inflation rate is 3.5%. • The portfolio's standard deviation is 15.0%. • The cost of earning investment returns is 50 bp. • AFMR targets a 5.5% annual distribution of assets. ; Question:Which of Osaka's statements about portfolio rebalancing is correct?; Answer Choices: A: Statement 1., B: Statement 2., C: Statement 3.. Answer:

Scenario: Greta Carson is a financial consultant for high-net-worth clients. Carson meets with prospective clients Nick and Hamidah Johnson. They are married, both 50 years old, and working full-time as physicians. The couple has two children, both of whom are grown and financially independent. The Johnsons plan to retire at age 65. Their investment assets total USD 5 million and are held in a combination of taxable and tax-advantaged accounts. Carson conducts a detailed interview with the Johnsons and developed an assessment of their risk preference and capacity for risk. She estimated the risk aversion coefficients (λ) as: +6 for Nick and -2 for Hamidah. She used the following utility function to determine a preferred asset allocation for each of them. Um = E(Rm) - 0.005λσ^2 Carson's assistant, Kei Osaka, compiles expected return and risk for three possible portfolios shown in Exhibit 1. In addition, he calculates perceived investor's utility based on three risk profiles and adds the results to Exhibit 1. Exhibit 1 Three Portfolio Options and Investor's Utility Portfolio|Expected Return|Standard Deviation of Return|Utility 1 (λ = -2)|Utility 2 (λ =+2)|Utility 3 (λ =+6) A|10.0%|20.0%|14.00%|6.00%|-2.00% B|8.0%|12.0%|9.44%|6.56%|3.68% C|5.0%|3.0%|5.09%|4.91%|4.73% Osaka listens to a podcast series on asset allocation. He writes down a few key criticisms of the traditional mean-variance optimization (MVO) approach in Exhibit 2 and plans to show how they have been addressed in practice. Exhibit 2 Criticisms of Traditional MVO Approach in Asset-Only Asset Allocation • High sensitivity to inputs Highly concentrated allocations • Non-normal distribution • Single-period framework • Trade/rebalancing costs and taxes Carson carefully reviews the Johnsons' existing IPS, which was prepared by their previous adviser. She determines that their current asset allocation is appropriate for them. Because no rebalancing policy was documented, she prepares three possible approaches. The allocation and potential options are presented in Exhibit 3. Exhibit 3 Possible Rebalancing Options Strategic Allocation|Fixed Width Ranges (+/-5%)|Proportional Ranges (+/- 1,000 bps)|Cost-Benefit Analysis Domestic equity|45%|40%-50%|40.5%-49.5%|42%-48% International equity|20%|15%-25%|18%-22%|17%-23% Emerging markets equity|5%|0%-10%|4.5%-5.5%|4%-6% Fixed income|30%|25%-35%|27%-33%|28%-32% Total|100% Osaka makes the following statements about portfolio rebalancing: Statement 1: An investor's beliefs in momentum and mean reversion may favor wider rebalancing ranges. Statement 2: Taxes and transaction costs often lead to wider rebalancing ranges in taxable accounts than in tax-advantaged accounts. Statement 3: Due to the high volatility and low correlation with the rest of the portfolio, and the Johnsons' moderate to high risk tolerance, the fixed income rebalancing range is narrower than the other asset classes based on the cost-benefit approach shown in Exhibit 3. A few months later, Carson receives a phone call from Hamidah, who is now on the board of trustees of the Arctic Foundation for Medical Research (AFMR). AFMR was established to support various medical research initiatives. Hamidah is very excited and asks Carson to help identify the return objective of AFMR's portfolio. Osaka notes the following: • AFMR's overall investment objective is to maintain its portfolio's real purchasing power after distributions. • The risk-free rate is 4.0%. • An expected inflation rate is 3.5%. • The portfolio's standard deviation is 15.0%. • The cost of earning investment returns is 50 bp. • AFMR targets a 5.5% annual distribution of assets. Question:Which of Osaka's statements about portfolio rebalancing is correct? Choices: A: Statement 1., B: Statement 2., C: Statement 3..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Greta Carson is a financial consultant for high-net-worth clients. Carson meets with prospective clients Nick and Hamidah Johnson. They are married, both 50 years old, and working full-time as physicians. The couple has two children, both of whom are grown and financially independent. The Johnsons plan to retire at age 65. Their investment assets total USD 5 million and are held in a combination of taxable and tax-advantaged accounts. Carson conducts a detailed interview with the Johnsons and developed an assessment of their risk preference and capacity for risk. She estimated the risk aversion coefficients (λ) as: +6 for Nick and -2 for Hamidah. She used the following utility function to determine a preferred asset allocation for each of them. Um = E(Rm) - 0.005λσ^2 Carson's assistant, Kei Osaka, compiles expected return and risk for three possible portfolios shown in Exhibit 1. In addition, he calculates perceived investor's utility based on three risk profiles and adds the results to Exhibit 1. Exhibit 1 Three Portfolio Options and Investor's Utility Portfolio|Expected Return|Standard Deviation of Return|Utility 1 (λ = -2)|Utility 2 (λ =+2)|Utility 3 (λ =+6) A|10.0%|20.0%|14.00%|6.00%|-2.00% B|8.0%|12.0%|9.44%|6.56%|3.68% C|5.0%|3.0%|5.09%|4.91%|4.73% Osaka listens to a podcast series on asset allocation. He writes down a few key criticisms of the traditional mean-variance optimization (MVO) approach in Exhibit 2 and plans to show how they have been addressed in practice. Exhibit 2 Criticisms of Traditional MVO Approach in Asset-Only Asset Allocation • High sensitivity to inputs Highly concentrated allocations • Non-normal distribution • Single-period framework • Trade/rebalancing costs and taxes Carson carefully reviews the Johnsons' existing IPS, which was prepared by their previous adviser. She determines that their current asset allocation is appropriate for them. Because no rebalancing policy was documented, she prepares three possible approaches. The allocation and potential options are presented in Exhibit 3. Exhibit 3 Possible Rebalancing Options Strategic Allocation|Fixed Width Ranges (+/-5%)|Proportional Ranges (+/- 1,000 bps)|Cost-Benefit Analysis Domestic equity|45%|40%-50%|40.5%-49.5%|42%-48% International equity|20%|15%-25%|18%-22%|17%-23% Emerging markets equity|5%|0%-10%|4.5%-5.5%|4%-6% Fixed income|30%|25%-35%|27%-33%|28%-32% Total|100% Osaka makes the following statements about portfolio rebalancing: Statement 1: An investor's beliefs in momentum and mean reversion may favor wider rebalancing ranges. Statement 2: Taxes and transaction costs often lead to wider rebalancing ranges in taxable accounts than in tax-advantaged accounts. Statement 3: Due to the high volatility and low correlation with the rest of the portfolio, and the Johnsons' moderate to high risk tolerance, the fixed income rebalancing range is narrower than the other asset classes based on the cost-benefit approach shown in Exhibit 3. A few months later, Carson receives a phone call from Hamidah, who is now on the board of trustees of the Arctic Foundation for Medical Research (AFMR). AFMR was established to support various medical research initiatives. Hamidah is very excited and asks Carson to help identify the return objective of AFMR's portfolio. Osaka notes the following: • AFMR's overall investment objective is to maintain its portfolio's real purchasing power after distributions. • The risk-free rate is 4.0%. • An expected inflation rate is 3.5%. • The portfolio's standard deviation is 15.0%. • The cost of earning investment returns is 50 bp. • AFMR targets a 5.5% annual distribution of assets. ; Question:AFMR's return objective is closest to:; Answer Choices: A: 9.50%, B: 9.74%, C: 10.27%. Answer:

B

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Greta Carson is a financial consultant for high-net-worth clients. Carson meets with prospective clients Nick and Hamidah Johnson. They are married, both 50 years old, and working full-time as physicians. The couple has two children, both of whom are grown and financially independent. The Johnsons plan to retire at age 65. Their investment assets total USD 5 million and are held in a combination of taxable and tax-advantaged accounts. Carson conducts a detailed interview with the Johnsons and developed an assessment of their risk preference and capacity for risk. She estimated the risk aversion coefficients (λ) as: +6 for Nick and -2 for Hamidah. She used the following utility function to determine a preferred asset allocation for each of them. Um = E(Rm) - 0.005λσ^2 Carson's assistant, Kei Osaka, compiles expected return and risk for three possible portfolios shown in Exhibit 1. In addition, he calculates perceived investor's utility based on three risk profiles and adds the results to Exhibit 1. Exhibit 1 Three Portfolio Options and Investor's Utility Portfolio|Expected Return|Standard Deviation of Return|Utility 1 (λ = -2)|Utility 2 (λ =+2)|Utility 3 (λ =+6) A|10.0%|20.0%|14.00%|6.00%|-2.00% B|8.0%|12.0%|9.44%|6.56%|3.68% C|5.0%|3.0%|5.09%|4.91%|4.73% Osaka listens to a podcast series on asset allocation. He writes down a few key criticisms of the traditional mean-variance optimization (MVO) approach in Exhibit 2 and plans to show how they have been addressed in practice. Exhibit 2 Criticisms of Traditional MVO Approach in Asset-Only Asset Allocation • High sensitivity to inputs Highly concentrated allocations • Non-normal distribution • Single-period framework • Trade/rebalancing costs and taxes Carson carefully reviews the Johnsons' existing IPS, which was prepared by their previous adviser. She determines that their current asset allocation is appropriate for them. Because no rebalancing policy was documented, she prepares three possible approaches. The allocation and potential options are presented in Exhibit 3. Exhibit 3 Possible Rebalancing Options Strategic Allocation|Fixed Width Ranges (+/-5%)|Proportional Ranges (+/- 1,000 bps)|Cost-Benefit Analysis Domestic equity|45%|40%-50%|40.5%-49.5%|42%-48% International equity|20%|15%-25%|18%-22%|17%-23% Emerging markets equity|5%|0%-10%|4.5%-5.5%|4%-6% Fixed income|30%|25%-35%|27%-33%|28%-32% Total|100% Osaka makes the following statements about portfolio rebalancing: Statement 1: An investor's beliefs in momentum and mean reversion may favor wider rebalancing ranges. Statement 2: Taxes and transaction costs often lead to wider rebalancing ranges in taxable accounts than in tax-advantaged accounts. Statement 3: Due to the high volatility and low correlation with the rest of the portfolio, and the Johnsons' moderate to high risk tolerance, the fixed income rebalancing range is narrower than the other asset classes based on the cost-benefit approach shown in Exhibit 3. A few months later, Carson receives a phone call from Hamidah, who is now on the board of trustees of the Arctic Foundation for Medical Research (AFMR). AFMR was established to support various medical research initiatives. Hamidah is very excited and asks Carson to help identify the return objective of AFMR's portfolio. Osaka notes the following: • AFMR's overall investment objective is to maintain its portfolio's real purchasing power after distributions. • The risk-free rate is 4.0%. • An expected inflation rate is 3.5%. • The portfolio's standard deviation is 15.0%. • The cost of earning investment returns is 50 bp. • AFMR targets a 5.5% annual distribution of assets. ; Question:AFMR's return objective is closest to:; Answer Choices: A: 9.50%, B: 9.74%, C: 10.27%. Answer:

Scenario: Greta Carson is a financial consultant for high-net-worth clients. Carson meets with prospective clients Nick and Hamidah Johnson. They are married, both 50 years old, and working full-time as physicians. The couple has two children, both of whom are grown and financially independent. The Johnsons plan to retire at age 65. Their investment assets total USD 5 million and are held in a combination of taxable and tax-advantaged accounts. Carson conducts a detailed interview with the Johnsons and developed an assessment of their risk preference and capacity for risk. She estimated the risk aversion coefficients (λ) as: +6 for Nick and -2 for Hamidah. She used the following utility function to determine a preferred asset allocation for each of them. Um = E(Rm) - 0.005λσ^2 Carson's assistant, Kei Osaka, compiles expected return and risk for three possible portfolios shown in Exhibit 1. In addition, he calculates perceived investor's utility based on three risk profiles and adds the results to Exhibit 1. Exhibit 1 Three Portfolio Options and Investor's Utility Portfolio|Expected Return|Standard Deviation of Return|Utility 1 (λ = -2)|Utility 2 (λ =+2)|Utility 3 (λ =+6) A|10.0%|20.0%|14.00%|6.00%|-2.00% B|8.0%|12.0%|9.44%|6.56%|3.68% C|5.0%|3.0%|5.09%|4.91%|4.73% Osaka listens to a podcast series on asset allocation. He writes down a few key criticisms of the traditional mean-variance optimization (MVO) approach in Exhibit 2 and plans to show how they have been addressed in practice. Exhibit 2 Criticisms of Traditional MVO Approach in Asset-Only Asset Allocation • High sensitivity to inputs Highly concentrated allocations • Non-normal distribution • Single-period framework • Trade/rebalancing costs and taxes Carson carefully reviews the Johnsons' existing IPS, which was prepared by their previous adviser. She determines that their current asset allocation is appropriate for them. Because no rebalancing policy was documented, she prepares three possible approaches. The allocation and potential options are presented in Exhibit 3. Exhibit 3 Possible Rebalancing Options Strategic Allocation|Fixed Width Ranges (+/-5%)|Proportional Ranges (+/- 1,000 bps)|Cost-Benefit Analysis Domestic equity|45%|40%-50%|40.5%-49.5%|42%-48% International equity|20%|15%-25%|18%-22%|17%-23% Emerging markets equity|5%|0%-10%|4.5%-5.5%|4%-6% Fixed income|30%|25%-35%|27%-33%|28%-32% Total|100% Osaka makes the following statements about portfolio rebalancing: Statement 1: An investor's beliefs in momentum and mean reversion may favor wider rebalancing ranges. Statement 2: Taxes and transaction costs often lead to wider rebalancing ranges in taxable accounts than in tax-advantaged accounts. Statement 3: Due to the high volatility and low correlation with the rest of the portfolio, and the Johnsons' moderate to high risk tolerance, the fixed income rebalancing range is narrower than the other asset classes based on the cost-benefit approach shown in Exhibit 3. A few months later, Carson receives a phone call from Hamidah, who is now on the board of trustees of the Arctic Foundation for Medical Research (AFMR). AFMR was established to support various medical research initiatives. Hamidah is very excited and asks Carson to help identify the return objective of AFMR's portfolio. Osaka notes the following: • AFMR's overall investment objective is to maintain its portfolio's real purchasing power after distributions. • The risk-free rate is 4.0%. • An expected inflation rate is 3.5%. • The portfolio's standard deviation is 15.0%. • The cost of earning investment returns is 50 bp. • AFMR targets a 5.5% annual distribution of assets. Question:AFMR's return objective is closest to: Choices: A: 9.50%, B: 9.74%, C: 10.27%.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Erica Taylor, CFA, is a derivatives analyst at Alpha Asset Management (Alpha). Taylor is concerned by recent equity market volatility and considers hedging strategies for the client portfolios that she oversees. Justine Fisher, a client of Alpha, holds a significant position in Dropqik Corporation, which currently trades at $30.50 per share. Fisher remains optimistic about the long-term performance of the stock and does not want to sell the shares. She is, however, concerned about potential future volatility and a short-term loss, and wants to protect the position's value with minimal cost. Exhibit 1 Option Contract Pricing Details for Dropqik Corporation Exercise Price|40|35|30|25|203-month call option price|0.56|1.45|4.05|10.30|12.423-month put option price|9.56|5.20|2.78|1.56|0.72 Another client, Nithin Rao, does not own any shares of Dropqik Corporation. Rao wants to speculate on the price volatility of Dropqik and expects large deviations in the share price following the new product release in the next month. Rao requests that Taylor recommend suitable strategies to profit from the directional moves in the share price. Taylor prepares the following three strategies to present to Rao: Strategy 1: A bull call spread combined with a bear put spread using $35 and $25 strike options. Strategy 2: A long straddle position at the $30 strike price. Strategy 3: A long strangle position using $40 and $20 strike options. ; Question:The most appropriate option strategy for Fisher is a:; Answer Choices: A: collar., B: covered call., C: short straddle.. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Erica Taylor, CFA, is a derivatives analyst at Alpha Asset Management (Alpha). Taylor is concerned by recent equity market volatility and considers hedging strategies for the client portfolios that she oversees. Justine Fisher, a client of Alpha, holds a significant position in Dropqik Corporation, which currently trades at $30.50 per share. Fisher remains optimistic about the long-term performance of the stock and does not want to sell the shares. She is, however, concerned about potential future volatility and a short-term loss, and wants to protect the position's value with minimal cost. Exhibit 1 Option Contract Pricing Details for Dropqik Corporation Exercise Price|40|35|30|25|203-month call option price|0.56|1.45|4.05|10.30|12.423-month put option price|9.56|5.20|2.78|1.56|0.72 Another client, Nithin Rao, does not own any shares of Dropqik Corporation. Rao wants to speculate on the price volatility of Dropqik and expects large deviations in the share price following the new product release in the next month. Rao requests that Taylor recommend suitable strategies to profit from the directional moves in the share price. Taylor prepares the following three strategies to present to Rao: Strategy 1: A bull call spread combined with a bear put spread using $35 and $25 strike options. Strategy 2: A long straddle position at the $30 strike price. Strategy 3: A long strangle position using $40 and $20 strike options. ; Question:The most appropriate option strategy for Fisher is a:; Answer Choices: A: collar., B: covered call., C: short straddle.. Answer:

Scenario: Erica Taylor, CFA, is a derivatives analyst at Alpha Asset Management (Alpha). Taylor is concerned by recent equity market volatility and considers hedging strategies for the client portfolios that she oversees. Justine Fisher, a client of Alpha, holds a significant position in Dropqik Corporation, which currently trades at $30.50 per share. Fisher remains optimistic about the long-term performance of the stock and does not want to sell the shares. She is, however, concerned about potential future volatility and a short-term loss, and wants to protect the position's value with minimal cost. Exhibit 1 Option Contract Pricing Details for Dropqik Corporation Exercise Price|40|35|30|25|203-month call option price|0.56|1.45|4.05|10.30|12.423-month put option price|9.56|5.20|2.78|1.56|0.72 Another client, Nithin Rao, does not own any shares of Dropqik Corporation. Rao wants to speculate on the price volatility of Dropqik and expects large deviations in the share price following the new product release in the next month. Rao requests that Taylor recommend suitable strategies to profit from the directional moves in the share price. Taylor prepares the following three strategies to present to Rao: Strategy 1: A bull call spread combined with a bear put spread using $35 and $25 strike options. Strategy 2: A long straddle position at the $30 strike price. Strategy 3: A long strangle position using $40 and $20 strike options. Question:The most appropriate option strategy for Fisher is a: Choices: A: collar., B: covered call., C: short straddle..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Erica Taylor, CFA, is a derivatives analyst at Alpha Asset Management (Alpha). Taylor is concerned by recent equity market volatility and considers hedging strategies for the client portfolios that she oversees. Justine Fisher, a client of Alpha, holds a significant position in Dropqik Corporation, which currently trades at $30.50 per share. Fisher remains optimistic about the long-term performance of the stock and does not want to sell the shares. She is, however, concerned about potential future volatility and a short-term loss, and wants to protect the position's value with minimal cost. Exhibit 1 Option Contract Pricing Details for Dropqik Corporation Exercise Price|40|35|30|25|203-month call option price|0.56|1.45|4.05|10.30|12.423-month put option price|9.56|5.20|2.78|1.56|0.72 Another client, Nithin Rao, does not own any shares of Dropqik Corporation. Rao wants to speculate on the price volatility of Dropqik and expects large deviations in the share price following the new product release in the next month. Rao requests that Taylor recommend suitable strategies to profit from the directional moves in the share price. Taylor prepares the following three strategies to present to Rao: Strategy 1: A bull call spread combined with a bear put spread using $35 and $25 strike options. Strategy 2: A long straddle position at the $30 strike price. Strategy 3: A long strangle position using $40 and $20 strike options. ; Question:The breakeven price for an at-the-money (ATM) protective put strategy is closest to:; Answer Choices: A: $25.95, B: $27.22, C: $33.28. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Erica Taylor, CFA, is a derivatives analyst at Alpha Asset Management (Alpha). Taylor is concerned by recent equity market volatility and considers hedging strategies for the client portfolios that she oversees. Justine Fisher, a client of Alpha, holds a significant position in Dropqik Corporation, which currently trades at $30.50 per share. Fisher remains optimistic about the long-term performance of the stock and does not want to sell the shares. She is, however, concerned about potential future volatility and a short-term loss, and wants to protect the position's value with minimal cost. Exhibit 1 Option Contract Pricing Details for Dropqik Corporation Exercise Price|40|35|30|25|203-month call option price|0.56|1.45|4.05|10.30|12.423-month put option price|9.56|5.20|2.78|1.56|0.72 Another client, Nithin Rao, does not own any shares of Dropqik Corporation. Rao wants to speculate on the price volatility of Dropqik and expects large deviations in the share price following the new product release in the next month. Rao requests that Taylor recommend suitable strategies to profit from the directional moves in the share price. Taylor prepares the following three strategies to present to Rao: Strategy 1: A bull call spread combined with a bear put spread using $35 and $25 strike options. Strategy 2: A long straddle position at the $30 strike price. Strategy 3: A long strangle position using $40 and $20 strike options. ; Question:The breakeven price for an at-the-money (ATM) protective put strategy is closest to:; Answer Choices: A: $25.95, B: $27.22, C: $33.28. Answer:

Scenario: Erica Taylor, CFA, is a derivatives analyst at Alpha Asset Management (Alpha). Taylor is concerned by recent equity market volatility and considers hedging strategies for the client portfolios that she oversees. Justine Fisher, a client of Alpha, holds a significant position in Dropqik Corporation, which currently trades at $30.50 per share. Fisher remains optimistic about the long-term performance of the stock and does not want to sell the shares. She is, however, concerned about potential future volatility and a short-term loss, and wants to protect the position's value with minimal cost. Exhibit 1 Option Contract Pricing Details for Dropqik Corporation Exercise Price|40|35|30|25|203-month call option price|0.56|1.45|4.05|10.30|12.423-month put option price|9.56|5.20|2.78|1.56|0.72 Another client, Nithin Rao, does not own any shares of Dropqik Corporation. Rao wants to speculate on the price volatility of Dropqik and expects large deviations in the share price following the new product release in the next month. Rao requests that Taylor recommend suitable strategies to profit from the directional moves in the share price. Taylor prepares the following three strategies to present to Rao: Strategy 1: A bull call spread combined with a bear put spread using $35 and $25 strike options. Strategy 2: A long straddle position at the $30 strike price. Strategy 3: A long strangle position using $40 and $20 strike options. Question:The breakeven price for an at-the-money (ATM) protective put strategy is closest to: Choices: A: $25.95, B: $27.22, C: $33.28.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Erica Taylor, CFA, is a derivatives analyst at Alpha Asset Management (Alpha). Taylor is concerned by recent equity market volatility and considers hedging strategies for the client portfolios that she oversees. Justine Fisher, a client of Alpha, holds a significant position in Dropqik Corporation, which currently trades at $30.50 per share. Fisher remains optimistic about the long-term performance of the stock and does not want to sell the shares. She is, however, concerned about potential future volatility and a short-term loss, and wants to protect the position's value with minimal cost. Exhibit 1 Option Contract Pricing Details for Dropqik Corporation Exercise Price|40|35|30|25|203-month call option price|0.56|1.45|4.05|10.30|12.423-month put option price|9.56|5.20|2.78|1.56|0.72 Another client, Nithin Rao, does not own any shares of Dropqik Corporation. Rao wants to speculate on the price volatility of Dropqik and expects large deviations in the share price following the new product release in the next month. Rao requests that Taylor recommend suitable strategies to profit from the directional moves in the share price. Taylor prepares the following three strategies to present to Rao: Strategy 1: A bull call spread combined with a bear put spread using $35 and $25 strike options. Strategy 2: A long straddle position at the $30 strike price. Strategy 3: A long strangle position using $40 and $20 strike options. ; Question:Given the information in Exhibit 1, the minimum cost of implementing Strategy 1 is closest to:; Answer Choices: A: $12.49, B: $12.75, C: $12.86. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Erica Taylor, CFA, is a derivatives analyst at Alpha Asset Management (Alpha). Taylor is concerned by recent equity market volatility and considers hedging strategies for the client portfolios that she oversees. Justine Fisher, a client of Alpha, holds a significant position in Dropqik Corporation, which currently trades at $30.50 per share. Fisher remains optimistic about the long-term performance of the stock and does not want to sell the shares. She is, however, concerned about potential future volatility and a short-term loss, and wants to protect the position's value with minimal cost. Exhibit 1 Option Contract Pricing Details for Dropqik Corporation Exercise Price|40|35|30|25|203-month call option price|0.56|1.45|4.05|10.30|12.423-month put option price|9.56|5.20|2.78|1.56|0.72 Another client, Nithin Rao, does not own any shares of Dropqik Corporation. Rao wants to speculate on the price volatility of Dropqik and expects large deviations in the share price following the new product release in the next month. Rao requests that Taylor recommend suitable strategies to profit from the directional moves in the share price. Taylor prepares the following three strategies to present to Rao: Strategy 1: A bull call spread combined with a bear put spread using $35 and $25 strike options. Strategy 2: A long straddle position at the $30 strike price. Strategy 3: A long strangle position using $40 and $20 strike options. ; Question:Given the information in Exhibit 1, the minimum cost of implementing Strategy 1 is closest to:; Answer Choices: A: $12.49, B: $12.75, C: $12.86. Answer:

Scenario: Erica Taylor, CFA, is a derivatives analyst at Alpha Asset Management (Alpha). Taylor is concerned by recent equity market volatility and considers hedging strategies for the client portfolios that she oversees. Justine Fisher, a client of Alpha, holds a significant position in Dropqik Corporation, which currently trades at $30.50 per share. Fisher remains optimistic about the long-term performance of the stock and does not want to sell the shares. She is, however, concerned about potential future volatility and a short-term loss, and wants to protect the position's value with minimal cost. Exhibit 1 Option Contract Pricing Details for Dropqik Corporation Exercise Price|40|35|30|25|203-month call option price|0.56|1.45|4.05|10.30|12.423-month put option price|9.56|5.20|2.78|1.56|0.72 Another client, Nithin Rao, does not own any shares of Dropqik Corporation. Rao wants to speculate on the price volatility of Dropqik and expects large deviations in the share price following the new product release in the next month. Rao requests that Taylor recommend suitable strategies to profit from the directional moves in the share price. Taylor prepares the following three strategies to present to Rao: Strategy 1: A bull call spread combined with a bear put spread using $35 and $25 strike options. Strategy 2: A long straddle position at the $30 strike price. Strategy 3: A long strangle position using $40 and $20 strike options. Question:Given the information in Exhibit 1, the minimum cost of implementing Strategy 1 is closest to: Choices: A: $12.49, B: $12.75, C: $12.86.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Erica Taylor, CFA, is a derivatives analyst at Alpha Asset Management (Alpha). Taylor is concerned by recent equity market volatility and considers hedging strategies for the client portfolios that she oversees. Justine Fisher, a client of Alpha, holds a significant position in Dropqik Corporation, which currently trades at $30.50 per share. Fisher remains optimistic about the long-term performance of the stock and does not want to sell the shares. She is, however, concerned about potential future volatility and a short-term loss, and wants to protect the position's value with minimal cost. Exhibit 1 Option Contract Pricing Details for Dropqik Corporation Exercise Price|40|35|30|25|203-month call option price|0.56|1.45|4.05|10.30|12.423-month put option price|9.56|5.20|2.78|1.56|0.72 Another client, Nithin Rao, does not own any shares of Dropqik Corporation. Rao wants to speculate on the price volatility of Dropqik and expects large deviations in the share price following the new product release in the next month. Rao requests that Taylor recommend suitable strategies to profit from the directional moves in the share price. Taylor prepares the following three strategies to present to Rao: Strategy 1: A bull call spread combined with a bear put spread using $35 and $25 strike options. Strategy 2: A long straddle position at the $30 strike price. Strategy 3: A long strangle position using $40 and $20 strike options. ; Question:At expiration, the breakeven points for Strategy 2 are closest to:; Answer Choices: A: $23.17 and $36.83., B: $23.67 and $37.33., C: $26.45 and $34.55.. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Erica Taylor, CFA, is a derivatives analyst at Alpha Asset Management (Alpha). Taylor is concerned by recent equity market volatility and considers hedging strategies for the client portfolios that she oversees. Justine Fisher, a client of Alpha, holds a significant position in Dropqik Corporation, which currently trades at $30.50 per share. Fisher remains optimistic about the long-term performance of the stock and does not want to sell the shares. She is, however, concerned about potential future volatility and a short-term loss, and wants to protect the position's value with minimal cost. Exhibit 1 Option Contract Pricing Details for Dropqik Corporation Exercise Price|40|35|30|25|203-month call option price|0.56|1.45|4.05|10.30|12.423-month put option price|9.56|5.20|2.78|1.56|0.72 Another client, Nithin Rao, does not own any shares of Dropqik Corporation. Rao wants to speculate on the price volatility of Dropqik and expects large deviations in the share price following the new product release in the next month. Rao requests that Taylor recommend suitable strategies to profit from the directional moves in the share price. Taylor prepares the following three strategies to present to Rao: Strategy 1: A bull call spread combined with a bear put spread using $35 and $25 strike options. Strategy 2: A long straddle position at the $30 strike price. Strategy 3: A long strangle position using $40 and $20 strike options. ; Question:At expiration, the breakeven points for Strategy 2 are closest to:; Answer Choices: A: $23.17 and $36.83., B: $23.67 and $37.33., C: $26.45 and $34.55.. Answer:

Scenario: Erica Taylor, CFA, is a derivatives analyst at Alpha Asset Management (Alpha). Taylor is concerned by recent equity market volatility and considers hedging strategies for the client portfolios that she oversees. Justine Fisher, a client of Alpha, holds a significant position in Dropqik Corporation, which currently trades at $30.50 per share. Fisher remains optimistic about the long-term performance of the stock and does not want to sell the shares. She is, however, concerned about potential future volatility and a short-term loss, and wants to protect the position's value with minimal cost. Exhibit 1 Option Contract Pricing Details for Dropqik Corporation Exercise Price|40|35|30|25|203-month call option price|0.56|1.45|4.05|10.30|12.423-month put option price|9.56|5.20|2.78|1.56|0.72 Another client, Nithin Rao, does not own any shares of Dropqik Corporation. Rao wants to speculate on the price volatility of Dropqik and expects large deviations in the share price following the new product release in the next month. Rao requests that Taylor recommend suitable strategies to profit from the directional moves in the share price. Taylor prepares the following three strategies to present to Rao: Strategy 1: A bull call spread combined with a bear put spread using $35 and $25 strike options. Strategy 2: A long straddle position at the $30 strike price. Strategy 3: A long strangle position using $40 and $20 strike options. Question:At expiration, the breakeven points for Strategy 2 are closest to: Choices: A: $23.17 and $36.83., B: $23.67 and $37.33., C: $26.45 and $34.55..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Alex Duhamel is an investment manager at Nashua Investment Associates Ltd. (Nashua). Duhamel specializes in portfolio management and is responsible for conducting annual reviews with clients. Duhamel begins to review the portfolio of Hannah Duffi, a US resident. Duffi's portfolio is invested in American and European securities. Duffi has a portfolio of USD 50 million and EUR 50 million allocated between stocks and bonds as shown in Exhibit 1. The exchange rate on January 1, 2019, was 1.1 USD/EUR. Exhibit 1 Hannah Duffi's Portfolio on January 1, 2019 Total Portfolio|Stocks|Beta|Bonds|Modified Duration United States|35%|1.2|65%|5.8 Europe|40%|1.15|60%|6.5 On January 1, 2020, the value of Duffi's European portfolio increased from EUR 50 million to EUR 54 million, with EUR 20 million in stocks and EUR 34 million in bonds. The USD/EUR exchange rate as of January 1, 2020, is 1.16. The Euro index futures contract is priced at EUR 700, has a multiplier of 10 and a beta of 1.0. Duffi decides to use futures contracts to rebalance the European portfolio to the allocation that existed on January 1, 2019. Duhamel is also meeting with Alyssa Pike, a 65-year-old client considering retirement. Pike's equity portfolio is presently valued at $3.6 million. Pike has an overall debt of $1 million with an average fixed interest rate of 4.5%. Pike expresses her concern regarding the uncertainty of equity markets and her worry that her portfolio will not generate an adequate return to cover her debt payments during retirement. Pike and Duhamel discuss the performance of the portfolio and the use of derivatives to manage risk. They are joined by Marie Kreutz, who works at Nashua with Duhamel. Kreutz makes the following statements: Statement 1: A total return swap will reduce the risk of the portfolio and convert the portfolio assets from receiving floating to receiving fixed. Statement 2: Buying a protective put on the portfolio would eliminate the downside risk of the portfolio and generate a fixed return. Statement 3: An interest rate swap can be used to modify fixed-rate liabilities into floating-rate liabilities. Evaluating Kreutz's statements, Duhamel suggests the use of an equity swap to pay the return on 50% of the equity portfolio's notional amount and receive a fixed interest rate of 3.75% for the same notional amount. Settlement dates will be annual. After entering the equity swap, the value of Pike's portfolio declines by 2% just before the first settlement date. ; Question:How many euro index futures are needed to rebalance Duffi's portfolio?; Answer Choices: A: Buy 199 Euro index futures., B: Buy 226 Euro index futures., C: Buy 263 Euro index futures.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Alex Duhamel is an investment manager at Nashua Investment Associates Ltd. (Nashua). Duhamel specializes in portfolio management and is responsible for conducting annual reviews with clients. Duhamel begins to review the portfolio of Hannah Duffi, a US resident. Duffi's portfolio is invested in American and European securities. Duffi has a portfolio of USD 50 million and EUR 50 million allocated between stocks and bonds as shown in Exhibit 1. The exchange rate on January 1, 2019, was 1.1 USD/EUR. Exhibit 1 Hannah Duffi's Portfolio on January 1, 2019 Total Portfolio|Stocks|Beta|Bonds|Modified Duration United States|35%|1.2|65%|5.8 Europe|40%|1.15|60%|6.5 On January 1, 2020, the value of Duffi's European portfolio increased from EUR 50 million to EUR 54 million, with EUR 20 million in stocks and EUR 34 million in bonds. The USD/EUR exchange rate as of January 1, 2020, is 1.16. The Euro index futures contract is priced at EUR 700, has a multiplier of 10 and a beta of 1.0. Duffi decides to use futures contracts to rebalance the European portfolio to the allocation that existed on January 1, 2019. Duhamel is also meeting with Alyssa Pike, a 65-year-old client considering retirement. Pike's equity portfolio is presently valued at $3.6 million. Pike has an overall debt of $1 million with an average fixed interest rate of 4.5%. Pike expresses her concern regarding the uncertainty of equity markets and her worry that her portfolio will not generate an adequate return to cover her debt payments during retirement. Pike and Duhamel discuss the performance of the portfolio and the use of derivatives to manage risk. They are joined by Marie Kreutz, who works at Nashua with Duhamel. Kreutz makes the following statements: Statement 1: A total return swap will reduce the risk of the portfolio and convert the portfolio assets from receiving floating to receiving fixed. Statement 2: Buying a protective put on the portfolio would eliminate the downside risk of the portfolio and generate a fixed return. Statement 3: An interest rate swap can be used to modify fixed-rate liabilities into floating-rate liabilities. Evaluating Kreutz's statements, Duhamel suggests the use of an equity swap to pay the return on 50% of the equity portfolio's notional amount and receive a fixed interest rate of 3.75% for the same notional amount. Settlement dates will be annual. After entering the equity swap, the value of Pike's portfolio declines by 2% just before the first settlement date. ; Question:How many euro index futures are needed to rebalance Duffi's portfolio?; Answer Choices: A: Buy 199 Euro index futures., B: Buy 226 Euro index futures., C: Buy 263 Euro index futures.. Answer:

Scenario: Alex Duhamel is an investment manager at Nashua Investment Associates Ltd. (Nashua). Duhamel specializes in portfolio management and is responsible for conducting annual reviews with clients. Duhamel begins to review the portfolio of Hannah Duffi, a US resident. Duffi's portfolio is invested in American and European securities. Duffi has a portfolio of USD 50 million and EUR 50 million allocated between stocks and bonds as shown in Exhibit 1. The exchange rate on January 1, 2019, was 1.1 USD/EUR. Exhibit 1 Hannah Duffi's Portfolio on January 1, 2019 Total Portfolio|Stocks|Beta|Bonds|Modified Duration United States|35%|1.2|65%|5.8 Europe|40%|1.15|60%|6.5 On January 1, 2020, the value of Duffi's European portfolio increased from EUR 50 million to EUR 54 million, with EUR 20 million in stocks and EUR 34 million in bonds. The USD/EUR exchange rate as of January 1, 2020, is 1.16. The Euro index futures contract is priced at EUR 700, has a multiplier of 10 and a beta of 1.0. Duffi decides to use futures contracts to rebalance the European portfolio to the allocation that existed on January 1, 2019. Duhamel is also meeting with Alyssa Pike, a 65-year-old client considering retirement. Pike's equity portfolio is presently valued at $3.6 million. Pike has an overall debt of $1 million with an average fixed interest rate of 4.5%. Pike expresses her concern regarding the uncertainty of equity markets and her worry that her portfolio will not generate an adequate return to cover her debt payments during retirement. Pike and Duhamel discuss the performance of the portfolio and the use of derivatives to manage risk. They are joined by Marie Kreutz, who works at Nashua with Duhamel. Kreutz makes the following statements: Statement 1: A total return swap will reduce the risk of the portfolio and convert the portfolio assets from receiving floating to receiving fixed. Statement 2: Buying a protective put on the portfolio would eliminate the downside risk of the portfolio and generate a fixed return. Statement 3: An interest rate swap can be used to modify fixed-rate liabilities into floating-rate liabilities. Evaluating Kreutz's statements, Duhamel suggests the use of an equity swap to pay the return on 50% of the equity portfolio's notional amount and receive a fixed interest rate of 3.75% for the same notional amount. Settlement dates will be annual. After entering the equity swap, the value of Pike's portfolio declines by 2% just before the first settlement date. Question:How many euro index futures are needed to rebalance Duffi's portfolio? Choices: A: Buy 199 Euro index futures., B: Buy 226 Euro index futures., C: Buy 263 Euro index futures..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Alex Duhamel is an investment manager at Nashua Investment Associates Ltd. (Nashua). Duhamel specializes in portfolio management and is responsible for conducting annual reviews with clients. Duhamel begins to review the portfolio of Hannah Duffi, a US resident. Duffi's portfolio is invested in American and European securities. Duffi has a portfolio of USD 50 million and EUR 50 million allocated between stocks and bonds as shown in Exhibit 1. The exchange rate on January 1, 2019, was 1.1 USD/EUR. Exhibit 1 Hannah Duffi's Portfolio on January 1, 2019 Total Portfolio|Stocks|Beta|Bonds|Modified Duration United States|35%|1.2|65%|5.8 Europe|40%|1.15|60%|6.5 On January 1, 2020, the value of Duffi's European portfolio increased from EUR 50 million to EUR 54 million, with EUR 20 million in stocks and EUR 34 million in bonds. The USD/EUR exchange rate as of January 1, 2020, is 1.16. The Euro index futures contract is priced at EUR 700, has a multiplier of 10 and a beta of 1.0. Duffi decides to use futures contracts to rebalance the European portfolio to the allocation that existed on January 1, 2019. Duhamel is also meeting with Alyssa Pike, a 65-year-old client considering retirement. Pike's equity portfolio is presently valued at $3.6 million. Pike has an overall debt of $1 million with an average fixed interest rate of 4.5%. Pike expresses her concern regarding the uncertainty of equity markets and her worry that her portfolio will not generate an adequate return to cover her debt payments during retirement. Pike and Duhamel discuss the performance of the portfolio and the use of derivatives to manage risk. They are joined by Marie Kreutz, who works at Nashua with Duhamel. Kreutz makes the following statements: Statement 1: A total return swap will reduce the risk of the portfolio and convert the portfolio assets from receiving floating to receiving fixed. Statement 2: Buying a protective put on the portfolio would eliminate the downside risk of the portfolio and generate a fixed return. Statement 3: An interest rate swap can be used to modify fixed-rate liabilities into floating-rate liabilities. Evaluating Kreutz's statements, Duhamel suggests the use of an equity swap to pay the return on 50% of the equity portfolio's notional amount and receive a fixed interest rate of 3.75% for the same notional amount. Settlement dates will be annual. After entering the equity swap, the value of Pike's portfolio declines by 2% just before the first settlement date. ; Question:The 1-year USD return on Duffi's European portfolio is closest to:; Answer Choices: A: 5.45%, B: 8.00%, C: 13.89%. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Alex Duhamel is an investment manager at Nashua Investment Associates Ltd. (Nashua). Duhamel specializes in portfolio management and is responsible for conducting annual reviews with clients. Duhamel begins to review the portfolio of Hannah Duffi, a US resident. Duffi's portfolio is invested in American and European securities. Duffi has a portfolio of USD 50 million and EUR 50 million allocated between stocks and bonds as shown in Exhibit 1. The exchange rate on January 1, 2019, was 1.1 USD/EUR. Exhibit 1 Hannah Duffi's Portfolio on January 1, 2019 Total Portfolio|Stocks|Beta|Bonds|Modified Duration United States|35%|1.2|65%|5.8 Europe|40%|1.15|60%|6.5 On January 1, 2020, the value of Duffi's European portfolio increased from EUR 50 million to EUR 54 million, with EUR 20 million in stocks and EUR 34 million in bonds. The USD/EUR exchange rate as of January 1, 2020, is 1.16. The Euro index futures contract is priced at EUR 700, has a multiplier of 10 and a beta of 1.0. Duffi decides to use futures contracts to rebalance the European portfolio to the allocation that existed on January 1, 2019. Duhamel is also meeting with Alyssa Pike, a 65-year-old client considering retirement. Pike's equity portfolio is presently valued at $3.6 million. Pike has an overall debt of $1 million with an average fixed interest rate of 4.5%. Pike expresses her concern regarding the uncertainty of equity markets and her worry that her portfolio will not generate an adequate return to cover her debt payments during retirement. Pike and Duhamel discuss the performance of the portfolio and the use of derivatives to manage risk. They are joined by Marie Kreutz, who works at Nashua with Duhamel. Kreutz makes the following statements: Statement 1: A total return swap will reduce the risk of the portfolio and convert the portfolio assets from receiving floating to receiving fixed. Statement 2: Buying a protective put on the portfolio would eliminate the downside risk of the portfolio and generate a fixed return. Statement 3: An interest rate swap can be used to modify fixed-rate liabilities into floating-rate liabilities. Evaluating Kreutz's statements, Duhamel suggests the use of an equity swap to pay the return on 50% of the equity portfolio's notional amount and receive a fixed interest rate of 3.75% for the same notional amount. Settlement dates will be annual. After entering the equity swap, the value of Pike's portfolio declines by 2% just before the first settlement date. ; Question:The 1-year USD return on Duffi's European portfolio is closest to:; Answer Choices: A: 5.45%, B: 8.00%, C: 13.89%. Answer:

Scenario: Alex Duhamel is an investment manager at Nashua Investment Associates Ltd. (Nashua). Duhamel specializes in portfolio management and is responsible for conducting annual reviews with clients. Duhamel begins to review the portfolio of Hannah Duffi, a US resident. Duffi's portfolio is invested in American and European securities. Duffi has a portfolio of USD 50 million and EUR 50 million allocated between stocks and bonds as shown in Exhibit 1. The exchange rate on January 1, 2019, was 1.1 USD/EUR. Exhibit 1 Hannah Duffi's Portfolio on January 1, 2019 Total Portfolio|Stocks|Beta|Bonds|Modified Duration United States|35%|1.2|65%|5.8 Europe|40%|1.15|60%|6.5 On January 1, 2020, the value of Duffi's European portfolio increased from EUR 50 million to EUR 54 million, with EUR 20 million in stocks and EUR 34 million in bonds. The USD/EUR exchange rate as of January 1, 2020, is 1.16. The Euro index futures contract is priced at EUR 700, has a multiplier of 10 and a beta of 1.0. Duffi decides to use futures contracts to rebalance the European portfolio to the allocation that existed on January 1, 2019. Duhamel is also meeting with Alyssa Pike, a 65-year-old client considering retirement. Pike's equity portfolio is presently valued at $3.6 million. Pike has an overall debt of $1 million with an average fixed interest rate of 4.5%. Pike expresses her concern regarding the uncertainty of equity markets and her worry that her portfolio will not generate an adequate return to cover her debt payments during retirement. Pike and Duhamel discuss the performance of the portfolio and the use of derivatives to manage risk. They are joined by Marie Kreutz, who works at Nashua with Duhamel. Kreutz makes the following statements: Statement 1: A total return swap will reduce the risk of the portfolio and convert the portfolio assets from receiving floating to receiving fixed. Statement 2: Buying a protective put on the portfolio would eliminate the downside risk of the portfolio and generate a fixed return. Statement 3: An interest rate swap can be used to modify fixed-rate liabilities into floating-rate liabilities. Evaluating Kreutz's statements, Duhamel suggests the use of an equity swap to pay the return on 50% of the equity portfolio's notional amount and receive a fixed interest rate of 3.75% for the same notional amount. Settlement dates will be annual. After entering the equity swap, the value of Pike's portfolio declines by 2% just before the first settlement date. Question:The 1-year USD return on Duffi's European portfolio is closest to: Choices: A: 5.45%, B: 8.00%, C: 13.89%.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Alex Duhamel is an investment manager at Nashua Investment Associates Ltd. (Nashua). Duhamel specializes in portfolio management and is responsible for conducting annual reviews with clients. Duhamel begins to review the portfolio of Hannah Duffi, a US resident. Duffi's portfolio is invested in American and European securities. Duffi has a portfolio of USD 50 million and EUR 50 million allocated between stocks and bonds as shown in Exhibit 1. The exchange rate on January 1, 2019, was 1.1 USD/EUR. Exhibit 1 Hannah Duffi's Portfolio on January 1, 2019 Total Portfolio|Stocks|Beta|Bonds|Modified Duration United States|35%|1.2|65%|5.8 Europe|40%|1.15|60%|6.5 On January 1, 2020, the value of Duffi's European portfolio increased from EUR 50 million to EUR 54 million, with EUR 20 million in stocks and EUR 34 million in bonds. The USD/EUR exchange rate as of January 1, 2020, is 1.16. The Euro index futures contract is priced at EUR 700, has a multiplier of 10 and a beta of 1.0. Duffi decides to use futures contracts to rebalance the European portfolio to the allocation that existed on January 1, 2019. Duhamel is also meeting with Alyssa Pike, a 65-year-old client considering retirement. Pike's equity portfolio is presently valued at $3.6 million. Pike has an overall debt of $1 million with an average fixed interest rate of 4.5%. Pike expresses her concern regarding the uncertainty of equity markets and her worry that her portfolio will not generate an adequate return to cover her debt payments during retirement. Pike and Duhamel discuss the performance of the portfolio and the use of derivatives to manage risk. They are joined by Marie Kreutz, who works at Nashua with Duhamel. Kreutz makes the following statements: Statement 1: A total return swap will reduce the risk of the portfolio and convert the portfolio assets from receiving floating to receiving fixed. Statement 2: Buying a protective put on the portfolio would eliminate the downside risk of the portfolio and generate a fixed return. Statement 3: An interest rate swap can be used to modify fixed-rate liabilities into floating-rate liabilities. Evaluating Kreutz's statements, Duhamel suggests the use of an equity swap to pay the return on 50% of the equity portfolio's notional amount and receive a fixed interest rate of 3.75% for the same notional amount. Settlement dates will be annual. After entering the equity swap, the value of Pike's portfolio declines by 2% just before the first settlement date. ; Question:Which of Kreutz's statements is least likely correct?; Answer Choices: A: Statement 1., B: Statement 2., C: Statement 3.. Answer:

B

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Alex Duhamel is an investment manager at Nashua Investment Associates Ltd. (Nashua). Duhamel specializes in portfolio management and is responsible for conducting annual reviews with clients. Duhamel begins to review the portfolio of Hannah Duffi, a US resident. Duffi's portfolio is invested in American and European securities. Duffi has a portfolio of USD 50 million and EUR 50 million allocated between stocks and bonds as shown in Exhibit 1. The exchange rate on January 1, 2019, was 1.1 USD/EUR. Exhibit 1 Hannah Duffi's Portfolio on January 1, 2019 Total Portfolio|Stocks|Beta|Bonds|Modified Duration United States|35%|1.2|65%|5.8 Europe|40%|1.15|60%|6.5 On January 1, 2020, the value of Duffi's European portfolio increased from EUR 50 million to EUR 54 million, with EUR 20 million in stocks and EUR 34 million in bonds. The USD/EUR exchange rate as of January 1, 2020, is 1.16. The Euro index futures contract is priced at EUR 700, has a multiplier of 10 and a beta of 1.0. Duffi decides to use futures contracts to rebalance the European portfolio to the allocation that existed on January 1, 2019. Duhamel is also meeting with Alyssa Pike, a 65-year-old client considering retirement. Pike's equity portfolio is presently valued at $3.6 million. Pike has an overall debt of $1 million with an average fixed interest rate of 4.5%. Pike expresses her concern regarding the uncertainty of equity markets and her worry that her portfolio will not generate an adequate return to cover her debt payments during retirement. Pike and Duhamel discuss the performance of the portfolio and the use of derivatives to manage risk. They are joined by Marie Kreutz, who works at Nashua with Duhamel. Kreutz makes the following statements: Statement 1: A total return swap will reduce the risk of the portfolio and convert the portfolio assets from receiving floating to receiving fixed. Statement 2: Buying a protective put on the portfolio would eliminate the downside risk of the portfolio and generate a fixed return. Statement 3: An interest rate swap can be used to modify fixed-rate liabilities into floating-rate liabilities. Evaluating Kreutz's statements, Duhamel suggests the use of an equity swap to pay the return on 50% of the equity portfolio's notional amount and receive a fixed interest rate of 3.75% for the same notional amount. Settlement dates will be annual. After entering the equity swap, the value of Pike's portfolio declines by 2% just before the first settlement date. ; Question:Which of Kreutz's statements is least likely correct?; Answer Choices: A: Statement 1., B: Statement 2., C: Statement 3.. Answer:

Scenario: Alex Duhamel is an investment manager at Nashua Investment Associates Ltd. (Nashua). Duhamel specializes in portfolio management and is responsible for conducting annual reviews with clients. Duhamel begins to review the portfolio of Hannah Duffi, a US resident. Duffi's portfolio is invested in American and European securities. Duffi has a portfolio of USD 50 million and EUR 50 million allocated between stocks and bonds as shown in Exhibit 1. The exchange rate on January 1, 2019, was 1.1 USD/EUR. Exhibit 1 Hannah Duffi's Portfolio on January 1, 2019 Total Portfolio|Stocks|Beta|Bonds|Modified Duration United States|35%|1.2|65%|5.8 Europe|40%|1.15|60%|6.5 On January 1, 2020, the value of Duffi's European portfolio increased from EUR 50 million to EUR 54 million, with EUR 20 million in stocks and EUR 34 million in bonds. The USD/EUR exchange rate as of January 1, 2020, is 1.16. The Euro index futures contract is priced at EUR 700, has a multiplier of 10 and a beta of 1.0. Duffi decides to use futures contracts to rebalance the European portfolio to the allocation that existed on January 1, 2019. Duhamel is also meeting with Alyssa Pike, a 65-year-old client considering retirement. Pike's equity portfolio is presently valued at $3.6 million. Pike has an overall debt of $1 million with an average fixed interest rate of 4.5%. Pike expresses her concern regarding the uncertainty of equity markets and her worry that her portfolio will not generate an adequate return to cover her debt payments during retirement. Pike and Duhamel discuss the performance of the portfolio and the use of derivatives to manage risk. They are joined by Marie Kreutz, who works at Nashua with Duhamel. Kreutz makes the following statements: Statement 1: A total return swap will reduce the risk of the portfolio and convert the portfolio assets from receiving floating to receiving fixed. Statement 2: Buying a protective put on the portfolio would eliminate the downside risk of the portfolio and generate a fixed return. Statement 3: An interest rate swap can be used to modify fixed-rate liabilities into floating-rate liabilities. Evaluating Kreutz's statements, Duhamel suggests the use of an equity swap to pay the return on 50% of the equity portfolio's notional amount and receive a fixed interest rate of 3.75% for the same notional amount. Settlement dates will be annual. After entering the equity swap, the value of Pike's portfolio declines by 2% just before the first settlement date. Question:Which of Kreutz's statements is least likely correct? Choices: A: Statement 1., B: Statement 2., C: Statement 3..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Alex Duhamel is an investment manager at Nashua Investment Associates Ltd. (Nashua). Duhamel specializes in portfolio management and is responsible for conducting annual reviews with clients. Duhamel begins to review the portfolio of Hannah Duffi, a US resident. Duffi's portfolio is invested in American and European securities. Duffi has a portfolio of USD 50 million and EUR 50 million allocated between stocks and bonds as shown in Exhibit 1. The exchange rate on January 1, 2019, was 1.1 USD/EUR. Exhibit 1 Hannah Duffi's Portfolio on January 1, 2019 Total Portfolio|Stocks|Beta|Bonds|Modified Duration United States|35%|1.2|65%|5.8 Europe|40%|1.15|60%|6.5 On January 1, 2020, the value of Duffi's European portfolio increased from EUR 50 million to EUR 54 million, with EUR 20 million in stocks and EUR 34 million in bonds. The USD/EUR exchange rate as of January 1, 2020, is 1.16. The Euro index futures contract is priced at EUR 700, has a multiplier of 10 and a beta of 1.0. Duffi decides to use futures contracts to rebalance the European portfolio to the allocation that existed on January 1, 2019. Duhamel is also meeting with Alyssa Pike, a 65-year-old client considering retirement. Pike's equity portfolio is presently valued at $3.6 million. Pike has an overall debt of $1 million with an average fixed interest rate of 4.5%. Pike expresses her concern regarding the uncertainty of equity markets and her worry that her portfolio will not generate an adequate return to cover her debt payments during retirement. Pike and Duhamel discuss the performance of the portfolio and the use of derivatives to manage risk. They are joined by Marie Kreutz, who works at Nashua with Duhamel. Kreutz makes the following statements: Statement 1: A total return swap will reduce the risk of the portfolio and convert the portfolio assets from receiving floating to receiving fixed. Statement 2: Buying a protective put on the portfolio would eliminate the downside risk of the portfolio and generate a fixed return. Statement 3: An interest rate swap can be used to modify fixed-rate liabilities into floating-rate liabilities. Evaluating Kreutz's statements, Duhamel suggests the use of an equity swap to pay the return on 50% of the equity portfolio's notional amount and receive a fixed interest rate of 3.75% for the same notional amount. Settlement dates will be annual. After entering the equity swap, the value of Pike's portfolio declines by 2% just before the first settlement date. ; Question:At the first swap settlement date, Pike would most likely:; Answer Choices: A: pay $36,000 to the swap counterparty., B: receive $67,500 from the swap counterparty., C: receive $103,500 from the swap counterparty.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Alex Duhamel is an investment manager at Nashua Investment Associates Ltd. (Nashua). Duhamel specializes in portfolio management and is responsible for conducting annual reviews with clients. Duhamel begins to review the portfolio of Hannah Duffi, a US resident. Duffi's portfolio is invested in American and European securities. Duffi has a portfolio of USD 50 million and EUR 50 million allocated between stocks and bonds as shown in Exhibit 1. The exchange rate on January 1, 2019, was 1.1 USD/EUR. Exhibit 1 Hannah Duffi's Portfolio on January 1, 2019 Total Portfolio|Stocks|Beta|Bonds|Modified Duration United States|35%|1.2|65%|5.8 Europe|40%|1.15|60%|6.5 On January 1, 2020, the value of Duffi's European portfolio increased from EUR 50 million to EUR 54 million, with EUR 20 million in stocks and EUR 34 million in bonds. The USD/EUR exchange rate as of January 1, 2020, is 1.16. The Euro index futures contract is priced at EUR 700, has a multiplier of 10 and a beta of 1.0. Duffi decides to use futures contracts to rebalance the European portfolio to the allocation that existed on January 1, 2019. Duhamel is also meeting with Alyssa Pike, a 65-year-old client considering retirement. Pike's equity portfolio is presently valued at $3.6 million. Pike has an overall debt of $1 million with an average fixed interest rate of 4.5%. Pike expresses her concern regarding the uncertainty of equity markets and her worry that her portfolio will not generate an adequate return to cover her debt payments during retirement. Pike and Duhamel discuss the performance of the portfolio and the use of derivatives to manage risk. They are joined by Marie Kreutz, who works at Nashua with Duhamel. Kreutz makes the following statements: Statement 1: A total return swap will reduce the risk of the portfolio and convert the portfolio assets from receiving floating to receiving fixed. Statement 2: Buying a protective put on the portfolio would eliminate the downside risk of the portfolio and generate a fixed return. Statement 3: An interest rate swap can be used to modify fixed-rate liabilities into floating-rate liabilities. Evaluating Kreutz's statements, Duhamel suggests the use of an equity swap to pay the return on 50% of the equity portfolio's notional amount and receive a fixed interest rate of 3.75% for the same notional amount. Settlement dates will be annual. After entering the equity swap, the value of Pike's portfolio declines by 2% just before the first settlement date. ; Question:At the first swap settlement date, Pike would most likely:; Answer Choices: A: pay $36,000 to the swap counterparty., B: receive $67,500 from the swap counterparty., C: receive $103,500 from the swap counterparty.. Answer:

Scenario: Alex Duhamel is an investment manager at Nashua Investment Associates Ltd. (Nashua). Duhamel specializes in portfolio management and is responsible for conducting annual reviews with clients. Duhamel begins to review the portfolio of Hannah Duffi, a US resident. Duffi's portfolio is invested in American and European securities. Duffi has a portfolio of USD 50 million and EUR 50 million allocated between stocks and bonds as shown in Exhibit 1. The exchange rate on January 1, 2019, was 1.1 USD/EUR. Exhibit 1 Hannah Duffi's Portfolio on January 1, 2019 Total Portfolio|Stocks|Beta|Bonds|Modified Duration United States|35%|1.2|65%|5.8 Europe|40%|1.15|60%|6.5 On January 1, 2020, the value of Duffi's European portfolio increased from EUR 50 million to EUR 54 million, with EUR 20 million in stocks and EUR 34 million in bonds. The USD/EUR exchange rate as of January 1, 2020, is 1.16. The Euro index futures contract is priced at EUR 700, has a multiplier of 10 and a beta of 1.0. Duffi decides to use futures contracts to rebalance the European portfolio to the allocation that existed on January 1, 2019. Duhamel is also meeting with Alyssa Pike, a 65-year-old client considering retirement. Pike's equity portfolio is presently valued at $3.6 million. Pike has an overall debt of $1 million with an average fixed interest rate of 4.5%. Pike expresses her concern regarding the uncertainty of equity markets and her worry that her portfolio will not generate an adequate return to cover her debt payments during retirement. Pike and Duhamel discuss the performance of the portfolio and the use of derivatives to manage risk. They are joined by Marie Kreutz, who works at Nashua with Duhamel. Kreutz makes the following statements: Statement 1: A total return swap will reduce the risk of the portfolio and convert the portfolio assets from receiving floating to receiving fixed. Statement 2: Buying a protective put on the portfolio would eliminate the downside risk of the portfolio and generate a fixed return. Statement 3: An interest rate swap can be used to modify fixed-rate liabilities into floating-rate liabilities. Evaluating Kreutz's statements, Duhamel suggests the use of an equity swap to pay the return on 50% of the equity portfolio's notional amount and receive a fixed interest rate of 3.75% for the same notional amount. Settlement dates will be annual. After entering the equity swap, the value of Pike's portfolio declines by 2% just before the first settlement date. Question:At the first swap settlement date, Pike would most likely: Choices: A: pay $36,000 to the swap counterparty., B: receive $67,500 from the swap counterparty., C: receive $103,500 from the swap counterparty..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Richard Elliott, CFA, is the head of the fixed income department of Lowell Wealth Management (LWM), a leading investment advisory firm. Elliott works closely with his director of research, Stephen Lee, CFA. LWM recently changed its focus from working only with pensions and endowments to working only with high-net-worth individuals. As a result, the team is revamping the layout of its presentations and reports. In addition to a core allocation to bullet government bonds, LWM expects to invest in securities that have embedded optionality, such as callable bonds and mortgage-backed securities. Historically, the firm has relied on identifying value from the shape of the yield curve. To measure the curvature of the current yield curve, Elliott uses the data in Exhibit 1 to calculate the butterfly spread. Exhibit 1 Yield|Curve Data Term (years)|Yield to Maturity (%) 2|5.50 10|5.75 30|7.00 Elliott asks Lee to prepare expected return estimates for the 2- and 30-year bonds, which are shown in Exhibit 2. Exhibit 2 Coupon yield|Current price|Expected price in one year 2-Year|4.75|105.00|106.05 30-Year|6.00|100.00|101.00 Additionally, Elliott asks Lee to construct sample portfolio structures by shifting the allocations between three tenors of bullet government bonds: 2-year, 10-year, and 30-year US Treasury securities. The allocations in the sample portfolios are shown in Exhibit 3. Exhibit 3 Sample Portfolio Allocations Sample|Portfolio|2-year|10-year|30-year 1|50%|0%|50% 2|20%|70%|10% 3|40%|30%|30% ; Question:The butterfly spread is closest to:; Answer Choices: A: -1.00%, B: 1.00%, C: 1.50%. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Richard Elliott, CFA, is the head of the fixed income department of Lowell Wealth Management (LWM), a leading investment advisory firm. Elliott works closely with his director of research, Stephen Lee, CFA. LWM recently changed its focus from working only with pensions and endowments to working only with high-net-worth individuals. As a result, the team is revamping the layout of its presentations and reports. In addition to a core allocation to bullet government bonds, LWM expects to invest in securities that have embedded optionality, such as callable bonds and mortgage-backed securities. Historically, the firm has relied on identifying value from the shape of the yield curve. To measure the curvature of the current yield curve, Elliott uses the data in Exhibit 1 to calculate the butterfly spread. Exhibit 1 Yield|Curve Data Term (years)|Yield to Maturity (%) 2|5.50 10|5.75 30|7.00 Elliott asks Lee to prepare expected return estimates for the 2- and 30-year bonds, which are shown in Exhibit 2. Exhibit 2 Coupon yield|Current price|Expected price in one year 2-Year|4.75|105.00|106.05 30-Year|6.00|100.00|101.00 Additionally, Elliott asks Lee to construct sample portfolio structures by shifting the allocations between three tenors of bullet government bonds: 2-year, 10-year, and 30-year US Treasury securities. The allocations in the sample portfolios are shown in Exhibit 3. Exhibit 3 Sample Portfolio Allocations Sample|Portfolio|2-year|10-year|30-year 1|50%|0%|50% 2|20%|70%|10% 3|40%|30%|30% ; Question:The butterfly spread is closest to:; Answer Choices: A: -1.00%, B: 1.00%, C: 1.50%. Answer:

Scenario: Richard Elliott, CFA, is the head of the fixed income department of Lowell Wealth Management (LWM), a leading investment advisory firm. Elliott works closely with his director of research, Stephen Lee, CFA. LWM recently changed its focus from working only with pensions and endowments to working only with high-net-worth individuals. As a result, the team is revamping the layout of its presentations and reports. In addition to a core allocation to bullet government bonds, LWM expects to invest in securities that have embedded optionality, such as callable bonds and mortgage-backed securities. Historically, the firm has relied on identifying value from the shape of the yield curve. To measure the curvature of the current yield curve, Elliott uses the data in Exhibit 1 to calculate the butterfly spread. Exhibit 1 Yield|Curve Data Term (years)|Yield to Maturity (%) 2|5.50 10|5.75 30|7.00 Elliott asks Lee to prepare expected return estimates for the 2- and 30-year bonds, which are shown in Exhibit 2. Exhibit 2 Coupon yield|Current price|Expected price in one year 2-Year|4.75|105.00|106.05 30-Year|6.00|100.00|101.00 Additionally, Elliott asks Lee to construct sample portfolio structures by shifting the allocations between three tenors of bullet government bonds: 2-year, 10-year, and 30-year US Treasury securities. The allocations in the sample portfolios are shown in Exhibit 3. Exhibit 3 Sample Portfolio Allocations Sample|Portfolio|2-year|10-year|30-year 1|50%|0%|50% 2|20%|70%|10% 3|40%|30%|30% Question:The butterfly spread is closest to: Choices: A: -1.00%, B: 1.00%, C: 1.50%.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Richard Elliott, CFA, is the head of the fixed income department of Lowell Wealth Management (LWM), a leading investment advisory firm. Elliott works closely with his director of research, Stephen Lee, CFA. LWM recently changed its focus from working only with pensions and endowments to working only with high-net-worth individuals. As a result, the team is revamping the layout of its presentations and reports. In addition to a core allocation to bullet government bonds, LWM expects to invest in securities that have embedded optionality, such as callable bonds and mortgage-backed securities. Historically, the firm has relied on identifying value from the shape of the yield curve. To measure the curvature of the current yield curve, Elliott uses the data in Exhibit 1 to calculate the butterfly spread. Exhibit 1 Yield|Curve Data Term (years)|Yield to Maturity (%) 2|5.50 10|5.75 30|7.00 Elliott asks Lee to prepare expected return estimates for the 2- and 30-year bonds, which are shown in Exhibit 2. Exhibit 2 Coupon yield|Current price|Expected price in one year 2-Year|4.75|105.00|106.05 30-Year|6.00|100.00|101.00 Additionally, Elliott asks Lee to construct sample portfolio structures by shifting the allocations between three tenors of bullet government bonds: 2-year, 10-year, and 30-year US Treasury securities. The allocations in the sample portfolios are shown in Exhibit 3. Exhibit 3 Sample Portfolio Allocations Sample|Portfolio|2-year|10-year|30-year 1|50%|0%|50% 2|20%|70%|10% 3|40%|30%|30% ; Question:Which measure of duration is most appropriate for LWM to use?; Answer Choices: A: Macaulay duration., B: Modified duration., C: Effective duration.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Richard Elliott, CFA, is the head of the fixed income department of Lowell Wealth Management (LWM), a leading investment advisory firm. Elliott works closely with his director of research, Stephen Lee, CFA. LWM recently changed its focus from working only with pensions and endowments to working only with high-net-worth individuals. As a result, the team is revamping the layout of its presentations and reports. In addition to a core allocation to bullet government bonds, LWM expects to invest in securities that have embedded optionality, such as callable bonds and mortgage-backed securities. Historically, the firm has relied on identifying value from the shape of the yield curve. To measure the curvature of the current yield curve, Elliott uses the data in Exhibit 1 to calculate the butterfly spread. Exhibit 1 Yield|Curve Data Term (years)|Yield to Maturity (%) 2|5.50 10|5.75 30|7.00 Elliott asks Lee to prepare expected return estimates for the 2- and 30-year bonds, which are shown in Exhibit 2. Exhibit 2 Coupon yield|Current price|Expected price in one year 2-Year|4.75|105.00|106.05 30-Year|6.00|100.00|101.00 Additionally, Elliott asks Lee to construct sample portfolio structures by shifting the allocations between three tenors of bullet government bonds: 2-year, 10-year, and 30-year US Treasury securities. The allocations in the sample portfolios are shown in Exhibit 3. Exhibit 3 Sample Portfolio Allocations Sample|Portfolio|2-year|10-year|30-year 1|50%|0%|50% 2|20%|70%|10% 3|40%|30%|30% ; Question:Which measure of duration is most appropriate for LWM to use?; Answer Choices: A: Macaulay duration., B: Modified duration., C: Effective duration.. Answer:

Scenario: Richard Elliott, CFA, is the head of the fixed income department of Lowell Wealth Management (LWM), a leading investment advisory firm. Elliott works closely with his director of research, Stephen Lee, CFA. LWM recently changed its focus from working only with pensions and endowments to working only with high-net-worth individuals. As a result, the team is revamping the layout of its presentations and reports. In addition to a core allocation to bullet government bonds, LWM expects to invest in securities that have embedded optionality, such as callable bonds and mortgage-backed securities. Historically, the firm has relied on identifying value from the shape of the yield curve. To measure the curvature of the current yield curve, Elliott uses the data in Exhibit 1 to calculate the butterfly spread. Exhibit 1 Yield|Curve Data Term (years)|Yield to Maturity (%) 2|5.50 10|5.75 30|7.00 Elliott asks Lee to prepare expected return estimates for the 2- and 30-year bonds, which are shown in Exhibit 2. Exhibit 2 Coupon yield|Current price|Expected price in one year 2-Year|4.75|105.00|106.05 30-Year|6.00|100.00|101.00 Additionally, Elliott asks Lee to construct sample portfolio structures by shifting the allocations between three tenors of bullet government bonds: 2-year, 10-year, and 30-year US Treasury securities. The allocations in the sample portfolios are shown in Exhibit 3. Exhibit 3 Sample Portfolio Allocations Sample|Portfolio|2-year|10-year|30-year 1|50%|0%|50% 2|20%|70%|10% 3|40%|30%|30% Question:Which measure of duration is most appropriate for LWM to use? Choices: A: Macaulay duration., B: Modified duration., C: Effective duration..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Richard Elliott, CFA, is the head of the fixed income department of Lowell Wealth Management (LWM), a leading investment advisory firm. Elliott works closely with his director of research, Stephen Lee, CFA. LWM recently changed its focus from working only with pensions and endowments to working only with high-net-worth individuals. As a result, the team is revamping the layout of its presentations and reports. In addition to a core allocation to bullet government bonds, LWM expects to invest in securities that have embedded optionality, such as callable bonds and mortgage-backed securities. Historically, the firm has relied on identifying value from the shape of the yield curve. To measure the curvature of the current yield curve, Elliott uses the data in Exhibit 1 to calculate the butterfly spread. Exhibit 1 Yield|Curve Data Term (years)|Yield to Maturity (%) 2|5.50 10|5.75 30|7.00 Elliott asks Lee to prepare expected return estimates for the 2- and 30-year bonds, which are shown in Exhibit 2. Exhibit 2 Coupon yield|Current price|Expected price in one year 2-Year|4.75|105.00|106.05 30-Year|6.00|100.00|101.00 Additionally, Elliott asks Lee to construct sample portfolio structures by shifting the allocations between three tenors of bullet government bonds: 2-year, 10-year, and 30-year US Treasury securities. The allocations in the sample portfolios are shown in Exhibit 3. Exhibit 3 Sample Portfolio Allocations Sample|Portfolio|2-year|10-year|30-year 1|50%|0%|50% 2|20%|70%|10% 3|40%|30%|30% ; Question:Given the expected prices over the next year, which bond has the higher expected total return?; Answer Choices: A: The 2-year., B: The 30-year., C: Both bonds have the same expected total return.. Answer:

B

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Richard Elliott, CFA, is the head of the fixed income department of Lowell Wealth Management (LWM), a leading investment advisory firm. Elliott works closely with his director of research, Stephen Lee, CFA. LWM recently changed its focus from working only with pensions and endowments to working only with high-net-worth individuals. As a result, the team is revamping the layout of its presentations and reports. In addition to a core allocation to bullet government bonds, LWM expects to invest in securities that have embedded optionality, such as callable bonds and mortgage-backed securities. Historically, the firm has relied on identifying value from the shape of the yield curve. To measure the curvature of the current yield curve, Elliott uses the data in Exhibit 1 to calculate the butterfly spread. Exhibit 1 Yield|Curve Data Term (years)|Yield to Maturity (%) 2|5.50 10|5.75 30|7.00 Elliott asks Lee to prepare expected return estimates for the 2- and 30-year bonds, which are shown in Exhibit 2. Exhibit 2 Coupon yield|Current price|Expected price in one year 2-Year|4.75|105.00|106.05 30-Year|6.00|100.00|101.00 Additionally, Elliott asks Lee to construct sample portfolio structures by shifting the allocations between three tenors of bullet government bonds: 2-year, 10-year, and 30-year US Treasury securities. The allocations in the sample portfolios are shown in Exhibit 3. Exhibit 3 Sample Portfolio Allocations Sample|Portfolio|2-year|10-year|30-year 1|50%|0%|50% 2|20%|70%|10% 3|40%|30%|30% ; Question:Given the expected prices over the next year, which bond has the higher expected total return?; Answer Choices: A: The 2-year., B: The 30-year., C: Both bonds have the same expected total return.. Answer:

Scenario: Richard Elliott, CFA, is the head of the fixed income department of Lowell Wealth Management (LWM), a leading investment advisory firm. Elliott works closely with his director of research, Stephen Lee, CFA. LWM recently changed its focus from working only with pensions and endowments to working only with high-net-worth individuals. As a result, the team is revamping the layout of its presentations and reports. In addition to a core allocation to bullet government bonds, LWM expects to invest in securities that have embedded optionality, such as callable bonds and mortgage-backed securities. Historically, the firm has relied on identifying value from the shape of the yield curve. To measure the curvature of the current yield curve, Elliott uses the data in Exhibit 1 to calculate the butterfly spread. Exhibit 1 Yield|Curve Data Term (years)|Yield to Maturity (%) 2|5.50 10|5.75 30|7.00 Elliott asks Lee to prepare expected return estimates for the 2- and 30-year bonds, which are shown in Exhibit 2. Exhibit 2 Coupon yield|Current price|Expected price in one year 2-Year|4.75|105.00|106.05 30-Year|6.00|100.00|101.00 Additionally, Elliott asks Lee to construct sample portfolio structures by shifting the allocations between three tenors of bullet government bonds: 2-year, 10-year, and 30-year US Treasury securities. The allocations in the sample portfolios are shown in Exhibit 3. Exhibit 3 Sample Portfolio Allocations Sample|Portfolio|2-year|10-year|30-year 1|50%|0%|50% 2|20%|70%|10% 3|40%|30%|30% Question:Given the expected prices over the next year, which bond has the higher expected total return? Choices: A: The 2-year., B: The 30-year., C: Both bonds have the same expected total return..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Richard Elliott, CFA, is the head of the fixed income department of Lowell Wealth Management (LWM), a leading investment advisory firm. Elliott works closely with his director of research, Stephen Lee, CFA. LWM recently changed its focus from working only with pensions and endowments to working only with high-net-worth individuals. As a result, the team is revamping the layout of its presentations and reports. In addition to a core allocation to bullet government bonds, LWM expects to invest in securities that have embedded optionality, such as callable bonds and mortgage-backed securities. Historically, the firm has relied on identifying value from the shape of the yield curve. To measure the curvature of the current yield curve, Elliott uses the data in Exhibit 1 to calculate the butterfly spread. Exhibit 1 Yield|Curve Data Term (years)|Yield to Maturity (%) 2|5.50 10|5.75 30|7.00 Elliott asks Lee to prepare expected return estimates for the 2- and 30-year bonds, which are shown in Exhibit 2. Exhibit 2 Coupon yield|Current price|Expected price in one year 2-Year|4.75|105.00|106.05 30-Year|6.00|100.00|101.00 Additionally, Elliott asks Lee to construct sample portfolio structures by shifting the allocations between three tenors of bullet government bonds: 2-year, 10-year, and 30-year US Treasury securities. The allocations in the sample portfolios are shown in Exhibit 3. Exhibit 3 Sample Portfolio Allocations Sample|Portfolio|2-year|10-year|30-year 1|50%|0%|50% 2|20%|70%|10% 3|40%|30%|30% ; Question:Which sample portfolio is most likely to benefit from a flattening yield curve environment?; Answer Choices: A: Portfolio 1., B: Portfolio 2., C: Portfolio 3.. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Richard Elliott, CFA, is the head of the fixed income department of Lowell Wealth Management (LWM), a leading investment advisory firm. Elliott works closely with his director of research, Stephen Lee, CFA. LWM recently changed its focus from working only with pensions and endowments to working only with high-net-worth individuals. As a result, the team is revamping the layout of its presentations and reports. In addition to a core allocation to bullet government bonds, LWM expects to invest in securities that have embedded optionality, such as callable bonds and mortgage-backed securities. Historically, the firm has relied on identifying value from the shape of the yield curve. To measure the curvature of the current yield curve, Elliott uses the data in Exhibit 1 to calculate the butterfly spread. Exhibit 1 Yield|Curve Data Term (years)|Yield to Maturity (%) 2|5.50 10|5.75 30|7.00 Elliott asks Lee to prepare expected return estimates for the 2- and 30-year bonds, which are shown in Exhibit 2. Exhibit 2 Coupon yield|Current price|Expected price in one year 2-Year|4.75|105.00|106.05 30-Year|6.00|100.00|101.00 Additionally, Elliott asks Lee to construct sample portfolio structures by shifting the allocations between three tenors of bullet government bonds: 2-year, 10-year, and 30-year US Treasury securities. The allocations in the sample portfolios are shown in Exhibit 3. Exhibit 3 Sample Portfolio Allocations Sample|Portfolio|2-year|10-year|30-year 1|50%|0%|50% 2|20%|70%|10% 3|40%|30%|30% ; Question:Which sample portfolio is most likely to benefit from a flattening yield curve environment?; Answer Choices: A: Portfolio 1., B: Portfolio 2., C: Portfolio 3.. Answer:

Scenario: Richard Elliott, CFA, is the head of the fixed income department of Lowell Wealth Management (LWM), a leading investment advisory firm. Elliott works closely with his director of research, Stephen Lee, CFA. LWM recently changed its focus from working only with pensions and endowments to working only with high-net-worth individuals. As a result, the team is revamping the layout of its presentations and reports. In addition to a core allocation to bullet government bonds, LWM expects to invest in securities that have embedded optionality, such as callable bonds and mortgage-backed securities. Historically, the firm has relied on identifying value from the shape of the yield curve. To measure the curvature of the current yield curve, Elliott uses the data in Exhibit 1 to calculate the butterfly spread. Exhibit 1 Yield|Curve Data Term (years)|Yield to Maturity (%) 2|5.50 10|5.75 30|7.00 Elliott asks Lee to prepare expected return estimates for the 2- and 30-year bonds, which are shown in Exhibit 2. Exhibit 2 Coupon yield|Current price|Expected price in one year 2-Year|4.75|105.00|106.05 30-Year|6.00|100.00|101.00 Additionally, Elliott asks Lee to construct sample portfolio structures by shifting the allocations between three tenors of bullet government bonds: 2-year, 10-year, and 30-year US Treasury securities. The allocations in the sample portfolios are shown in Exhibit 3. Exhibit 3 Sample Portfolio Allocations Sample|Portfolio|2-year|10-year|30-year 1|50%|0%|50% 2|20%|70%|10% 3|40%|30%|30% Question:Which sample portfolio is most likely to benefit from a flattening yield curve environment? Choices: A: Portfolio 1., B: Portfolio 2., C: Portfolio 3..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Maria Robinson, CFA, is a senior analyst in the Balance Sheet Strategy Division of Bayside Insurance (Bayside), a regional insurance company. Robinson is preparing the material for the monthly meeting of Bayside's Asset/Liability and Investment committees. Robinson has been asked to contrast the merits of cash flow matching and duration matching. Bayside presently uses both strategies, but given the recent increase in volatility in US interest rates over the last month, Bayside's management wants to better prepare for future opportunities. Robinson also considers the use of derivatives to manage interest rate risk. This would be a new strategy for Bayside. Robinson determines the number of bond futures needed to immunize the overall interest rate risk exposure of the company, particularly in an environment characterized by non-parallel shifts in the yield curve. The basis point value (BPV) for the asset portfolio is 96,000, while the liability portfolio has a BPV of 44,000. To facilitate her analysis, Robinson compiles the additional information related to bond futures shown in Exhibit 1. Exhibit 1 |Yield to maturity|Modified duration|BPV per 100,000 in par value|Conversion factor for cheapest-to-deliver 5-Year T-Note|6.02%|4.8|47.22|0.88 10-Year T-Note|6.41%|9.1|88.41|0.90rd Elliott, CFA, There has also been much debate at Bayside over passive bond market exposure. The discussion has focused primarily on two key related points: 1) Should Bayside seek passive bond market exposure? 2) If so, what vehicle would be the most appropriate and effective way to achieve it? Historically, Bayside has been a direct investor in fixed income instruments, but it has recently been looking into the possible use of both mutual funds and total return swaps to obtain passive bond market exposure instead of direct investment in fixed income. Robinson has lobbied for the use of total return swaps, because she believes the use of the swaps will increase the correlation between Bayside's asset portfolio and its benchmark. ; Question:Which immunization strategy is likely to be more negatively impacted by expected yield curve behavior?; Answer Choices: A: Cash flow matching, B: Duration matching, C: The strategies will perform the same.. Answer:

B

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Maria Robinson, CFA, is a senior analyst in the Balance Sheet Strategy Division of Bayside Insurance (Bayside), a regional insurance company. Robinson is preparing the material for the monthly meeting of Bayside's Asset/Liability and Investment committees. Robinson has been asked to contrast the merits of cash flow matching and duration matching. Bayside presently uses both strategies, but given the recent increase in volatility in US interest rates over the last month, Bayside's management wants to better prepare for future opportunities. Robinson also considers the use of derivatives to manage interest rate risk. This would be a new strategy for Bayside. Robinson determines the number of bond futures needed to immunize the overall interest rate risk exposure of the company, particularly in an environment characterized by non-parallel shifts in the yield curve. The basis point value (BPV) for the asset portfolio is 96,000, while the liability portfolio has a BPV of 44,000. To facilitate her analysis, Robinson compiles the additional information related to bond futures shown in Exhibit 1. Exhibit 1 |Yield to maturity|Modified duration|BPV per 100,000 in par value|Conversion factor for cheapest-to-deliver 5-Year T-Note|6.02%|4.8|47.22|0.88 10-Year T-Note|6.41%|9.1|88.41|0.90rd Elliott, CFA, There has also been much debate at Bayside over passive bond market exposure. The discussion has focused primarily on two key related points: 1) Should Bayside seek passive bond market exposure? 2) If so, what vehicle would be the most appropriate and effective way to achieve it? Historically, Bayside has been a direct investor in fixed income instruments, but it has recently been looking into the possible use of both mutual funds and total return swaps to obtain passive bond market exposure instead of direct investment in fixed income. Robinson has lobbied for the use of total return swaps, because she believes the use of the swaps will increase the correlation between Bayside's asset portfolio and its benchmark. ; Question:Which immunization strategy is likely to be more negatively impacted by expected yield curve behavior?; Answer Choices: A: Cash flow matching, B: Duration matching, C: The strategies will perform the same.. Answer:

Scenario: Maria Robinson, CFA, is a senior analyst in the Balance Sheet Strategy Division of Bayside Insurance (Bayside), a regional insurance company. Robinson is preparing the material for the monthly meeting of Bayside's Asset/Liability and Investment committees. Robinson has been asked to contrast the merits of cash flow matching and duration matching. Bayside presently uses both strategies, but given the recent increase in volatility in US interest rates over the last month, Bayside's management wants to better prepare for future opportunities. Robinson also considers the use of derivatives to manage interest rate risk. This would be a new strategy for Bayside. Robinson determines the number of bond futures needed to immunize the overall interest rate risk exposure of the company, particularly in an environment characterized by non-parallel shifts in the yield curve. The basis point value (BPV) for the asset portfolio is 96,000, while the liability portfolio has a BPV of 44,000. To facilitate her analysis, Robinson compiles the additional information related to bond futures shown in Exhibit 1. Exhibit 1 |Yield to maturity|Modified duration|BPV per 100,000 in par value|Conversion factor for cheapest-to-deliver 5-Year T-Note|6.02%|4.8|47.22|0.88 10-Year T-Note|6.41%|9.1|88.41|0.90rd Elliott, CFA, There has also been much debate at Bayside over passive bond market exposure. The discussion has focused primarily on two key related points: 1) Should Bayside seek passive bond market exposure? 2) If so, what vehicle would be the most appropriate and effective way to achieve it? Historically, Bayside has been a direct investor in fixed income instruments, but it has recently been looking into the possible use of both mutual funds and total return swaps to obtain passive bond market exposure instead of direct investment in fixed income. Robinson has lobbied for the use of total return swaps, because she believes the use of the swaps will increase the correlation between Bayside's asset portfolio and its benchmark. Question:Which immunization strategy is likely to be more negatively impacted by expected yield curve behavior? Choices: A: Cash flow matching, B: Duration matching, C: The strategies will perform the same..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Maria Robinson, CFA, is a senior analyst in the Balance Sheet Strategy Division of Bayside Insurance (Bayside), a regional insurance company. Robinson is preparing the material for the monthly meeting of Bayside's Asset/Liability and Investment committees. Robinson has been asked to contrast the merits of cash flow matching and duration matching. Bayside presently uses both strategies, but given the recent increase in volatility in US interest rates over the last month, Bayside's management wants to better prepare for future opportunities. Robinson also considers the use of derivatives to manage interest rate risk. This would be a new strategy for Bayside. Robinson determines the number of bond futures needed to immunize the overall interest rate risk exposure of the company, particularly in an environment characterized by non-parallel shifts in the yield curve. The basis point value (BPV) for the asset portfolio is 96,000, while the liability portfolio has a BPV of 44,000. To facilitate her analysis, Robinson compiles the additional information related to bond futures shown in Exhibit 1. Exhibit 1 |Yield to maturity|Modified duration|BPV per 100,000 in par value|Conversion factor for cheapest-to-deliver 5-Year T-Note|6.02%|4.8|47.22|0.88 10-Year T-Note|6.41%|9.1|88.41|0.90rd Elliott, CFA, There has also been much debate at Bayside over passive bond market exposure. The discussion has focused primarily on two key related points: 1) Should Bayside seek passive bond market exposure? 2) If so, what vehicle would be the most appropriate and effective way to achieve it? Historically, Bayside has been a direct investor in fixed income instruments, but it has recently been looking into the possible use of both mutual funds and total return swaps to obtain passive bond market exposure instead of direct investment in fixed income. Robinson has lobbied for the use of total return swaps, because she believes the use of the swaps will increase the correlation between Bayside's asset portfolio and its benchmark. ; Question:The number of five-year note futures contracts required to be sold in order to immunize the portfolio is closest to:; Answer Choices: A: 529 contracts., B: 969 contracts., C: 1101 contracts.. Answer:

B

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Maria Robinson, CFA, is a senior analyst in the Balance Sheet Strategy Division of Bayside Insurance (Bayside), a regional insurance company. Robinson is preparing the material for the monthly meeting of Bayside's Asset/Liability and Investment committees. Robinson has been asked to contrast the merits of cash flow matching and duration matching. Bayside presently uses both strategies, but given the recent increase in volatility in US interest rates over the last month, Bayside's management wants to better prepare for future opportunities. Robinson also considers the use of derivatives to manage interest rate risk. This would be a new strategy for Bayside. Robinson determines the number of bond futures needed to immunize the overall interest rate risk exposure of the company, particularly in an environment characterized by non-parallel shifts in the yield curve. The basis point value (BPV) for the asset portfolio is 96,000, while the liability portfolio has a BPV of 44,000. To facilitate her analysis, Robinson compiles the additional information related to bond futures shown in Exhibit 1. Exhibit 1 |Yield to maturity|Modified duration|BPV per 100,000 in par value|Conversion factor for cheapest-to-deliver 5-Year T-Note|6.02%|4.8|47.22|0.88 10-Year T-Note|6.41%|9.1|88.41|0.90rd Elliott, CFA, There has also been much debate at Bayside over passive bond market exposure. The discussion has focused primarily on two key related points: 1) Should Bayside seek passive bond market exposure? 2) If so, what vehicle would be the most appropriate and effective way to achieve it? Historically, Bayside has been a direct investor in fixed income instruments, but it has recently been looking into the possible use of both mutual funds and total return swaps to obtain passive bond market exposure instead of direct investment in fixed income. Robinson has lobbied for the use of total return swaps, because she believes the use of the swaps will increase the correlation between Bayside's asset portfolio and its benchmark. ; Question:The number of five-year note futures contracts required to be sold in order to immunize the portfolio is closest to:; Answer Choices: A: 529 contracts., B: 969 contracts., C: 1101 contracts.. Answer:

Scenario: Maria Robinson, CFA, is a senior analyst in the Balance Sheet Strategy Division of Bayside Insurance (Bayside), a regional insurance company. Robinson is preparing the material for the monthly meeting of Bayside's Asset/Liability and Investment committees. Robinson has been asked to contrast the merits of cash flow matching and duration matching. Bayside presently uses both strategies, but given the recent increase in volatility in US interest rates over the last month, Bayside's management wants to better prepare for future opportunities. Robinson also considers the use of derivatives to manage interest rate risk. This would be a new strategy for Bayside. Robinson determines the number of bond futures needed to immunize the overall interest rate risk exposure of the company, particularly in an environment characterized by non-parallel shifts in the yield curve. The basis point value (BPV) for the asset portfolio is 96,000, while the liability portfolio has a BPV of 44,000. To facilitate her analysis, Robinson compiles the additional information related to bond futures shown in Exhibit 1. Exhibit 1 |Yield to maturity|Modified duration|BPV per 100,000 in par value|Conversion factor for cheapest-to-deliver 5-Year T-Note|6.02%|4.8|47.22|0.88 10-Year T-Note|6.41%|9.1|88.41|0.90rd Elliott, CFA, There has also been much debate at Bayside over passive bond market exposure. The discussion has focused primarily on two key related points: 1) Should Bayside seek passive bond market exposure? 2) If so, what vehicle would be the most appropriate and effective way to achieve it? Historically, Bayside has been a direct investor in fixed income instruments, but it has recently been looking into the possible use of both mutual funds and total return swaps to obtain passive bond market exposure instead of direct investment in fixed income. Robinson has lobbied for the use of total return swaps, because she believes the use of the swaps will increase the correlation between Bayside's asset portfolio and its benchmark. Question:The number of five-year note futures contracts required to be sold in order to immunize the portfolio is closest to: Choices: A: 529 contracts., B: 969 contracts., C: 1101 contracts..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Maria Robinson, CFA, is a senior analyst in the Balance Sheet Strategy Division of Bayside Insurance (Bayside), a regional insurance company. Robinson is preparing the material for the monthly meeting of Bayside's Asset/Liability and Investment committees. Robinson has been asked to contrast the merits of cash flow matching and duration matching. Bayside presently uses both strategies, but given the recent increase in volatility in US interest rates over the last month, Bayside's management wants to better prepare for future opportunities. Robinson also considers the use of derivatives to manage interest rate risk. This would be a new strategy for Bayside. Robinson determines the number of bond futures needed to immunize the overall interest rate risk exposure of the company, particularly in an environment characterized by non-parallel shifts in the yield curve. The basis point value (BPV) for the asset portfolio is 96,000, while the liability portfolio has a BPV of 44,000. To facilitate her analysis, Robinson compiles the additional information related to bond futures shown in Exhibit 1. Exhibit 1 |Yield to maturity|Modified duration|BPV per 100,000 in par value|Conversion factor for cheapest-to-deliver 5-Year T-Note|6.02%|4.8|47.22|0.88 10-Year T-Note|6.41%|9.1|88.41|0.90rd Elliott, CFA, There has also been much debate at Bayside over passive bond market exposure. The discussion has focused primarily on two key related points: 1) Should Bayside seek passive bond market exposure? 2) If so, what vehicle would be the most appropriate and effective way to achieve it? Historically, Bayside has been a direct investor in fixed income instruments, but it has recently been looking into the possible use of both mutual funds and total return swaps to obtain passive bond market exposure instead of direct investment in fixed income. Robinson has lobbied for the use of total return swaps, because she believes the use of the swaps will increase the correlation between Bayside's asset portfolio and its benchmark. ; Question:If Bayside were to use mutual funds to gain fixed income exposure, what advantages would it realize?; Answer Choices: A: Increased diversification and stable income streams., B: Economies of scale and daily liquidity., C: Ability to redeem at NAV and intraday liquidity.. Answer:

B

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Maria Robinson, CFA, is a senior analyst in the Balance Sheet Strategy Division of Bayside Insurance (Bayside), a regional insurance company. Robinson is preparing the material for the monthly meeting of Bayside's Asset/Liability and Investment committees. Robinson has been asked to contrast the merits of cash flow matching and duration matching. Bayside presently uses both strategies, but given the recent increase in volatility in US interest rates over the last month, Bayside's management wants to better prepare for future opportunities. Robinson also considers the use of derivatives to manage interest rate risk. This would be a new strategy for Bayside. Robinson determines the number of bond futures needed to immunize the overall interest rate risk exposure of the company, particularly in an environment characterized by non-parallel shifts in the yield curve. The basis point value (BPV) for the asset portfolio is 96,000, while the liability portfolio has a BPV of 44,000. To facilitate her analysis, Robinson compiles the additional information related to bond futures shown in Exhibit 1. Exhibit 1 |Yield to maturity|Modified duration|BPV per 100,000 in par value|Conversion factor for cheapest-to-deliver 5-Year T-Note|6.02%|4.8|47.22|0.88 10-Year T-Note|6.41%|9.1|88.41|0.90rd Elliott, CFA, There has also been much debate at Bayside over passive bond market exposure. The discussion has focused primarily on two key related points: 1) Should Bayside seek passive bond market exposure? 2) If so, what vehicle would be the most appropriate and effective way to achieve it? Historically, Bayside has been a direct investor in fixed income instruments, but it has recently been looking into the possible use of both mutual funds and total return swaps to obtain passive bond market exposure instead of direct investment in fixed income. Robinson has lobbied for the use of total return swaps, because she believes the use of the swaps will increase the correlation between Bayside's asset portfolio and its benchmark. ; Question:If Bayside were to use mutual funds to gain fixed income exposure, what advantages would it realize?; Answer Choices: A: Increased diversification and stable income streams., B: Economies of scale and daily liquidity., C: Ability to redeem at NAV and intraday liquidity.. Answer:

Scenario: Maria Robinson, CFA, is a senior analyst in the Balance Sheet Strategy Division of Bayside Insurance (Bayside), a regional insurance company. Robinson is preparing the material for the monthly meeting of Bayside's Asset/Liability and Investment committees. Robinson has been asked to contrast the merits of cash flow matching and duration matching. Bayside presently uses both strategies, but given the recent increase in volatility in US interest rates over the last month, Bayside's management wants to better prepare for future opportunities. Robinson also considers the use of derivatives to manage interest rate risk. This would be a new strategy for Bayside. Robinson determines the number of bond futures needed to immunize the overall interest rate risk exposure of the company, particularly in an environment characterized by non-parallel shifts in the yield curve. The basis point value (BPV) for the asset portfolio is 96,000, while the liability portfolio has a BPV of 44,000. To facilitate her analysis, Robinson compiles the additional information related to bond futures shown in Exhibit 1. Exhibit 1 |Yield to maturity|Modified duration|BPV per 100,000 in par value|Conversion factor for cheapest-to-deliver 5-Year T-Note|6.02%|4.8|47.22|0.88 10-Year T-Note|6.41%|9.1|88.41|0.90rd Elliott, CFA, There has also been much debate at Bayside over passive bond market exposure. The discussion has focused primarily on two key related points: 1) Should Bayside seek passive bond market exposure? 2) If so, what vehicle would be the most appropriate and effective way to achieve it? Historically, Bayside has been a direct investor in fixed income instruments, but it has recently been looking into the possible use of both mutual funds and total return swaps to obtain passive bond market exposure instead of direct investment in fixed income. Robinson has lobbied for the use of total return swaps, because she believes the use of the swaps will increase the correlation between Bayside's asset portfolio and its benchmark. Question:If Bayside were to use mutual funds to gain fixed income exposure, what advantages would it realize? Choices: A: Increased diversification and stable income streams., B: Economies of scale and daily liquidity., C: Ability to redeem at NAV and intraday liquidity..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Maria Robinson, CFA, is a senior analyst in the Balance Sheet Strategy Division of Bayside Insurance (Bayside), a regional insurance company. Robinson is preparing the material for the monthly meeting of Bayside's Asset/Liability and Investment committees. Robinson has been asked to contrast the merits of cash flow matching and duration matching. Bayside presently uses both strategies, but given the recent increase in volatility in US interest rates over the last month, Bayside's management wants to better prepare for future opportunities. Robinson also considers the use of derivatives to manage interest rate risk. This would be a new strategy for Bayside. Robinson determines the number of bond futures needed to immunize the overall interest rate risk exposure of the company, particularly in an environment characterized by non-parallel shifts in the yield curve. The basis point value (BPV) for the asset portfolio is 96,000, while the liability portfolio has a BPV of 44,000. To facilitate her analysis, Robinson compiles the additional information related to bond futures shown in Exhibit 1. Exhibit 1 |Yield to maturity|Modified duration|BPV per 100,000 in par value|Conversion factor for cheapest-to-deliver 5-Year T-Note|6.02%|4.8|47.22|0.88 10-Year T-Note|6.41%|9.1|88.41|0.90rd Elliott, CFA, There has also been much debate at Bayside over passive bond market exposure. The discussion has focused primarily on two key related points: 1) Should Bayside seek passive bond market exposure? 2) If so, what vehicle would be the most appropriate and effective way to achieve it? Historically, Bayside has been a direct investor in fixed income instruments, but it has recently been looking into the possible use of both mutual funds and total return swaps to obtain passive bond market exposure instead of direct investment in fixed income. Robinson has lobbied for the use of total return swaps, because she believes the use of the swaps will increase the correlation between Bayside's asset portfolio and its benchmark. ; Question:Which type of total return swap should be used to decrease tracking risk?; Answer Choices: A: Total return receiver—to capture appreciation in the index., B: Total return payer—to capture the cash flows of the index., C: Total return receiver—to avoid counterparty credit risk.. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Maria Robinson, CFA, is a senior analyst in the Balance Sheet Strategy Division of Bayside Insurance (Bayside), a regional insurance company. Robinson is preparing the material for the monthly meeting of Bayside's Asset/Liability and Investment committees. Robinson has been asked to contrast the merits of cash flow matching and duration matching. Bayside presently uses both strategies, but given the recent increase in volatility in US interest rates over the last month, Bayside's management wants to better prepare for future opportunities. Robinson also considers the use of derivatives to manage interest rate risk. This would be a new strategy for Bayside. Robinson determines the number of bond futures needed to immunize the overall interest rate risk exposure of the company, particularly in an environment characterized by non-parallel shifts in the yield curve. The basis point value (BPV) for the asset portfolio is 96,000, while the liability portfolio has a BPV of 44,000. To facilitate her analysis, Robinson compiles the additional information related to bond futures shown in Exhibit 1. Exhibit 1 |Yield to maturity|Modified duration|BPV per 100,000 in par value|Conversion factor for cheapest-to-deliver 5-Year T-Note|6.02%|4.8|47.22|0.88 10-Year T-Note|6.41%|9.1|88.41|0.90rd Elliott, CFA, There has also been much debate at Bayside over passive bond market exposure. The discussion has focused primarily on two key related points: 1) Should Bayside seek passive bond market exposure? 2) If so, what vehicle would be the most appropriate and effective way to achieve it? Historically, Bayside has been a direct investor in fixed income instruments, but it has recently been looking into the possible use of both mutual funds and total return swaps to obtain passive bond market exposure instead of direct investment in fixed income. Robinson has lobbied for the use of total return swaps, because she believes the use of the swaps will increase the correlation between Bayside's asset portfolio and its benchmark. ; Question:Which type of total return swap should be used to decrease tracking risk?; Answer Choices: A: Total return receiver—to capture appreciation in the index., B: Total return payer—to capture the cash flows of the index., C: Total return receiver—to avoid counterparty credit risk.. Answer:

Scenario: Maria Robinson, CFA, is a senior analyst in the Balance Sheet Strategy Division of Bayside Insurance (Bayside), a regional insurance company. Robinson is preparing the material for the monthly meeting of Bayside's Asset/Liability and Investment committees. Robinson has been asked to contrast the merits of cash flow matching and duration matching. Bayside presently uses both strategies, but given the recent increase in volatility in US interest rates over the last month, Bayside's management wants to better prepare for future opportunities. Robinson also considers the use of derivatives to manage interest rate risk. This would be a new strategy for Bayside. Robinson determines the number of bond futures needed to immunize the overall interest rate risk exposure of the company, particularly in an environment characterized by non-parallel shifts in the yield curve. The basis point value (BPV) for the asset portfolio is 96,000, while the liability portfolio has a BPV of 44,000. To facilitate her analysis, Robinson compiles the additional information related to bond futures shown in Exhibit 1. Exhibit 1 |Yield to maturity|Modified duration|BPV per 100,000 in par value|Conversion factor for cheapest-to-deliver 5-Year T-Note|6.02%|4.8|47.22|0.88 10-Year T-Note|6.41%|9.1|88.41|0.90rd Elliott, CFA, There has also been much debate at Bayside over passive bond market exposure. The discussion has focused primarily on two key related points: 1) Should Bayside seek passive bond market exposure? 2) If so, what vehicle would be the most appropriate and effective way to achieve it? Historically, Bayside has been a direct investor in fixed income instruments, but it has recently been looking into the possible use of both mutual funds and total return swaps to obtain passive bond market exposure instead of direct investment in fixed income. Robinson has lobbied for the use of total return swaps, because she believes the use of the swaps will increase the correlation between Bayside's asset portfolio and its benchmark. Question:Which type of total return swap should be used to decrease tracking risk? Choices: A: Total return receiver—to capture appreciation in the index., B: Total return payer—to capture the cash flows of the index., C: Total return receiver—to avoid counterparty credit risk..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. ; Question:The rationale provided by Gelormini in Statement 1 is most likely incorrect because:; Answer Choices: A: the benchmark should have a limited number of underlying securities., B: the benchmark's underlying securities should have significant depth of liquidity., C: the tax burden is not a factor in considering actively managed strategies.. Answer:

B

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. ; Question:The rationale provided by Gelormini in Statement 1 is most likely incorrect because:; Answer Choices: A: the benchmark should have a limited number of underlying securities., B: the benchmark's underlying securities should have significant depth of liquidity., C: the tax burden is not a factor in considering actively managed strategies.. Answer:

Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. Question:The rationale provided by Gelormini in Statement 1 is most likely incorrect because: Choices: A: the benchmark should have a limited number of underlying securities., B: the benchmark's underlying securities should have significant depth of liquidity., C: the tax burden is not a factor in considering actively managed strategies..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. ; Question:Given Gelormini's comments in Statement 2, the best approach he could take to construct passive portfolios for Cherry Street is:; Answer Choices: A: full replication., B: stratified sampling., C: optimization.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. ; Question:Given Gelormini's comments in Statement 2, the best approach he could take to construct passive portfolios for Cherry Street is:; Answer Choices: A: full replication., B: stratified sampling., C: optimization.. Answer:

Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. Question:Given Gelormini's comments in Statement 2, the best approach he could take to construct passive portfolios for Cherry Street is: Choices: A: full replication., B: stratified sampling., C: optimization..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. ; Question:The most likely way to reduce Cherry Street's tracking error is to:; Answer Choices: A: equitize the portfolio using futures., B: transact at the market-on-close price., C: use stratified sampling to mimic the benchmark.. Answer:

B

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. ; Question:The most likely way to reduce Cherry Street's tracking error is to:; Answer Choices: A: equitize the portfolio using futures., B: transact at the market-on-close price., C: use stratified sampling to mimic the benchmark.. Answer:

Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. Question:The most likely way to reduce Cherry Street's tracking error is to: Choices: A: equitize the portfolio using futures., B: transact at the market-on-close price., C: use stratified sampling to mimic the benchmark..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. ; Question:Which of the factor-based funds in Exhibit 1 best provides exposure to the factors of size, value and quality?; Answer Choices: A: Fund A., B: Fund B., C: Fund C.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. ; Question:Which of the factor-based funds in Exhibit 1 best provides exposure to the factors of size, value and quality?; Answer Choices: A: Fund A., B: Fund B., C: Fund C.. Answer:

Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. Question:Which of the factor-based funds in Exhibit 1 best provides exposure to the factors of size, value and quality? Choices: A: Fund A., B: Fund B., C: Fund C..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. ; Question:Which of the following activities, if engaged in by Cherry Street, would prevent the foundation from participating in proxy voting as described in Statement 3?; Answer Choices: A: Hiring an external proxy advisory firm., B: Purchasing the security on margin., C: Loaning the security to a short seller.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. ; Question:Which of the following activities, if engaged in by Cherry Street, would prevent the foundation from participating in proxy voting as described in Statement 3?; Answer Choices: A: Hiring an external proxy advisory firm., B: Purchasing the security on margin., C: Loaning the security to a short seller.. Answer:

Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. Question:Which of the following activities, if engaged in by Cherry Street, would prevent the foundation from participating in proxy voting as described in Statement 3? Choices: A: Hiring an external proxy advisory firm., B: Purchasing the security on margin., C: Loaning the security to a short seller..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. ; Question:Gelormini's comments about activists in Statement 4 are most likely incorrect because:; Answer Choices: A: activist investors typically have a longer time horizon., B: ESG-focused activists use different processes and tactics than traditional activists., C: activist investors typically take a stake of less than 10%.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. ; Question:Gelormini's comments about activists in Statement 4 are most likely incorrect because:; Answer Choices: A: activist investors typically have a longer time horizon., B: ESG-focused activists use different processes and tactics than traditional activists., C: activist investors typically take a stake of less than 10%.. Answer:

Scenario: The Cherry Street Foundation is a nonprofit institution that provides resources for refugee children around the world. Over the last several years, Cherry Street has experienced a significant increase in donations, resulting in an increase to the foundation's investment portfolio of more than $100 million. Consequently, Ellie Blumenstock, Cherry Street's founder, recently concluded that the time had come to hire a professional chief investment officer (CIO) to manage this large pool of assets. Today, Blumenstock is interviewing A. J. Gelormini, a portfolio manager with over two decades of experience, for the CIO role. At the start of the interview, Blumenstock asks Gelormini to explain his approach to investing in global equities. Gelormini's response includes the following statements: Statement 1: I would utilize actively managed funds in equity market segments where the manager has confidence that the benchmark can be beaten, the liquidity of the underlying securities in the benchmark is thin, and the number of securities in the benchmark is broad. Cherry Street's tax-exempt status makes any tax burden associated with an actively managed strategy irrelevant. Statement 2: I would build passively managed funds internally through direct investment in individual securities. My focus would be on constructing funds that minimize tracking error versus the benchmark, subject to a constraint that each fund's volatility equals that of its relevant benchmark. Cherry Street would have several such funds, all under $5 million in assets, with benchmarks containing over 2,000 constituents. Blumenstock replies that Cherry Street has always used the S&P 500 as the benchmark for its entire investment portfolio and has tried to replicate its returns through direct investment in the underlying constituents. Blumenstock manages this process herself by obtaining a list of S&P 500 constituent weightings and submitting purchase and sell orders to Cherry Street's broker as necessary to appropriately reflect the weightings. Orders are typically filled immediately after the market's open. Little cash is kept on hand and trades are commission-free. Blumenstock expresses her frustration that the investment portfolio has nevertheless lagged the S&P 500 and has experienced significant tracking error. Gelormini responds by suggesting that Cherry Street invest in a handful of factor-based strategies that track the S&P 500. He states that these strategies have the potential to improve returns while limiting tracking error versus the benchmark. He then presents Blumenstock with a one-page comparison of several such funds, a summary of which is provided in Exhibit 1. Note that the values provided in Exhibit 1 represent the average quarterly values for each of the underlying holdings in Fund A, Fund B, Fund C and each of the constituents in the S&P 500, calculated on a trailing five-year basis. All data on the underlying holdings and index constituents is sourced from their SEC filings and publicly available market data. Exhibit 1 Factor-Based Funds Summary Data (Trailing Five-Year Weighted Averages) |Fund A|Fund B|Fund C|S&P 500 Market cap ($ billions)|$72|$18|$13|$48 P/E|24.5x|27.2x|13.8x|17.2x Dividend yield|1.6%|1.9%|2.8%|2.1% Trailing 12-month EPS growth|14%|18%|3%|7% Trailing 12-month price return|6%|25%|12%|9% Debt-to-equity ratio|40%|50%|10%|35% Before concluding the interview, Blumenstock mentions that she recently read several articles regarding shareholder engagement and activist investing strategies. She was particularly intrigued by the role of activists in advocating for the implementation of ESG standards at large companies. Blumenstock asks Gelormini if it would make sense for Cherry Street to participate in shareholder engagement activities or to commit to a firm that engages in activist investing, and, if so, what approach would make the most sense. Gelormini's response includes the following statements. Statement 3: If Cherry Street were to develop its own internally managed passive funds investing directly in individual securities, it would be difficult to participate in shareholder engagement activities without driving up costs. However, Cherry Street could, at a very low cost, engage in proxy voting for each of the individual securities it held. Statement 4: Plenty of activist managers focusing on ESG issues exist, and investing with one could make sense for Cherry Street. Managers of these strategies utilize the same tactics as more traditional activist investors because they both typically have shorter time horizons and take stakes in target companies greater than 10% of the target's outstanding equity. Some of these tactics include proposing significant changes in corporate governance, seeking board representation and engaging in proxy contests. Question:Gelormini's comments about activists in Statement 4 are most likely incorrect because: Choices: A: activist investors typically have a longer time horizon., B: ESG-focused activists use different processes and tactics than traditional activists., C: activist investors typically take a stake of less than 10%..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: James Holden, CFA, is creating the asset allocation for the Lehigh Foundation, a nonprofit organization that provides grants and scholarships on an annual basis to researchers and students in environmental protection. Holden would like to add alternative investments to Lehigh's portfolio, which presently includes only US common equity and debt securities. The dollar amount of the grants provided each year by Lehigh is not fixed, so the organization would like Holden to consider liquidity a priority. Additionally, Lehigh's investment committee wants to be more mindful about ensuring that the foundation's investments are in line with the organization's overall mission of environmental protection. The committee would like Holden to consider a shift to an ESG-focused portfolio. Holden first contemplates the asset allocation approach. He is aware of both the traditional and risk-based approaches, and ultimately decides to use a risk-based approach to asset allocation despite its known limitations. Holden is looking at three potential hedge funds to add to the portfolio: • Fund 1 has a history of consistently high returns buying distressed companies. • Fund 2 specializes in quantitative long-short equity strategies. • Fund 3 is a long-only equity fund that focuses on high-growth companies. He evaluates them on a stand-alone basis against Lehigh's priorities without considering their correlation with other asset classes. Holden decides to consult his firm's annual economic briefing which has a section describing the expectations for the upcoming year. The report highlights many macroeconomic factors, including GDP growth, unemployment rates, and consumer spending. The report outlines the following expectations: • GDP growth will remain at 4.5% into the following year. • The unemployment rate is expected to drop to 3%. • Consumer spending is on track to reach its highest level in three years. • The US will likely experience high inflation due to recent monetary policy. Finally, Holden looks into the possibility of an ESG-focused portfolio for Lehigh. Holden determines that this objective could be achieved with the current asset classes. However, he is concerned by the lack of transparency of holdings typically associated with ESG funds. Holden sets the asset allocation and plans to meet with the investment committee later to discuss the ESG direction of the portfolio. ; Question:Which of the following is least likely to be a limitation of Holden's approach to setting Lehigh's asset allocation?; Answer Choices: A: Combining investments with varying risk characteristics into a single portfolio., B: The impact of the historical sample on risk factor exposure., C: The need for additional considerations for liquidity and rebalancing.. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: James Holden, CFA, is creating the asset allocation for the Lehigh Foundation, a nonprofit organization that provides grants and scholarships on an annual basis to researchers and students in environmental protection. Holden would like to add alternative investments to Lehigh's portfolio, which presently includes only US common equity and debt securities. The dollar amount of the grants provided each year by Lehigh is not fixed, so the organization would like Holden to consider liquidity a priority. Additionally, Lehigh's investment committee wants to be more mindful about ensuring that the foundation's investments are in line with the organization's overall mission of environmental protection. The committee would like Holden to consider a shift to an ESG-focused portfolio. Holden first contemplates the asset allocation approach. He is aware of both the traditional and risk-based approaches, and ultimately decides to use a risk-based approach to asset allocation despite its known limitations. Holden is looking at three potential hedge funds to add to the portfolio: • Fund 1 has a history of consistently high returns buying distressed companies. • Fund 2 specializes in quantitative long-short equity strategies. • Fund 3 is a long-only equity fund that focuses on high-growth companies. He evaluates them on a stand-alone basis against Lehigh's priorities without considering their correlation with other asset classes. Holden decides to consult his firm's annual economic briefing which has a section describing the expectations for the upcoming year. The report highlights many macroeconomic factors, including GDP growth, unemployment rates, and consumer spending. The report outlines the following expectations: • GDP growth will remain at 4.5% into the following year. • The unemployment rate is expected to drop to 3%. • Consumer spending is on track to reach its highest level in three years. • The US will likely experience high inflation due to recent monetary policy. Finally, Holden looks into the possibility of an ESG-focused portfolio for Lehigh. Holden determines that this objective could be achieved with the current asset classes. However, he is concerned by the lack of transparency of holdings typically associated with ESG funds. Holden sets the asset allocation and plans to meet with the investment committee later to discuss the ESG direction of the portfolio. ; Question:Which of the following is least likely to be a limitation of Holden's approach to setting Lehigh's asset allocation?; Answer Choices: A: Combining investments with varying risk characteristics into a single portfolio., B: The impact of the historical sample on risk factor exposure., C: The need for additional considerations for liquidity and rebalancing.. Answer:

Scenario: James Holden, CFA, is creating the asset allocation for the Lehigh Foundation, a nonprofit organization that provides grants and scholarships on an annual basis to researchers and students in environmental protection. Holden would like to add alternative investments to Lehigh's portfolio, which presently includes only US common equity and debt securities. The dollar amount of the grants provided each year by Lehigh is not fixed, so the organization would like Holden to consider liquidity a priority. Additionally, Lehigh's investment committee wants to be more mindful about ensuring that the foundation's investments are in line with the organization's overall mission of environmental protection. The committee would like Holden to consider a shift to an ESG-focused portfolio. Holden first contemplates the asset allocation approach. He is aware of both the traditional and risk-based approaches, and ultimately decides to use a risk-based approach to asset allocation despite its known limitations. Holden is looking at three potential hedge funds to add to the portfolio: • Fund 1 has a history of consistently high returns buying distressed companies. • Fund 2 specializes in quantitative long-short equity strategies. • Fund 3 is a long-only equity fund that focuses on high-growth companies. He evaluates them on a stand-alone basis against Lehigh's priorities without considering their correlation with other asset classes. Holden decides to consult his firm's annual economic briefing which has a section describing the expectations for the upcoming year. The report highlights many macroeconomic factors, including GDP growth, unemployment rates, and consumer spending. The report outlines the following expectations: • GDP growth will remain at 4.5% into the following year. • The unemployment rate is expected to drop to 3%. • Consumer spending is on track to reach its highest level in three years. • The US will likely experience high inflation due to recent monetary policy. Finally, Holden looks into the possibility of an ESG-focused portfolio for Lehigh. Holden determines that this objective could be achieved with the current asset classes. However, he is concerned by the lack of transparency of holdings typically associated with ESG funds. Holden sets the asset allocation and plans to meet with the investment committee later to discuss the ESG direction of the portfolio. Question:Which of the following is least likely to be a limitation of Holden's approach to setting Lehigh's asset allocation? Choices: A: Combining investments with varying risk characteristics into a single portfolio., B: The impact of the historical sample on risk factor exposure., C: The need for additional considerations for liquidity and rebalancing..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: James Holden, CFA, is creating the asset allocation for the Lehigh Foundation, a nonprofit organization that provides grants and scholarships on an annual basis to researchers and students in environmental protection. Holden would like to add alternative investments to Lehigh's portfolio, which presently includes only US common equity and debt securities. The dollar amount of the grants provided each year by Lehigh is not fixed, so the organization would like Holden to consider liquidity a priority. Additionally, Lehigh's investment committee wants to be more mindful about ensuring that the foundation's investments are in line with the organization's overall mission of environmental protection. The committee would like Holden to consider a shift to an ESG-focused portfolio. Holden first contemplates the asset allocation approach. He is aware of both the traditional and risk-based approaches, and ultimately decides to use a risk-based approach to asset allocation despite its known limitations. Holden is looking at three potential hedge funds to add to the portfolio: • Fund 1 has a history of consistently high returns buying distressed companies. • Fund 2 specializes in quantitative long-short equity strategies. • Fund 3 is a long-only equity fund that focuses on high-growth companies. He evaluates them on a stand-alone basis against Lehigh's priorities without considering their correlation with other asset classes. Holden decides to consult his firm's annual economic briefing which has a section describing the expectations for the upcoming year. The report highlights many macroeconomic factors, including GDP growth, unemployment rates, and consumer spending. The report outlines the following expectations: • GDP growth will remain at 4.5% into the following year. • The unemployment rate is expected to drop to 3%. • Consumer spending is on track to reach its highest level in three years. • The US will likely experience high inflation due to recent monetary policy. Finally, Holden looks into the possibility of an ESG-focused portfolio for Lehigh. Holden determines that this objective could be achieved with the current asset classes. However, he is concerned by the lack of transparency of holdings typically associated with ESG funds. Holden sets the asset allocation and plans to meet with the investment committee later to discuss the ESG direction of the portfolio. ; Question:Which of the 3 hedge funds is least suitable for Lehigh?; Answer Choices: A: Fund 1., B: Fund 2., C: Fund 3.. Answer:

A

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: James Holden, CFA, is creating the asset allocation for the Lehigh Foundation, a nonprofit organization that provides grants and scholarships on an annual basis to researchers and students in environmental protection. Holden would like to add alternative investments to Lehigh's portfolio, which presently includes only US common equity and debt securities. The dollar amount of the grants provided each year by Lehigh is not fixed, so the organization would like Holden to consider liquidity a priority. Additionally, Lehigh's investment committee wants to be more mindful about ensuring that the foundation's investments are in line with the organization's overall mission of environmental protection. The committee would like Holden to consider a shift to an ESG-focused portfolio. Holden first contemplates the asset allocation approach. He is aware of both the traditional and risk-based approaches, and ultimately decides to use a risk-based approach to asset allocation despite its known limitations. Holden is looking at three potential hedge funds to add to the portfolio: • Fund 1 has a history of consistently high returns buying distressed companies. • Fund 2 specializes in quantitative long-short equity strategies. • Fund 3 is a long-only equity fund that focuses on high-growth companies. He evaluates them on a stand-alone basis against Lehigh's priorities without considering their correlation with other asset classes. Holden decides to consult his firm's annual economic briefing which has a section describing the expectations for the upcoming year. The report highlights many macroeconomic factors, including GDP growth, unemployment rates, and consumer spending. The report outlines the following expectations: • GDP growth will remain at 4.5% into the following year. • The unemployment rate is expected to drop to 3%. • Consumer spending is on track to reach its highest level in three years. • The US will likely experience high inflation due to recent monetary policy. Finally, Holden looks into the possibility of an ESG-focused portfolio for Lehigh. Holden determines that this objective could be achieved with the current asset classes. However, he is concerned by the lack of transparency of holdings typically associated with ESG funds. Holden sets the asset allocation and plans to meet with the investment committee later to discuss the ESG direction of the portfolio. ; Question:Which of the 3 hedge funds is least suitable for Lehigh?; Answer Choices: A: Fund 1., B: Fund 2., C: Fund 3.. Answer:

Scenario: James Holden, CFA, is creating the asset allocation for the Lehigh Foundation, a nonprofit organization that provides grants and scholarships on an annual basis to researchers and students in environmental protection. Holden would like to add alternative investments to Lehigh's portfolio, which presently includes only US common equity and debt securities. The dollar amount of the grants provided each year by Lehigh is not fixed, so the organization would like Holden to consider liquidity a priority. Additionally, Lehigh's investment committee wants to be more mindful about ensuring that the foundation's investments are in line with the organization's overall mission of environmental protection. The committee would like Holden to consider a shift to an ESG-focused portfolio. Holden first contemplates the asset allocation approach. He is aware of both the traditional and risk-based approaches, and ultimately decides to use a risk-based approach to asset allocation despite its known limitations. Holden is looking at three potential hedge funds to add to the portfolio: • Fund 1 has a history of consistently high returns buying distressed companies. • Fund 2 specializes in quantitative long-short equity strategies. • Fund 3 is a long-only equity fund that focuses on high-growth companies. He evaluates them on a stand-alone basis against Lehigh's priorities without considering their correlation with other asset classes. Holden decides to consult his firm's annual economic briefing which has a section describing the expectations for the upcoming year. The report highlights many macroeconomic factors, including GDP growth, unemployment rates, and consumer spending. The report outlines the following expectations: • GDP growth will remain at 4.5% into the following year. • The unemployment rate is expected to drop to 3%. • Consumer spending is on track to reach its highest level in three years. • The US will likely experience high inflation due to recent monetary policy. Finally, Holden looks into the possibility of an ESG-focused portfolio for Lehigh. Holden determines that this objective could be achieved with the current asset classes. However, he is concerned by the lack of transparency of holdings typically associated with ESG funds. Holden sets the asset allocation and plans to meet with the investment committee later to discuss the ESG direction of the portfolio. Question:Which of the 3 hedge funds is least suitable for Lehigh? Choices: A: Fund 1., B: Fund 2., C: Fund 3..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: James Holden, CFA, is creating the asset allocation for the Lehigh Foundation, a nonprofit organization that provides grants and scholarships on an annual basis to researchers and students in environmental protection. Holden would like to add alternative investments to Lehigh's portfolio, which presently includes only US common equity and debt securities. The dollar amount of the grants provided each year by Lehigh is not fixed, so the organization would like Holden to consider liquidity a priority. Additionally, Lehigh's investment committee wants to be more mindful about ensuring that the foundation's investments are in line with the organization's overall mission of environmental protection. The committee would like Holden to consider a shift to an ESG-focused portfolio. Holden first contemplates the asset allocation approach. He is aware of both the traditional and risk-based approaches, and ultimately decides to use a risk-based approach to asset allocation despite its known limitations. Holden is looking at three potential hedge funds to add to the portfolio: • Fund 1 has a history of consistently high returns buying distressed companies. • Fund 2 specializes in quantitative long-short equity strategies. • Fund 3 is a long-only equity fund that focuses on high-growth companies. He evaluates them on a stand-alone basis against Lehigh's priorities without considering their correlation with other asset classes. Holden decides to consult his firm's annual economic briefing which has a section describing the expectations for the upcoming year. The report highlights many macroeconomic factors, including GDP growth, unemployment rates, and consumer spending. The report outlines the following expectations: • GDP growth will remain at 4.5% into the following year. • The unemployment rate is expected to drop to 3%. • Consumer spending is on track to reach its highest level in three years. • The US will likely experience high inflation due to recent monetary policy. Finally, Holden looks into the possibility of an ESG-focused portfolio for Lehigh. Holden determines that this objective could be achieved with the current asset classes. However, he is concerned by the lack of transparency of holdings typically associated with ESG funds. Holden sets the asset allocation and plans to meet with the investment committee later to discuss the ESG direction of the portfolio. ; Question:Based on the macroeconomic expectations, the alternative asset class that should perform the best over the next year is most likely:; Answer Choices: A: Gold., B: Private equity., C: Real estate.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: James Holden, CFA, is creating the asset allocation for the Lehigh Foundation, a nonprofit organization that provides grants and scholarships on an annual basis to researchers and students in environmental protection. Holden would like to add alternative investments to Lehigh's portfolio, which presently includes only US common equity and debt securities. The dollar amount of the grants provided each year by Lehigh is not fixed, so the organization would like Holden to consider liquidity a priority. Additionally, Lehigh's investment committee wants to be more mindful about ensuring that the foundation's investments are in line with the organization's overall mission of environmental protection. The committee would like Holden to consider a shift to an ESG-focused portfolio. Holden first contemplates the asset allocation approach. He is aware of both the traditional and risk-based approaches, and ultimately decides to use a risk-based approach to asset allocation despite its known limitations. Holden is looking at three potential hedge funds to add to the portfolio: • Fund 1 has a history of consistently high returns buying distressed companies. • Fund 2 specializes in quantitative long-short equity strategies. • Fund 3 is a long-only equity fund that focuses on high-growth companies. He evaluates them on a stand-alone basis against Lehigh's priorities without considering their correlation with other asset classes. Holden decides to consult his firm's annual economic briefing which has a section describing the expectations for the upcoming year. The report highlights many macroeconomic factors, including GDP growth, unemployment rates, and consumer spending. The report outlines the following expectations: • GDP growth will remain at 4.5% into the following year. • The unemployment rate is expected to drop to 3%. • Consumer spending is on track to reach its highest level in three years. • The US will likely experience high inflation due to recent monetary policy. Finally, Holden looks into the possibility of an ESG-focused portfolio for Lehigh. Holden determines that this objective could be achieved with the current asset classes. However, he is concerned by the lack of transparency of holdings typically associated with ESG funds. Holden sets the asset allocation and plans to meet with the investment committee later to discuss the ESG direction of the portfolio. ; Question:Based on the macroeconomic expectations, the alternative asset class that should perform the best over the next year is most likely:; Answer Choices: A: Gold., B: Private equity., C: Real estate.. Answer:

Scenario: James Holden, CFA, is creating the asset allocation for the Lehigh Foundation, a nonprofit organization that provides grants and scholarships on an annual basis to researchers and students in environmental protection. Holden would like to add alternative investments to Lehigh's portfolio, which presently includes only US common equity and debt securities. The dollar amount of the grants provided each year by Lehigh is not fixed, so the organization would like Holden to consider liquidity a priority. Additionally, Lehigh's investment committee wants to be more mindful about ensuring that the foundation's investments are in line with the organization's overall mission of environmental protection. The committee would like Holden to consider a shift to an ESG-focused portfolio. Holden first contemplates the asset allocation approach. He is aware of both the traditional and risk-based approaches, and ultimately decides to use a risk-based approach to asset allocation despite its known limitations. Holden is looking at three potential hedge funds to add to the portfolio: • Fund 1 has a history of consistently high returns buying distressed companies. • Fund 2 specializes in quantitative long-short equity strategies. • Fund 3 is a long-only equity fund that focuses on high-growth companies. He evaluates them on a stand-alone basis against Lehigh's priorities without considering their correlation with other asset classes. Holden decides to consult his firm's annual economic briefing which has a section describing the expectations for the upcoming year. The report highlights many macroeconomic factors, including GDP growth, unemployment rates, and consumer spending. The report outlines the following expectations: • GDP growth will remain at 4.5% into the following year. • The unemployment rate is expected to drop to 3%. • Consumer spending is on track to reach its highest level in three years. • The US will likely experience high inflation due to recent monetary policy. Finally, Holden looks into the possibility of an ESG-focused portfolio for Lehigh. Holden determines that this objective could be achieved with the current asset classes. However, he is concerned by the lack of transparency of holdings typically associated with ESG funds. Holden sets the asset allocation and plans to meet with the investment committee later to discuss the ESG direction of the portfolio. Question:Based on the macroeconomic expectations, the alternative asset class that should perform the best over the next year is most likely: Choices: A: Gold., B: Private equity., C: Real estate..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: James Holden, CFA, is creating the asset allocation for the Lehigh Foundation, a nonprofit organization that provides grants and scholarships on an annual basis to researchers and students in environmental protection. Holden would like to add alternative investments to Lehigh's portfolio, which presently includes only US common equity and debt securities. The dollar amount of the grants provided each year by Lehigh is not fixed, so the organization would like Holden to consider liquidity a priority. Additionally, Lehigh's investment committee wants to be more mindful about ensuring that the foundation's investments are in line with the organization's overall mission of environmental protection. The committee would like Holden to consider a shift to an ESG-focused portfolio. Holden first contemplates the asset allocation approach. He is aware of both the traditional and risk-based approaches, and ultimately decides to use a risk-based approach to asset allocation despite its known limitations. Holden is looking at three potential hedge funds to add to the portfolio: • Fund 1 has a history of consistently high returns buying distressed companies. • Fund 2 specializes in quantitative long-short equity strategies. • Fund 3 is a long-only equity fund that focuses on high-growth companies. He evaluates them on a stand-alone basis against Lehigh's priorities without considering their correlation with other asset classes. Holden decides to consult his firm's annual economic briefing which has a section describing the expectations for the upcoming year. The report highlights many macroeconomic factors, including GDP growth, unemployment rates, and consumer spending. The report outlines the following expectations: • GDP growth will remain at 4.5% into the following year. • The unemployment rate is expected to drop to 3%. • Consumer spending is on track to reach its highest level in three years. • The US will likely experience high inflation due to recent monetary policy. Finally, Holden looks into the possibility of an ESG-focused portfolio for Lehigh. Holden determines that this objective could be achieved with the current asset classes. However, he is concerned by the lack of transparency of holdings typically associated with ESG funds. Holden sets the asset allocation and plans to meet with the investment committee later to discuss the ESG direction of the portfolio. ; Question:An alternative investment that would most likely address Holden's ESG concern is a:; Answer Choices: A: A hedge fund specializing in trading commodity derivatives., B: A private real estate fund with holdings in both the US and Canada., C: A hedge fund with a long-short strategy invested only in publicly traded equities.. Answer:

B

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: James Holden, CFA, is creating the asset allocation for the Lehigh Foundation, a nonprofit organization that provides grants and scholarships on an annual basis to researchers and students in environmental protection. Holden would like to add alternative investments to Lehigh's portfolio, which presently includes only US common equity and debt securities. The dollar amount of the grants provided each year by Lehigh is not fixed, so the organization would like Holden to consider liquidity a priority. Additionally, Lehigh's investment committee wants to be more mindful about ensuring that the foundation's investments are in line with the organization's overall mission of environmental protection. The committee would like Holden to consider a shift to an ESG-focused portfolio. Holden first contemplates the asset allocation approach. He is aware of both the traditional and risk-based approaches, and ultimately decides to use a risk-based approach to asset allocation despite its known limitations. Holden is looking at three potential hedge funds to add to the portfolio: • Fund 1 has a history of consistently high returns buying distressed companies. • Fund 2 specializes in quantitative long-short equity strategies. • Fund 3 is a long-only equity fund that focuses on high-growth companies. He evaluates them on a stand-alone basis against Lehigh's priorities without considering their correlation with other asset classes. Holden decides to consult his firm's annual economic briefing which has a section describing the expectations for the upcoming year. The report highlights many macroeconomic factors, including GDP growth, unemployment rates, and consumer spending. The report outlines the following expectations: • GDP growth will remain at 4.5% into the following year. • The unemployment rate is expected to drop to 3%. • Consumer spending is on track to reach its highest level in three years. • The US will likely experience high inflation due to recent monetary policy. Finally, Holden looks into the possibility of an ESG-focused portfolio for Lehigh. Holden determines that this objective could be achieved with the current asset classes. However, he is concerned by the lack of transparency of holdings typically associated with ESG funds. Holden sets the asset allocation and plans to meet with the investment committee later to discuss the ESG direction of the portfolio. ; Question:An alternative investment that would most likely address Holden's ESG concern is a:; Answer Choices: A: A hedge fund specializing in trading commodity derivatives., B: A private real estate fund with holdings in both the US and Canada., C: A hedge fund with a long-short strategy invested only in publicly traded equities.. Answer:

Scenario: James Holden, CFA, is creating the asset allocation for the Lehigh Foundation, a nonprofit organization that provides grants and scholarships on an annual basis to researchers and students in environmental protection. Holden would like to add alternative investments to Lehigh's portfolio, which presently includes only US common equity and debt securities. The dollar amount of the grants provided each year by Lehigh is not fixed, so the organization would like Holden to consider liquidity a priority. Additionally, Lehigh's investment committee wants to be more mindful about ensuring that the foundation's investments are in line with the organization's overall mission of environmental protection. The committee would like Holden to consider a shift to an ESG-focused portfolio. Holden first contemplates the asset allocation approach. He is aware of both the traditional and risk-based approaches, and ultimately decides to use a risk-based approach to asset allocation despite its known limitations. Holden is looking at three potential hedge funds to add to the portfolio: • Fund 1 has a history of consistently high returns buying distressed companies. • Fund 2 specializes in quantitative long-short equity strategies. • Fund 3 is a long-only equity fund that focuses on high-growth companies. He evaluates them on a stand-alone basis against Lehigh's priorities without considering their correlation with other asset classes. Holden decides to consult his firm's annual economic briefing which has a section describing the expectations for the upcoming year. The report highlights many macroeconomic factors, including GDP growth, unemployment rates, and consumer spending. The report outlines the following expectations: • GDP growth will remain at 4.5% into the following year. • The unemployment rate is expected to drop to 3%. • Consumer spending is on track to reach its highest level in three years. • The US will likely experience high inflation due to recent monetary policy. Finally, Holden looks into the possibility of an ESG-focused portfolio for Lehigh. Holden determines that this objective could be achieved with the current asset classes. However, he is concerned by the lack of transparency of holdings typically associated with ESG funds. Holden sets the asset allocation and plans to meet with the investment committee later to discuss the ESG direction of the portfolio. Question:An alternative investment that would most likely address Holden's ESG concern is a: Choices: A: A hedge fund specializing in trading commodity derivatives., B: A private real estate fund with holdings in both the US and Canada., C: A hedge fund with a long-short strategy invested only in publicly traded equities..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Ivy Chatterjee is a senior portfolio manager at Lingonberry Securities, a global investment management firm. Chatterjee manages a US large-cap equity fund that invests in liquid securities, utilizing an active, fundamental investment process. Chatterjee has been researching MPU, a bank stock, and increasing its allocation in the fund she manages. MPU released its quarterly earnings report yesterday and provided a weaker earnings forecast than expected. As a result, MPU closed at $40.00 per share yesterday, a meaningful decline from its previous price. Chatterjee felt that the market overreacted to the bad news, and as a result was provided with an opportunity to buy MPU at a more favorable price. She was concerned that the market overreaction would be short-lived. Chatterjee met with Lenny Angels, the head of trading at Lingonberry Securities, to finalize the trading strategy before the opening of the equity market. Angels made the following general statements about trading strategies: Statement 1: Trading in securities with a higher rate of alpha decay, like MPU, will have better execution if we adopt a longer trade time horizon. Statement 2: The more liquid the security, such as MPU, the higher the market impact of trading will be. Chatterjee orders 10,000 shares of MPU with a decision price of $40.00 per share and sets a limit price of $40.50 for the order. The trading venue charges $0.03 per share as a commission. MPU faces strong demand and prices continue rising throughout the trading day. Angels is able to get three trades executed within the limit order set by Chatterjee. After the third trade, MPU shares trade at prices over the limit order and close at $40.90. Chatterjee determines that MPU is now fairly valued and does not want to buy any more MPU shares at the current price. The trade execution details are shown in Exhibit 1. Exhibit 1 Trades|Execution Price Shares Executed Trade 1|40.20|2,000 Trade 2|40.35|5,000 Trade 3|40.45|1,000 Displeased with the opportunity cost of the trade execution, Chatterjee and Angels discuss ways to reduce it. ; Question:Which of Lenny Angels's statements regarding trading strategies is most likely to be correct?; Answer Choices: A: Statement 1., B: Statement 2., C: Neither Statement 1 nor Statement 2 is correct.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Ivy Chatterjee is a senior portfolio manager at Lingonberry Securities, a global investment management firm. Chatterjee manages a US large-cap equity fund that invests in liquid securities, utilizing an active, fundamental investment process. Chatterjee has been researching MPU, a bank stock, and increasing its allocation in the fund she manages. MPU released its quarterly earnings report yesterday and provided a weaker earnings forecast than expected. As a result, MPU closed at $40.00 per share yesterday, a meaningful decline from its previous price. Chatterjee felt that the market overreacted to the bad news, and as a result was provided with an opportunity to buy MPU at a more favorable price. She was concerned that the market overreaction would be short-lived. Chatterjee met with Lenny Angels, the head of trading at Lingonberry Securities, to finalize the trading strategy before the opening of the equity market. Angels made the following general statements about trading strategies: Statement 1: Trading in securities with a higher rate of alpha decay, like MPU, will have better execution if we adopt a longer trade time horizon. Statement 2: The more liquid the security, such as MPU, the higher the market impact of trading will be. Chatterjee orders 10,000 shares of MPU with a decision price of $40.00 per share and sets a limit price of $40.50 for the order. The trading venue charges $0.03 per share as a commission. MPU faces strong demand and prices continue rising throughout the trading day. Angels is able to get three trades executed within the limit order set by Chatterjee. After the third trade, MPU shares trade at prices over the limit order and close at $40.90. Chatterjee determines that MPU is now fairly valued and does not want to buy any more MPU shares at the current price. The trade execution details are shown in Exhibit 1. Exhibit 1 Trades|Execution Price Shares Executed Trade 1|40.20|2,000 Trade 2|40.35|5,000 Trade 3|40.45|1,000 Displeased with the opportunity cost of the trade execution, Chatterjee and Angels discuss ways to reduce it. ; Question:Which of Lenny Angels's statements regarding trading strategies is most likely to be correct?; Answer Choices: A: Statement 1., B: Statement 2., C: Neither Statement 1 nor Statement 2 is correct.. Answer:

Scenario: Ivy Chatterjee is a senior portfolio manager at Lingonberry Securities, a global investment management firm. Chatterjee manages a US large-cap equity fund that invests in liquid securities, utilizing an active, fundamental investment process. Chatterjee has been researching MPU, a bank stock, and increasing its allocation in the fund she manages. MPU released its quarterly earnings report yesterday and provided a weaker earnings forecast than expected. As a result, MPU closed at $40.00 per share yesterday, a meaningful decline from its previous price. Chatterjee felt that the market overreacted to the bad news, and as a result was provided with an opportunity to buy MPU at a more favorable price. She was concerned that the market overreaction would be short-lived. Chatterjee met with Lenny Angels, the head of trading at Lingonberry Securities, to finalize the trading strategy before the opening of the equity market. Angels made the following general statements about trading strategies: Statement 1: Trading in securities with a higher rate of alpha decay, like MPU, will have better execution if we adopt a longer trade time horizon. Statement 2: The more liquid the security, such as MPU, the higher the market impact of trading will be. Chatterjee orders 10,000 shares of MPU with a decision price of $40.00 per share and sets a limit price of $40.50 for the order. The trading venue charges $0.03 per share as a commission. MPU faces strong demand and prices continue rising throughout the trading day. Angels is able to get three trades executed within the limit order set by Chatterjee. After the third trade, MPU shares trade at prices over the limit order and close at $40.90. Chatterjee determines that MPU is now fairly valued and does not want to buy any more MPU shares at the current price. The trade execution details are shown in Exhibit 1. Exhibit 1 Trades|Execution Price Shares Executed Trade 1|40.20|2,000 Trade 2|40.35|5,000 Trade 3|40.45|1,000 Displeased with the opportunity cost of the trade execution, Chatterjee and Angels discuss ways to reduce it. Question:Which of Lenny Angels's statements regarding trading strategies is most likely to be correct? Choices: A: Statement 1., B: Statement 2., C: Neither Statement 1 nor Statement 2 is correct..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Ivy Chatterjee is a senior portfolio manager at Lingonberry Securities, a global investment management firm. Chatterjee manages a US large-cap equity fund that invests in liquid securities, utilizing an active, fundamental investment process. Chatterjee has been researching MPU, a bank stock, and increasing its allocation in the fund she manages. MPU released its quarterly earnings report yesterday and provided a weaker earnings forecast than expected. As a result, MPU closed at $40.00 per share yesterday, a meaningful decline from its previous price. Chatterjee felt that the market overreacted to the bad news, and as a result was provided with an opportunity to buy MPU at a more favorable price. She was concerned that the market overreaction would be short-lived. Chatterjee met with Lenny Angels, the head of trading at Lingonberry Securities, to finalize the trading strategy before the opening of the equity market. Angels made the following general statements about trading strategies: Statement 1: Trading in securities with a higher rate of alpha decay, like MPU, will have better execution if we adopt a longer trade time horizon. Statement 2: The more liquid the security, such as MPU, the higher the market impact of trading will be. Chatterjee orders 10,000 shares of MPU with a decision price of $40.00 per share and sets a limit price of $40.50 for the order. The trading venue charges $0.03 per share as a commission. MPU faces strong demand and prices continue rising throughout the trading day. Angels is able to get three trades executed within the limit order set by Chatterjee. After the third trade, MPU shares trade at prices over the limit order and close at $40.90. Chatterjee determines that MPU is now fairly valued and does not want to buy any more MPU shares at the current price. The trade execution details are shown in Exhibit 1. Exhibit 1 Trades|Execution Price Shares Executed Trade 1|40.20|2,000 Trade 2|40.35|5,000 Trade 3|40.45|1,000 Displeased with the opportunity cost of the trade execution, Chatterjee and Angels discuss ways to reduce it. ; Question:The opportunity cost of the MPU trade is closest to:; Answer Choices: A: 20 bps., B: 45 bps., C: 57 bps.. Answer:

B

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Ivy Chatterjee is a senior portfolio manager at Lingonberry Securities, a global investment management firm. Chatterjee manages a US large-cap equity fund that invests in liquid securities, utilizing an active, fundamental investment process. Chatterjee has been researching MPU, a bank stock, and increasing its allocation in the fund she manages. MPU released its quarterly earnings report yesterday and provided a weaker earnings forecast than expected. As a result, MPU closed at $40.00 per share yesterday, a meaningful decline from its previous price. Chatterjee felt that the market overreacted to the bad news, and as a result was provided with an opportunity to buy MPU at a more favorable price. She was concerned that the market overreaction would be short-lived. Chatterjee met with Lenny Angels, the head of trading at Lingonberry Securities, to finalize the trading strategy before the opening of the equity market. Angels made the following general statements about trading strategies: Statement 1: Trading in securities with a higher rate of alpha decay, like MPU, will have better execution if we adopt a longer trade time horizon. Statement 2: The more liquid the security, such as MPU, the higher the market impact of trading will be. Chatterjee orders 10,000 shares of MPU with a decision price of $40.00 per share and sets a limit price of $40.50 for the order. The trading venue charges $0.03 per share as a commission. MPU faces strong demand and prices continue rising throughout the trading day. Angels is able to get three trades executed within the limit order set by Chatterjee. After the third trade, MPU shares trade at prices over the limit order and close at $40.90. Chatterjee determines that MPU is now fairly valued and does not want to buy any more MPU shares at the current price. The trade execution details are shown in Exhibit 1. Exhibit 1 Trades|Execution Price Shares Executed Trade 1|40.20|2,000 Trade 2|40.35|5,000 Trade 3|40.45|1,000 Displeased with the opportunity cost of the trade execution, Chatterjee and Angels discuss ways to reduce it. ; Question:The opportunity cost of the MPU trade is closest to:; Answer Choices: A: 20 bps., B: 45 bps., C: 57 bps.. Answer:

Scenario: Ivy Chatterjee is a senior portfolio manager at Lingonberry Securities, a global investment management firm. Chatterjee manages a US large-cap equity fund that invests in liquid securities, utilizing an active, fundamental investment process. Chatterjee has been researching MPU, a bank stock, and increasing its allocation in the fund she manages. MPU released its quarterly earnings report yesterday and provided a weaker earnings forecast than expected. As a result, MPU closed at $40.00 per share yesterday, a meaningful decline from its previous price. Chatterjee felt that the market overreacted to the bad news, and as a result was provided with an opportunity to buy MPU at a more favorable price. She was concerned that the market overreaction would be short-lived. Chatterjee met with Lenny Angels, the head of trading at Lingonberry Securities, to finalize the trading strategy before the opening of the equity market. Angels made the following general statements about trading strategies: Statement 1: Trading in securities with a higher rate of alpha decay, like MPU, will have better execution if we adopt a longer trade time horizon. Statement 2: The more liquid the security, such as MPU, the higher the market impact of trading will be. Chatterjee orders 10,000 shares of MPU with a decision price of $40.00 per share and sets a limit price of $40.50 for the order. The trading venue charges $0.03 per share as a commission. MPU faces strong demand and prices continue rising throughout the trading day. Angels is able to get three trades executed within the limit order set by Chatterjee. After the third trade, MPU shares trade at prices over the limit order and close at $40.90. Chatterjee determines that MPU is now fairly valued and does not want to buy any more MPU shares at the current price. The trade execution details are shown in Exhibit 1. Exhibit 1 Trades|Execution Price Shares Executed Trade 1|40.20|2,000 Trade 2|40.35|5,000 Trade 3|40.45|1,000 Displeased with the opportunity cost of the trade execution, Chatterjee and Angels discuss ways to reduce it. Question:The opportunity cost of the MPU trade is closest to: Choices: A: 20 bps., B: 45 bps., C: 57 bps..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Ivy Chatterjee is a senior portfolio manager at Lingonberry Securities, a global investment management firm. Chatterjee manages a US large-cap equity fund that invests in liquid securities, utilizing an active, fundamental investment process. Chatterjee has been researching MPU, a bank stock, and increasing its allocation in the fund she manages. MPU released its quarterly earnings report yesterday and provided a weaker earnings forecast than expected. As a result, MPU closed at $40.00 per share yesterday, a meaningful decline from its previous price. Chatterjee felt that the market overreacted to the bad news, and as a result was provided with an opportunity to buy MPU at a more favorable price. She was concerned that the market overreaction would be short-lived. Chatterjee met with Lenny Angels, the head of trading at Lingonberry Securities, to finalize the trading strategy before the opening of the equity market. Angels made the following general statements about trading strategies: Statement 1: Trading in securities with a higher rate of alpha decay, like MPU, will have better execution if we adopt a longer trade time horizon. Statement 2: The more liquid the security, such as MPU, the higher the market impact of trading will be. Chatterjee orders 10,000 shares of MPU with a decision price of $40.00 per share and sets a limit price of $40.50 for the order. The trading venue charges $0.03 per share as a commission. MPU faces strong demand and prices continue rising throughout the trading day. Angels is able to get three trades executed within the limit order set by Chatterjee. After the third trade, MPU shares trade at prices over the limit order and close at $40.90. Chatterjee determines that MPU is now fairly valued and does not want to buy any more MPU shares at the current price. The trade execution details are shown in Exhibit 1. Exhibit 1 Trades|Execution Price Shares Executed Trade 1|40.20|2,000 Trade 2|40.35|5,000 Trade 3|40.45|1,000 Displeased with the opportunity cost of the trade execution, Chatterjee and Angels discuss ways to reduce it. ; Question:The implementation shortfall of the MPU trade is closest to:; Answer Choices: A: $4,400, B: $4,500, C: $4,640. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Ivy Chatterjee is a senior portfolio manager at Lingonberry Securities, a global investment management firm. Chatterjee manages a US large-cap equity fund that invests in liquid securities, utilizing an active, fundamental investment process. Chatterjee has been researching MPU, a bank stock, and increasing its allocation in the fund she manages. MPU released its quarterly earnings report yesterday and provided a weaker earnings forecast than expected. As a result, MPU closed at $40.00 per share yesterday, a meaningful decline from its previous price. Chatterjee felt that the market overreacted to the bad news, and as a result was provided with an opportunity to buy MPU at a more favorable price. She was concerned that the market overreaction would be short-lived. Chatterjee met with Lenny Angels, the head of trading at Lingonberry Securities, to finalize the trading strategy before the opening of the equity market. Angels made the following general statements about trading strategies: Statement 1: Trading in securities with a higher rate of alpha decay, like MPU, will have better execution if we adopt a longer trade time horizon. Statement 2: The more liquid the security, such as MPU, the higher the market impact of trading will be. Chatterjee orders 10,000 shares of MPU with a decision price of $40.00 per share and sets a limit price of $40.50 for the order. The trading venue charges $0.03 per share as a commission. MPU faces strong demand and prices continue rising throughout the trading day. Angels is able to get three trades executed within the limit order set by Chatterjee. After the third trade, MPU shares trade at prices over the limit order and close at $40.90. Chatterjee determines that MPU is now fairly valued and does not want to buy any more MPU shares at the current price. The trade execution details are shown in Exhibit 1. Exhibit 1 Trades|Execution Price Shares Executed Trade 1|40.20|2,000 Trade 2|40.35|5,000 Trade 3|40.45|1,000 Displeased with the opportunity cost of the trade execution, Chatterjee and Angels discuss ways to reduce it. ; Question:The implementation shortfall of the MPU trade is closest to:; Answer Choices: A: $4,400, B: $4,500, C: $4,640. Answer:

Scenario: Ivy Chatterjee is a senior portfolio manager at Lingonberry Securities, a global investment management firm. Chatterjee manages a US large-cap equity fund that invests in liquid securities, utilizing an active, fundamental investment process. Chatterjee has been researching MPU, a bank stock, and increasing its allocation in the fund she manages. MPU released its quarterly earnings report yesterday and provided a weaker earnings forecast than expected. As a result, MPU closed at $40.00 per share yesterday, a meaningful decline from its previous price. Chatterjee felt that the market overreacted to the bad news, and as a result was provided with an opportunity to buy MPU at a more favorable price. She was concerned that the market overreaction would be short-lived. Chatterjee met with Lenny Angels, the head of trading at Lingonberry Securities, to finalize the trading strategy before the opening of the equity market. Angels made the following general statements about trading strategies: Statement 1: Trading in securities with a higher rate of alpha decay, like MPU, will have better execution if we adopt a longer trade time horizon. Statement 2: The more liquid the security, such as MPU, the higher the market impact of trading will be. Chatterjee orders 10,000 shares of MPU with a decision price of $40.00 per share and sets a limit price of $40.50 for the order. The trading venue charges $0.03 per share as a commission. MPU faces strong demand and prices continue rising throughout the trading day. Angels is able to get three trades executed within the limit order set by Chatterjee. After the third trade, MPU shares trade at prices over the limit order and close at $40.90. Chatterjee determines that MPU is now fairly valued and does not want to buy any more MPU shares at the current price. The trade execution details are shown in Exhibit 1. Exhibit 1 Trades|Execution Price Shares Executed Trade 1|40.20|2,000 Trade 2|40.35|5,000 Trade 3|40.45|1,000 Displeased with the opportunity cost of the trade execution, Chatterjee and Angels discuss ways to reduce it. Question:The implementation shortfall of the MPU trade is closest to: Choices: A: $4,400, B: $4,500, C: $4,640.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Ivy Chatterjee is a senior portfolio manager at Lingonberry Securities, a global investment management firm. Chatterjee manages a US large-cap equity fund that invests in liquid securities, utilizing an active, fundamental investment process. Chatterjee has been researching MPU, a bank stock, and increasing its allocation in the fund she manages. MPU released its quarterly earnings report yesterday and provided a weaker earnings forecast than expected. As a result, MPU closed at $40.00 per share yesterday, a meaningful decline from its previous price. Chatterjee felt that the market overreacted to the bad news, and as a result was provided with an opportunity to buy MPU at a more favorable price. She was concerned that the market overreaction would be short-lived. Chatterjee met with Lenny Angels, the head of trading at Lingonberry Securities, to finalize the trading strategy before the opening of the equity market. Angels made the following general statements about trading strategies: Statement 1: Trading in securities with a higher rate of alpha decay, like MPU, will have better execution if we adopt a longer trade time horizon. Statement 2: The more liquid the security, such as MPU, the higher the market impact of trading will be. Chatterjee orders 10,000 shares of MPU with a decision price of $40.00 per share and sets a limit price of $40.50 for the order. The trading venue charges $0.03 per share as a commission. MPU faces strong demand and prices continue rising throughout the trading day. Angels is able to get three trades executed within the limit order set by Chatterjee. After the third trade, MPU shares trade at prices over the limit order and close at $40.90. Chatterjee determines that MPU is now fairly valued and does not want to buy any more MPU shares at the current price. The trade execution details are shown in Exhibit 1. Exhibit 1 Trades|Execution Price Shares Executed Trade 1|40.20|2,000 Trade 2|40.35|5,000 Trade 3|40.45|1,000 Displeased with the opportunity cost of the trade execution, Chatterjee and Angels discuss ways to reduce it. ; Question:Which of the following improvements is most likely to reduce the opportunity cost of the trade execution?; Answer Choices: A: Selecting the proper trading urgency., B: Knowing the share quantity that is most likely to be executed within a specified price range., C: Knowing which broker and/or algorithm is best suited to reduce the time between receipt of the order and market execution.. Answer:

B

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Ivy Chatterjee is a senior portfolio manager at Lingonberry Securities, a global investment management firm. Chatterjee manages a US large-cap equity fund that invests in liquid securities, utilizing an active, fundamental investment process. Chatterjee has been researching MPU, a bank stock, and increasing its allocation in the fund she manages. MPU released its quarterly earnings report yesterday and provided a weaker earnings forecast than expected. As a result, MPU closed at $40.00 per share yesterday, a meaningful decline from its previous price. Chatterjee felt that the market overreacted to the bad news, and as a result was provided with an opportunity to buy MPU at a more favorable price. She was concerned that the market overreaction would be short-lived. Chatterjee met with Lenny Angels, the head of trading at Lingonberry Securities, to finalize the trading strategy before the opening of the equity market. Angels made the following general statements about trading strategies: Statement 1: Trading in securities with a higher rate of alpha decay, like MPU, will have better execution if we adopt a longer trade time horizon. Statement 2: The more liquid the security, such as MPU, the higher the market impact of trading will be. Chatterjee orders 10,000 shares of MPU with a decision price of $40.00 per share and sets a limit price of $40.50 for the order. The trading venue charges $0.03 per share as a commission. MPU faces strong demand and prices continue rising throughout the trading day. Angels is able to get three trades executed within the limit order set by Chatterjee. After the third trade, MPU shares trade at prices over the limit order and close at $40.90. Chatterjee determines that MPU is now fairly valued and does not want to buy any more MPU shares at the current price. The trade execution details are shown in Exhibit 1. Exhibit 1 Trades|Execution Price Shares Executed Trade 1|40.20|2,000 Trade 2|40.35|5,000 Trade 3|40.45|1,000 Displeased with the opportunity cost of the trade execution, Chatterjee and Angels discuss ways to reduce it. ; Question:Which of the following improvements is most likely to reduce the opportunity cost of the trade execution?; Answer Choices: A: Selecting the proper trading urgency., B: Knowing the share quantity that is most likely to be executed within a specified price range., C: Knowing which broker and/or algorithm is best suited to reduce the time between receipt of the order and market execution.. Answer:

Scenario: Ivy Chatterjee is a senior portfolio manager at Lingonberry Securities, a global investment management firm. Chatterjee manages a US large-cap equity fund that invests in liquid securities, utilizing an active, fundamental investment process. Chatterjee has been researching MPU, a bank stock, and increasing its allocation in the fund she manages. MPU released its quarterly earnings report yesterday and provided a weaker earnings forecast than expected. As a result, MPU closed at $40.00 per share yesterday, a meaningful decline from its previous price. Chatterjee felt that the market overreacted to the bad news, and as a result was provided with an opportunity to buy MPU at a more favorable price. She was concerned that the market overreaction would be short-lived. Chatterjee met with Lenny Angels, the head of trading at Lingonberry Securities, to finalize the trading strategy before the opening of the equity market. Angels made the following general statements about trading strategies: Statement 1: Trading in securities with a higher rate of alpha decay, like MPU, will have better execution if we adopt a longer trade time horizon. Statement 2: The more liquid the security, such as MPU, the higher the market impact of trading will be. Chatterjee orders 10,000 shares of MPU with a decision price of $40.00 per share and sets a limit price of $40.50 for the order. The trading venue charges $0.03 per share as a commission. MPU faces strong demand and prices continue rising throughout the trading day. Angels is able to get three trades executed within the limit order set by Chatterjee. After the third trade, MPU shares trade at prices over the limit order and close at $40.90. Chatterjee determines that MPU is now fairly valued and does not want to buy any more MPU shares at the current price. The trade execution details are shown in Exhibit 1. Exhibit 1 Trades|Execution Price Shares Executed Trade 1|40.20|2,000 Trade 2|40.35|5,000 Trade 3|40.45|1,000 Displeased with the opportunity cost of the trade execution, Chatterjee and Angels discuss ways to reduce it. Question:Which of the following improvements is most likely to reduce the opportunity cost of the trade execution? Choices: A: Selecting the proper trading urgency., B: Knowing the share quantity that is most likely to be executed within a specified price range., C: Knowing which broker and/or algorithm is best suited to reduce the time between receipt of the order and market execution..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Riverdale University Endowment is interested in hiring equity managers who have a demonstrated track record of outperforming the market through a full business cycle. Crestwood Capital Partners, a manager research specialist firm, has been retained by Riverdale to help with the selection of investment managers. Scott Bloomstone, Managing Director at Crestwood, has performed the investment manager due diligence and is presenting his findings to the Riverdale Investment Committee. Bloomstone presents the upside and downside capture ratios of the top three investment manager candidates as shown in Exhibit 1. Exhibit 1 Investment Manager|Upside Capture|Downside Capture Oakfarm Investments|75%|75% Sailboat Asset Mgmt|90%|125% TripleCircle Investors|90%|75% Riverdale does not want to invest in a company that derives any direct or indirect revenue from the sale of guns or ammunitions. Bloomstone makes the following statements regarding customization and choice of investment vehicles: Statement 1: A pooled vehicle offers investors the option to express individual constraints. Statement 2: Investor-specific customization requirements can create tracking risk relative to a benchmark, which can confuse performance attribution. Riverdale has decided to benchmark the portfolio against the S&P 500 Index and is mindful of investment management fees. Bloomstone prepares the following schedules, which outline the fee structure of the top three manager candidates. The investment management fee of each manager consists of two components, a base fee and a performance-based fee, as shown in Exhibit 2. Exhibit 2 Investment Manager|Base Fee|Performance Fee Structure|Applied to| Applied on Oakfarm Investments|65 bps|10% Positive returns only|Return net of base fee Sailboat Asset Mgmt|55 bps|10% Positive returns only|Excess return gross of base fee TripleCircle Investors|70 bps|1% Both positive and negative|Return net of base fee To contrast investment management fees charged by the three investment managers, Bloomstone constructs a performance table for two years and summarizes the results in Exhibit 3. Exhibit 3 Scenario| Portfolio Gross Return | S&P 500 Index ReturnYear 1|8%|6%Year 2|-7%|-10% ; Question:Which investment manager exhibits the greatest positive asymmetry in its historical returns?; Answer Choices: A: Oakfarm Investments., B: Sailboat Asset Management., C: TripleCircle Investors.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Riverdale University Endowment is interested in hiring equity managers who have a demonstrated track record of outperforming the market through a full business cycle. Crestwood Capital Partners, a manager research specialist firm, has been retained by Riverdale to help with the selection of investment managers. Scott Bloomstone, Managing Director at Crestwood, has performed the investment manager due diligence and is presenting his findings to the Riverdale Investment Committee. Bloomstone presents the upside and downside capture ratios of the top three investment manager candidates as shown in Exhibit 1. Exhibit 1 Investment Manager|Upside Capture|Downside Capture Oakfarm Investments|75%|75% Sailboat Asset Mgmt|90%|125% TripleCircle Investors|90%|75% Riverdale does not want to invest in a company that derives any direct or indirect revenue from the sale of guns or ammunitions. Bloomstone makes the following statements regarding customization and choice of investment vehicles: Statement 1: A pooled vehicle offers investors the option to express individual constraints. Statement 2: Investor-specific customization requirements can create tracking risk relative to a benchmark, which can confuse performance attribution. Riverdale has decided to benchmark the portfolio against the S&P 500 Index and is mindful of investment management fees. Bloomstone prepares the following schedules, which outline the fee structure of the top three manager candidates. The investment management fee of each manager consists of two components, a base fee and a performance-based fee, as shown in Exhibit 2. Exhibit 2 Investment Manager|Base Fee|Performance Fee Structure|Applied to| Applied on Oakfarm Investments|65 bps|10% Positive returns only|Return net of base fee Sailboat Asset Mgmt|55 bps|10% Positive returns only|Excess return gross of base fee TripleCircle Investors|70 bps|1% Both positive and negative|Return net of base fee To contrast investment management fees charged by the three investment managers, Bloomstone constructs a performance table for two years and summarizes the results in Exhibit 3. Exhibit 3 Scenario| Portfolio Gross Return | S&P 500 Index ReturnYear 1|8%|6%Year 2|-7%|-10% ; Question:Which investment manager exhibits the greatest positive asymmetry in its historical returns?; Answer Choices: A: Oakfarm Investments., B: Sailboat Asset Management., C: TripleCircle Investors.. Answer:

Scenario: Riverdale University Endowment is interested in hiring equity managers who have a demonstrated track record of outperforming the market through a full business cycle. Crestwood Capital Partners, a manager research specialist firm, has been retained by Riverdale to help with the selection of investment managers. Scott Bloomstone, Managing Director at Crestwood, has performed the investment manager due diligence and is presenting his findings to the Riverdale Investment Committee. Bloomstone presents the upside and downside capture ratios of the top three investment manager candidates as shown in Exhibit 1. Exhibit 1 Investment Manager|Upside Capture|Downside Capture Oakfarm Investments|75%|75% Sailboat Asset Mgmt|90%|125% TripleCircle Investors|90%|75% Riverdale does not want to invest in a company that derives any direct or indirect revenue from the sale of guns or ammunitions. Bloomstone makes the following statements regarding customization and choice of investment vehicles: Statement 1: A pooled vehicle offers investors the option to express individual constraints. Statement 2: Investor-specific customization requirements can create tracking risk relative to a benchmark, which can confuse performance attribution. Riverdale has decided to benchmark the portfolio against the S&P 500 Index and is mindful of investment management fees. Bloomstone prepares the following schedules, which outline the fee structure of the top three manager candidates. The investment management fee of each manager consists of two components, a base fee and a performance-based fee, as shown in Exhibit 2. Exhibit 2 Investment Manager|Base Fee|Performance Fee Structure|Applied to| Applied on Oakfarm Investments|65 bps|10% Positive returns only|Return net of base fee Sailboat Asset Mgmt|55 bps|10% Positive returns only|Excess return gross of base fee TripleCircle Investors|70 bps|1% Both positive and negative|Return net of base fee To contrast investment management fees charged by the three investment managers, Bloomstone constructs a performance table for two years and summarizes the results in Exhibit 3. Exhibit 3 Scenario| Portfolio Gross Return | S&P 500 Index ReturnYear 1|8%|6%Year 2|-7%|-10% Question:Which investment manager exhibits the greatest positive asymmetry in its historical returns? Choices: A: Oakfarm Investments., B: Sailboat Asset Management., C: TripleCircle Investors..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Riverdale University Endowment is interested in hiring equity managers who have a demonstrated track record of outperforming the market through a full business cycle. Crestwood Capital Partners, a manager research specialist firm, has been retained by Riverdale to help with the selection of investment managers. Scott Bloomstone, Managing Director at Crestwood, has performed the investment manager due diligence and is presenting his findings to the Riverdale Investment Committee. Bloomstone presents the upside and downside capture ratios of the top three investment manager candidates as shown in Exhibit 1. Exhibit 1 Investment Manager|Upside Capture|Downside Capture Oakfarm Investments|75%|75% Sailboat Asset Mgmt|90%|125% TripleCircle Investors|90%|75% Riverdale does not want to invest in a company that derives any direct or indirect revenue from the sale of guns or ammunitions. Bloomstone makes the following statements regarding customization and choice of investment vehicles: Statement 1: A pooled vehicle offers investors the option to express individual constraints. Statement 2: Investor-specific customization requirements can create tracking risk relative to a benchmark, which can confuse performance attribution. Riverdale has decided to benchmark the portfolio against the S&P 500 Index and is mindful of investment management fees. Bloomstone prepares the following schedules, which outline the fee structure of the top three manager candidates. The investment management fee of each manager consists of two components, a base fee and a performance-based fee, as shown in Exhibit 2. Exhibit 2 Investment Manager|Base Fee|Performance Fee Structure|Applied to| Applied on Oakfarm Investments|65 bps|10% Positive returns only|Return net of base fee Sailboat Asset Mgmt|55 bps|10% Positive returns only|Excess return gross of base fee TripleCircle Investors|70 bps|1% Both positive and negative|Return net of base fee To contrast investment management fees charged by the three investment managers, Bloomstone constructs a performance table for two years and summarizes the results in Exhibit 3. Exhibit 3 Scenario| Portfolio Gross Return | S&P 500 Index ReturnYear 1|8%|6%Year 2|-7%|-10% ; Question:Which of Bloomstone's statements regarding vehicle recommendations is most likely correct?; Answer Choices: A: Statement 1., B: Statement 2., C: Both Statement 1 and Statement 2.. Answer:

B

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Riverdale University Endowment is interested in hiring equity managers who have a demonstrated track record of outperforming the market through a full business cycle. Crestwood Capital Partners, a manager research specialist firm, has been retained by Riverdale to help with the selection of investment managers. Scott Bloomstone, Managing Director at Crestwood, has performed the investment manager due diligence and is presenting his findings to the Riverdale Investment Committee. Bloomstone presents the upside and downside capture ratios of the top three investment manager candidates as shown in Exhibit 1. Exhibit 1 Investment Manager|Upside Capture|Downside Capture Oakfarm Investments|75%|75% Sailboat Asset Mgmt|90%|125% TripleCircle Investors|90%|75% Riverdale does not want to invest in a company that derives any direct or indirect revenue from the sale of guns or ammunitions. Bloomstone makes the following statements regarding customization and choice of investment vehicles: Statement 1: A pooled vehicle offers investors the option to express individual constraints. Statement 2: Investor-specific customization requirements can create tracking risk relative to a benchmark, which can confuse performance attribution. Riverdale has decided to benchmark the portfolio against the S&P 500 Index and is mindful of investment management fees. Bloomstone prepares the following schedules, which outline the fee structure of the top three manager candidates. The investment management fee of each manager consists of two components, a base fee and a performance-based fee, as shown in Exhibit 2. Exhibit 2 Investment Manager|Base Fee|Performance Fee Structure|Applied to| Applied on Oakfarm Investments|65 bps|10% Positive returns only|Return net of base fee Sailboat Asset Mgmt|55 bps|10% Positive returns only|Excess return gross of base fee TripleCircle Investors|70 bps|1% Both positive and negative|Return net of base fee To contrast investment management fees charged by the three investment managers, Bloomstone constructs a performance table for two years and summarizes the results in Exhibit 3. Exhibit 3 Scenario| Portfolio Gross Return | S&P 500 Index ReturnYear 1|8%|6%Year 2|-7%|-10% ; Question:Which of Bloomstone's statements regarding vehicle recommendations is most likely correct?; Answer Choices: A: Statement 1., B: Statement 2., C: Both Statement 1 and Statement 2.. Answer:

Scenario: Riverdale University Endowment is interested in hiring equity managers who have a demonstrated track record of outperforming the market through a full business cycle. Crestwood Capital Partners, a manager research specialist firm, has been retained by Riverdale to help with the selection of investment managers. Scott Bloomstone, Managing Director at Crestwood, has performed the investment manager due diligence and is presenting his findings to the Riverdale Investment Committee. Bloomstone presents the upside and downside capture ratios of the top three investment manager candidates as shown in Exhibit 1. Exhibit 1 Investment Manager|Upside Capture|Downside Capture Oakfarm Investments|75%|75% Sailboat Asset Mgmt|90%|125% TripleCircle Investors|90%|75% Riverdale does not want to invest in a company that derives any direct or indirect revenue from the sale of guns or ammunitions. Bloomstone makes the following statements regarding customization and choice of investment vehicles: Statement 1: A pooled vehicle offers investors the option to express individual constraints. Statement 2: Investor-specific customization requirements can create tracking risk relative to a benchmark, which can confuse performance attribution. Riverdale has decided to benchmark the portfolio against the S&P 500 Index and is mindful of investment management fees. Bloomstone prepares the following schedules, which outline the fee structure of the top three manager candidates. The investment management fee of each manager consists of two components, a base fee and a performance-based fee, as shown in Exhibit 2. Exhibit 2 Investment Manager|Base Fee|Performance Fee Structure|Applied to| Applied on Oakfarm Investments|65 bps|10% Positive returns only|Return net of base fee Sailboat Asset Mgmt|55 bps|10% Positive returns only|Excess return gross of base fee TripleCircle Investors|70 bps|1% Both positive and negative|Return net of base fee To contrast investment management fees charged by the three investment managers, Bloomstone constructs a performance table for two years and summarizes the results in Exhibit 3. Exhibit 3 Scenario| Portfolio Gross Return | S&P 500 Index ReturnYear 1|8%|6%Year 2|-7%|-10% Question:Which of Bloomstone's statements regarding vehicle recommendations is most likely correct? Choices: A: Statement 1., B: Statement 2., C: Both Statement 1 and Statement 2..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Riverdale University Endowment is interested in hiring equity managers who have a demonstrated track record of outperforming the market through a full business cycle. Crestwood Capital Partners, a manager research specialist firm, has been retained by Riverdale to help with the selection of investment managers. Scott Bloomstone, Managing Director at Crestwood, has performed the investment manager due diligence and is presenting his findings to the Riverdale Investment Committee. Bloomstone presents the upside and downside capture ratios of the top three investment manager candidates as shown in Exhibit 1. Exhibit 1 Investment Manager|Upside Capture|Downside Capture Oakfarm Investments|75%|75% Sailboat Asset Mgmt|90%|125% TripleCircle Investors|90%|75% Riverdale does not want to invest in a company that derives any direct or indirect revenue from the sale of guns or ammunitions. Bloomstone makes the following statements regarding customization and choice of investment vehicles: Statement 1: A pooled vehicle offers investors the option to express individual constraints. Statement 2: Investor-specific customization requirements can create tracking risk relative to a benchmark, which can confuse performance attribution. Riverdale has decided to benchmark the portfolio against the S&P 500 Index and is mindful of investment management fees. Bloomstone prepares the following schedules, which outline the fee structure of the top three manager candidates. The investment management fee of each manager consists of two components, a base fee and a performance-based fee, as shown in Exhibit 2. Exhibit 2 Investment Manager|Base Fee|Performance Fee Structure|Applied to| Applied on Oakfarm Investments|65 bps|10% Positive returns only|Return net of base fee Sailboat Asset Mgmt|55 bps|10% Positive returns only|Excess return gross of base fee TripleCircle Investors|70 bps|1% Both positive and negative|Return net of base fee To contrast investment management fees charged by the three investment managers, Bloomstone constructs a performance table for two years and summarizes the results in Exhibit 3. Exhibit 3 Scenario| Portfolio Gross Return | S&P 500 Index ReturnYear 1|8%|6%Year 2|-7%|-10% ; Question:If Sailboat Asset Management generates the exact return shown in Exhibit 3, Year 1, its total investment management fee for Year 1 is closest to:; Answer Choices: A: 55 bps., B: 60 bps., C: 75 bps.. Answer:

C

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Riverdale University Endowment is interested in hiring equity managers who have a demonstrated track record of outperforming the market through a full business cycle. Crestwood Capital Partners, a manager research specialist firm, has been retained by Riverdale to help with the selection of investment managers. Scott Bloomstone, Managing Director at Crestwood, has performed the investment manager due diligence and is presenting his findings to the Riverdale Investment Committee. Bloomstone presents the upside and downside capture ratios of the top three investment manager candidates as shown in Exhibit 1. Exhibit 1 Investment Manager|Upside Capture|Downside Capture Oakfarm Investments|75%|75% Sailboat Asset Mgmt|90%|125% TripleCircle Investors|90%|75% Riverdale does not want to invest in a company that derives any direct or indirect revenue from the sale of guns or ammunitions. Bloomstone makes the following statements regarding customization and choice of investment vehicles: Statement 1: A pooled vehicle offers investors the option to express individual constraints. Statement 2: Investor-specific customization requirements can create tracking risk relative to a benchmark, which can confuse performance attribution. Riverdale has decided to benchmark the portfolio against the S&P 500 Index and is mindful of investment management fees. Bloomstone prepares the following schedules, which outline the fee structure of the top three manager candidates. The investment management fee of each manager consists of two components, a base fee and a performance-based fee, as shown in Exhibit 2. Exhibit 2 Investment Manager|Base Fee|Performance Fee Structure|Applied to| Applied on Oakfarm Investments|65 bps|10% Positive returns only|Return net of base fee Sailboat Asset Mgmt|55 bps|10% Positive returns only|Excess return gross of base fee TripleCircle Investors|70 bps|1% Both positive and negative|Return net of base fee To contrast investment management fees charged by the three investment managers, Bloomstone constructs a performance table for two years and summarizes the results in Exhibit 3. Exhibit 3 Scenario| Portfolio Gross Return | S&P 500 Index ReturnYear 1|8%|6%Year 2|-7%|-10% ; Question:If Sailboat Asset Management generates the exact return shown in Exhibit 3, Year 1, its total investment management fee for Year 1 is closest to:; Answer Choices: A: 55 bps., B: 60 bps., C: 75 bps.. Answer:

Scenario: Riverdale University Endowment is interested in hiring equity managers who have a demonstrated track record of outperforming the market through a full business cycle. Crestwood Capital Partners, a manager research specialist firm, has been retained by Riverdale to help with the selection of investment managers. Scott Bloomstone, Managing Director at Crestwood, has performed the investment manager due diligence and is presenting his findings to the Riverdale Investment Committee. Bloomstone presents the upside and downside capture ratios of the top three investment manager candidates as shown in Exhibit 1. Exhibit 1 Investment Manager|Upside Capture|Downside Capture Oakfarm Investments|75%|75% Sailboat Asset Mgmt|90%|125% TripleCircle Investors|90%|75% Riverdale does not want to invest in a company that derives any direct or indirect revenue from the sale of guns or ammunitions. Bloomstone makes the following statements regarding customization and choice of investment vehicles: Statement 1: A pooled vehicle offers investors the option to express individual constraints. Statement 2: Investor-specific customization requirements can create tracking risk relative to a benchmark, which can confuse performance attribution. Riverdale has decided to benchmark the portfolio against the S&P 500 Index and is mindful of investment management fees. Bloomstone prepares the following schedules, which outline the fee structure of the top three manager candidates. The investment management fee of each manager consists of two components, a base fee and a performance-based fee, as shown in Exhibit 2. Exhibit 2 Investment Manager|Base Fee|Performance Fee Structure|Applied to| Applied on Oakfarm Investments|65 bps|10% Positive returns only|Return net of base fee Sailboat Asset Mgmt|55 bps|10% Positive returns only|Excess return gross of base fee TripleCircle Investors|70 bps|1% Both positive and negative|Return net of base fee To contrast investment management fees charged by the three investment managers, Bloomstone constructs a performance table for two years and summarizes the results in Exhibit 3. Exhibit 3 Scenario| Portfolio Gross Return | S&P 500 Index ReturnYear 1|8%|6%Year 2|-7%|-10% Question:If Sailboat Asset Management generates the exact return shown in Exhibit 3, Year 1, its total investment management fee for Year 1 is closest to: Choices: A: 55 bps., B: 60 bps., C: 75 bps..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Riverdale University Endowment is interested in hiring equity managers who have a demonstrated track record of outperforming the market through a full business cycle. Crestwood Capital Partners, a manager research specialist firm, has been retained by Riverdale to help with the selection of investment managers. Scott Bloomstone, Managing Director at Crestwood, has performed the investment manager due diligence and is presenting his findings to the Riverdale Investment Committee. Bloomstone presents the upside and downside capture ratios of the top three investment manager candidates as shown in Exhibit 1. Exhibit 1 Investment Manager|Upside Capture|Downside Capture Oakfarm Investments|75%|75% Sailboat Asset Mgmt|90%|125% TripleCircle Investors|90%|75% Riverdale does not want to invest in a company that derives any direct or indirect revenue from the sale of guns or ammunitions. Bloomstone makes the following statements regarding customization and choice of investment vehicles: Statement 1: A pooled vehicle offers investors the option to express individual constraints. Statement 2: Investor-specific customization requirements can create tracking risk relative to a benchmark, which can confuse performance attribution. Riverdale has decided to benchmark the portfolio against the S&P 500 Index and is mindful of investment management fees. Bloomstone prepares the following schedules, which outline the fee structure of the top three manager candidates. The investment management fee of each manager consists of two components, a base fee and a performance-based fee, as shown in Exhibit 2. Exhibit 2 Investment Manager|Base Fee|Performance Fee Structure|Applied to| Applied on Oakfarm Investments|65 bps|10% Positive returns only|Return net of base fee Sailboat Asset Mgmt|55 bps|10% Positive returns only|Excess return gross of base fee TripleCircle Investors|70 bps|1% Both positive and negative|Return net of base fee To contrast investment management fees charged by the three investment managers, Bloomstone constructs a performance table for two years and summarizes the results in Exhibit 3. Exhibit 3 Scenario| Portfolio Gross Return | S&P 500 Index ReturnYear 1|8%|6%Year 2|-7%|-10% ; Question:Given the portfolio returns shown in Exhibit 3, Year 2, the investment manager with the lowest total investment management fee is most likely:; Answer Choices: A: Oakfarm Investments., B: Sailboat Asset Management., C: TripleCircle Investors.. Answer:

B

2020 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Riverdale University Endowment is interested in hiring equity managers who have a demonstrated track record of outperforming the market through a full business cycle. Crestwood Capital Partners, a manager research specialist firm, has been retained by Riverdale to help with the selection of investment managers. Scott Bloomstone, Managing Director at Crestwood, has performed the investment manager due diligence and is presenting his findings to the Riverdale Investment Committee. Bloomstone presents the upside and downside capture ratios of the top three investment manager candidates as shown in Exhibit 1. Exhibit 1 Investment Manager|Upside Capture|Downside Capture Oakfarm Investments|75%|75% Sailboat Asset Mgmt|90%|125% TripleCircle Investors|90%|75% Riverdale does not want to invest in a company that derives any direct or indirect revenue from the sale of guns or ammunitions. Bloomstone makes the following statements regarding customization and choice of investment vehicles: Statement 1: A pooled vehicle offers investors the option to express individual constraints. Statement 2: Investor-specific customization requirements can create tracking risk relative to a benchmark, which can confuse performance attribution. Riverdale has decided to benchmark the portfolio against the S&P 500 Index and is mindful of investment management fees. Bloomstone prepares the following schedules, which outline the fee structure of the top three manager candidates. The investment management fee of each manager consists of two components, a base fee and a performance-based fee, as shown in Exhibit 2. Exhibit 2 Investment Manager|Base Fee|Performance Fee Structure|Applied to| Applied on Oakfarm Investments|65 bps|10% Positive returns only|Return net of base fee Sailboat Asset Mgmt|55 bps|10% Positive returns only|Excess return gross of base fee TripleCircle Investors|70 bps|1% Both positive and negative|Return net of base fee To contrast investment management fees charged by the three investment managers, Bloomstone constructs a performance table for two years and summarizes the results in Exhibit 3. Exhibit 3 Scenario| Portfolio Gross Return | S&P 500 Index ReturnYear 1|8%|6%Year 2|-7%|-10% ; Question:Given the portfolio returns shown in Exhibit 3, Year 2, the investment manager with the lowest total investment management fee is most likely:; Answer Choices: A: Oakfarm Investments., B: Sailboat Asset Management., C: TripleCircle Investors.. Answer:

Scenario: Riverdale University Endowment is interested in hiring equity managers who have a demonstrated track record of outperforming the market through a full business cycle. Crestwood Capital Partners, a manager research specialist firm, has been retained by Riverdale to help with the selection of investment managers. Scott Bloomstone, Managing Director at Crestwood, has performed the investment manager due diligence and is presenting his findings to the Riverdale Investment Committee. Bloomstone presents the upside and downside capture ratios of the top three investment manager candidates as shown in Exhibit 1. Exhibit 1 Investment Manager|Upside Capture|Downside Capture Oakfarm Investments|75%|75% Sailboat Asset Mgmt|90%|125% TripleCircle Investors|90%|75% Riverdale does not want to invest in a company that derives any direct or indirect revenue from the sale of guns or ammunitions. Bloomstone makes the following statements regarding customization and choice of investment vehicles: Statement 1: A pooled vehicle offers investors the option to express individual constraints. Statement 2: Investor-specific customization requirements can create tracking risk relative to a benchmark, which can confuse performance attribution. Riverdale has decided to benchmark the portfolio against the S&P 500 Index and is mindful of investment management fees. Bloomstone prepares the following schedules, which outline the fee structure of the top three manager candidates. The investment management fee of each manager consists of two components, a base fee and a performance-based fee, as shown in Exhibit 2. Exhibit 2 Investment Manager|Base Fee|Performance Fee Structure|Applied to| Applied on Oakfarm Investments|65 bps|10% Positive returns only|Return net of base fee Sailboat Asset Mgmt|55 bps|10% Positive returns only|Excess return gross of base fee TripleCircle Investors|70 bps|1% Both positive and negative|Return net of base fee To contrast investment management fees charged by the three investment managers, Bloomstone constructs a performance table for two years and summarizes the results in Exhibit 3. Exhibit 3 Scenario| Portfolio Gross Return | S&P 500 Index ReturnYear 1|8%|6%Year 2|-7%|-10% Question:Given the portfolio returns shown in Exhibit 3, Year 2, the investment manager with the lowest total investment management fee is most likely: Choices: A: Oakfarm Investments., B: Sailboat Asset Management., C: TripleCircle Investors..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Mary Lee Vincenzo, CFA, is a fixed income portfolio manager who oversees the operations of GLL Investments, a major financial institution in Germany. Vincenzo observes what she believes to be a violation of the Code of Ethics and Standards of Professional Conduct by one of the managers in another department. She approaches the manager with her concerns and recommends that the manager cease the improper activity. These direct discussions with the manager are, however, unsuccessful. Vincenzo believes the Code and Standards compel her to take the following actions: Action 1: Bring the violation to the attention of the manager's supervisor or the firm's compliance department. Action 2: Step away and dissociate from the activity. Action 3: Report the violation to the relevant governmental or regulatory organization. Gertrude Shultz, CFA, an analyst with GLL, approaches Vincenzo with a concern. Shultz was accused of professional misconduct. Shultz tells Vincenzo that she is innocent and will not accept the charges nor the proposed sanction levied against her. Shultz explains that she was accused of accepting outside compensation in violation of Standard IV(B)-Additional Compensation Arrangements. She states that she discussed all pertinent details with her managing director at a meeting one month before she accepted the outside compensation. At that meeting, Shultz notified the director of her intention to do independent outside work, the nature and duration of the services she intended to provide, and the total compensation she expected. The director nodded her approval and shook Shultz's hand, wishing her good luck with the endeavor. At an industry conference on ethics, Vincenzo makes the following three statements regarding what it means to be a CFA charterholder: Statement 1: Soft dollars cannot be used when managing client accounts. Statement 2: Conflicts of interest are sometimes permissible. Statement 3: Whistleblowing is always allowed. Vincenzo would like GLL to adopt the Asset Manager Code of Professional Conduct (AMC), but she recognizes that it will take time before it is fully implemented at the firm. She wonders how GLL can achieve this goal in phases. ; Question:Vincenzo's understanding of the Code and Standards is most likely:; Answer Choices: A: Action 1 Correct, Action 2 Incorrect, Action 3 Incorrect, B: Action 1 Correct, Action 2 Correct, Action 3 Incorrect, C: Action 1 Correct, Action 2 Correct, Action 3 Correct. Answer:

B

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Mary Lee Vincenzo, CFA, is a fixed income portfolio manager who oversees the operations of GLL Investments, a major financial institution in Germany. Vincenzo observes what she believes to be a violation of the Code of Ethics and Standards of Professional Conduct by one of the managers in another department. She approaches the manager with her concerns and recommends that the manager cease the improper activity. These direct discussions with the manager are, however, unsuccessful. Vincenzo believes the Code and Standards compel her to take the following actions: Action 1: Bring the violation to the attention of the manager's supervisor or the firm's compliance department. Action 2: Step away and dissociate from the activity. Action 3: Report the violation to the relevant governmental or regulatory organization. Gertrude Shultz, CFA, an analyst with GLL, approaches Vincenzo with a concern. Shultz was accused of professional misconduct. Shultz tells Vincenzo that she is innocent and will not accept the charges nor the proposed sanction levied against her. Shultz explains that she was accused of accepting outside compensation in violation of Standard IV(B)-Additional Compensation Arrangements. She states that she discussed all pertinent details with her managing director at a meeting one month before she accepted the outside compensation. At that meeting, Shultz notified the director of her intention to do independent outside work, the nature and duration of the services she intended to provide, and the total compensation she expected. The director nodded her approval and shook Shultz's hand, wishing her good luck with the endeavor. At an industry conference on ethics, Vincenzo makes the following three statements regarding what it means to be a CFA charterholder: Statement 1: Soft dollars cannot be used when managing client accounts. Statement 2: Conflicts of interest are sometimes permissible. Statement 3: Whistleblowing is always allowed. Vincenzo would like GLL to adopt the Asset Manager Code of Professional Conduct (AMC), but she recognizes that it will take time before it is fully implemented at the firm. She wonders how GLL can achieve this goal in phases. ; Question:Vincenzo's understanding of the Code and Standards is most likely:; Answer Choices: A: Action 1 Correct, Action 2 Incorrect, Action 3 Incorrect, B: Action 1 Correct, Action 2 Correct, Action 3 Incorrect, C: Action 1 Correct, Action 2 Correct, Action 3 Correct. Answer:

Scenario: Mary Lee Vincenzo, CFA, is a fixed income portfolio manager who oversees the operations of GLL Investments, a major financial institution in Germany. Vincenzo observes what she believes to be a violation of the Code of Ethics and Standards of Professional Conduct by one of the managers in another department. She approaches the manager with her concerns and recommends that the manager cease the improper activity. These direct discussions with the manager are, however, unsuccessful. Vincenzo believes the Code and Standards compel her to take the following actions: Action 1: Bring the violation to the attention of the manager's supervisor or the firm's compliance department. Action 2: Step away and dissociate from the activity. Action 3: Report the violation to the relevant governmental or regulatory organization. Gertrude Shultz, CFA, an analyst with GLL, approaches Vincenzo with a concern. Shultz was accused of professional misconduct. Shultz tells Vincenzo that she is innocent and will not accept the charges nor the proposed sanction levied against her. Shultz explains that she was accused of accepting outside compensation in violation of Standard IV(B)-Additional Compensation Arrangements. She states that she discussed all pertinent details with her managing director at a meeting one month before she accepted the outside compensation. At that meeting, Shultz notified the director of her intention to do independent outside work, the nature and duration of the services she intended to provide, and the total compensation she expected. The director nodded her approval and shook Shultz's hand, wishing her good luck with the endeavor. At an industry conference on ethics, Vincenzo makes the following three statements regarding what it means to be a CFA charterholder: Statement 1: Soft dollars cannot be used when managing client accounts. Statement 2: Conflicts of interest are sometimes permissible. Statement 3: Whistleblowing is always allowed. Vincenzo would like GLL to adopt the Asset Manager Code of Professional Conduct (AMC), but she recognizes that it will take time before it is fully implemented at the firm. She wonders how GLL can achieve this goal in phases. Question:Vincenzo's understanding of the Code and Standards is most likely: Choices: A: Action 1 Correct, Action 2 Incorrect, Action 3 Incorrect, B: Action 1 Correct, Action 2 Correct, Action 3 Incorrect, C: Action 1 Correct, Action 2 Correct, Action 3 Correct.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Mary Lee Vincenzo, CFA, is a fixed income portfolio manager who oversees the operations of GLL Investments, a major financial institution in Germany. Vincenzo observes what she believes to be a violation of the Code of Ethics and Standards of Professional Conduct by one of the managers in another department. She approaches the manager with her concerns and recommends that the manager cease the improper activity. These direct discussions with the manager are, however, unsuccessful. Vincenzo believes the Code and Standards compel her to take the following actions: Action 1: Bring the violation to the attention of the manager's supervisor or the firm's compliance department. Action 2: Step away and dissociate from the activity. Action 3: Report the violation to the relevant governmental or regulatory organization. Gertrude Shultz, CFA, an analyst with GLL, approaches Vincenzo with a concern. Shultz was accused of professional misconduct. Shultz tells Vincenzo that she is innocent and will not accept the charges nor the proposed sanction levied against her. Shultz explains that she was accused of accepting outside compensation in violation of Standard IV(B)-Additional Compensation Arrangements. She states that she discussed all pertinent details with her managing director at a meeting one month before she accepted the outside compensation. At that meeting, Shultz notified the director of her intention to do independent outside work, the nature and duration of the services she intended to provide, and the total compensation she expected. The director nodded her approval and shook Shultz's hand, wishing her good luck with the endeavor. At an industry conference on ethics, Vincenzo makes the following three statements regarding what it means to be a CFA charterholder: Statement 1: Soft dollars cannot be used when managing client accounts. Statement 2: Conflicts of interest are sometimes permissible. Statement 3: Whistleblowing is always allowed. Vincenzo would like GLL to adopt the Asset Manager Code of Professional Conduct (AMC), but she recognizes that it will take time before it is fully implemented at the firm. She wonders how GLL can achieve this goal in phases. ; Question:Shultz's refusal to accept the charge and proposed sanction will most likely be referred to:; Answer Choices: A: a volunteer committee., B: the CFA Institute Board of Governors., C: a disciplinary panel elected by CFA Institute members.. Answer:

A

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Mary Lee Vincenzo, CFA, is a fixed income portfolio manager who oversees the operations of GLL Investments, a major financial institution in Germany. Vincenzo observes what she believes to be a violation of the Code of Ethics and Standards of Professional Conduct by one of the managers in another department. She approaches the manager with her concerns and recommends that the manager cease the improper activity. These direct discussions with the manager are, however, unsuccessful. Vincenzo believes the Code and Standards compel her to take the following actions: Action 1: Bring the violation to the attention of the manager's supervisor or the firm's compliance department. Action 2: Step away and dissociate from the activity. Action 3: Report the violation to the relevant governmental or regulatory organization. Gertrude Shultz, CFA, an analyst with GLL, approaches Vincenzo with a concern. Shultz was accused of professional misconduct. Shultz tells Vincenzo that she is innocent and will not accept the charges nor the proposed sanction levied against her. Shultz explains that she was accused of accepting outside compensation in violation of Standard IV(B)-Additional Compensation Arrangements. She states that she discussed all pertinent details with her managing director at a meeting one month before she accepted the outside compensation. At that meeting, Shultz notified the director of her intention to do independent outside work, the nature and duration of the services she intended to provide, and the total compensation she expected. The director nodded her approval and shook Shultz's hand, wishing her good luck with the endeavor. At an industry conference on ethics, Vincenzo makes the following three statements regarding what it means to be a CFA charterholder: Statement 1: Soft dollars cannot be used when managing client accounts. Statement 2: Conflicts of interest are sometimes permissible. Statement 3: Whistleblowing is always allowed. Vincenzo would like GLL to adopt the Asset Manager Code of Professional Conduct (AMC), but she recognizes that it will take time before it is fully implemented at the firm. She wonders how GLL can achieve this goal in phases. ; Question:Shultz's refusal to accept the charge and proposed sanction will most likely be referred to:; Answer Choices: A: a volunteer committee., B: the CFA Institute Board of Governors., C: a disciplinary panel elected by CFA Institute members.. Answer:

Scenario: Mary Lee Vincenzo, CFA, is a fixed income portfolio manager who oversees the operations of GLL Investments, a major financial institution in Germany. Vincenzo observes what she believes to be a violation of the Code of Ethics and Standards of Professional Conduct by one of the managers in another department. She approaches the manager with her concerns and recommends that the manager cease the improper activity. These direct discussions with the manager are, however, unsuccessful. Vincenzo believes the Code and Standards compel her to take the following actions: Action 1: Bring the violation to the attention of the manager's supervisor or the firm's compliance department. Action 2: Step away and dissociate from the activity. Action 3: Report the violation to the relevant governmental or regulatory organization. Gertrude Shultz, CFA, an analyst with GLL, approaches Vincenzo with a concern. Shultz was accused of professional misconduct. Shultz tells Vincenzo that she is innocent and will not accept the charges nor the proposed sanction levied against her. Shultz explains that she was accused of accepting outside compensation in violation of Standard IV(B)-Additional Compensation Arrangements. She states that she discussed all pertinent details with her managing director at a meeting one month before she accepted the outside compensation. At that meeting, Shultz notified the director of her intention to do independent outside work, the nature and duration of the services she intended to provide, and the total compensation she expected. The director nodded her approval and shook Shultz's hand, wishing her good luck with the endeavor. At an industry conference on ethics, Vincenzo makes the following three statements regarding what it means to be a CFA charterholder: Statement 1: Soft dollars cannot be used when managing client accounts. Statement 2: Conflicts of interest are sometimes permissible. Statement 3: Whistleblowing is always allowed. Vincenzo would like GLL to adopt the Asset Manager Code of Professional Conduct (AMC), but she recognizes that it will take time before it is fully implemented at the firm. She wonders how GLL can achieve this goal in phases. Question:Shultz's refusal to accept the charge and proposed sanction will most likely be referred to: Choices: A: a volunteer committee., B: the CFA Institute Board of Governors., C: a disciplinary panel elected by CFA Institute members..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Mary Lee Vincenzo, CFA, is a fixed income portfolio manager who oversees the operations of GLL Investments, a major financial institution in Germany. Vincenzo observes what she believes to be a violation of the Code of Ethics and Standards of Professional Conduct by one of the managers in another department. She approaches the manager with her concerns and recommends that the manager cease the improper activity. These direct discussions with the manager are, however, unsuccessful. Vincenzo believes the Code and Standards compel her to take the following actions: Action 1: Bring the violation to the attention of the manager's supervisor or the firm's compliance department. Action 2: Step away and dissociate from the activity. Action 3: Report the violation to the relevant governmental or regulatory organization. Gertrude Shultz, CFA, an analyst with GLL, approaches Vincenzo with a concern. Shultz was accused of professional misconduct. Shultz tells Vincenzo that she is innocent and will not accept the charges nor the proposed sanction levied against her. Shultz explains that she was accused of accepting outside compensation in violation of Standard IV(B)-Additional Compensation Arrangements. She states that she discussed all pertinent details with her managing director at a meeting one month before she accepted the outside compensation. At that meeting, Shultz notified the director of her intention to do independent outside work, the nature and duration of the services she intended to provide, and the total compensation she expected. The director nodded her approval and shook Shultz's hand, wishing her good luck with the endeavor. At an industry conference on ethics, Vincenzo makes the following three statements regarding what it means to be a CFA charterholder: Statement 1: Soft dollars cannot be used when managing client accounts. Statement 2: Conflicts of interest are sometimes permissible. Statement 3: Whistleblowing is always allowed. Vincenzo would like GLL to adopt the Asset Manager Code of Professional Conduct (AMC), but she recognizes that it will take time before it is fully implemented at the firm. She wonders how GLL can achieve this goal in phases. ; Question:Vincenzo's statement at the conference that is most likely correct is:; Answer Choices: A: Statement 1., B: Statement 2., C: Statement 3.. Answer:

B

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Mary Lee Vincenzo, CFA, is a fixed income portfolio manager who oversees the operations of GLL Investments, a major financial institution in Germany. Vincenzo observes what she believes to be a violation of the Code of Ethics and Standards of Professional Conduct by one of the managers in another department. She approaches the manager with her concerns and recommends that the manager cease the improper activity. These direct discussions with the manager are, however, unsuccessful. Vincenzo believes the Code and Standards compel her to take the following actions: Action 1: Bring the violation to the attention of the manager's supervisor or the firm's compliance department. Action 2: Step away and dissociate from the activity. Action 3: Report the violation to the relevant governmental or regulatory organization. Gertrude Shultz, CFA, an analyst with GLL, approaches Vincenzo with a concern. Shultz was accused of professional misconduct. Shultz tells Vincenzo that she is innocent and will not accept the charges nor the proposed sanction levied against her. Shultz explains that she was accused of accepting outside compensation in violation of Standard IV(B)-Additional Compensation Arrangements. She states that she discussed all pertinent details with her managing director at a meeting one month before she accepted the outside compensation. At that meeting, Shultz notified the director of her intention to do independent outside work, the nature and duration of the services she intended to provide, and the total compensation she expected. The director nodded her approval and shook Shultz's hand, wishing her good luck with the endeavor. At an industry conference on ethics, Vincenzo makes the following three statements regarding what it means to be a CFA charterholder: Statement 1: Soft dollars cannot be used when managing client accounts. Statement 2: Conflicts of interest are sometimes permissible. Statement 3: Whistleblowing is always allowed. Vincenzo would like GLL to adopt the Asset Manager Code of Professional Conduct (AMC), but she recognizes that it will take time before it is fully implemented at the firm. She wonders how GLL can achieve this goal in phases. ; Question:Vincenzo's statement at the conference that is most likely correct is:; Answer Choices: A: Statement 1., B: Statement 2., C: Statement 3.. Answer:

Scenario: Mary Lee Vincenzo, CFA, is a fixed income portfolio manager who oversees the operations of GLL Investments, a major financial institution in Germany. Vincenzo observes what she believes to be a violation of the Code of Ethics and Standards of Professional Conduct by one of the managers in another department. She approaches the manager with her concerns and recommends that the manager cease the improper activity. These direct discussions with the manager are, however, unsuccessful. Vincenzo believes the Code and Standards compel her to take the following actions: Action 1: Bring the violation to the attention of the manager's supervisor or the firm's compliance department. Action 2: Step away and dissociate from the activity. Action 3: Report the violation to the relevant governmental or regulatory organization. Gertrude Shultz, CFA, an analyst with GLL, approaches Vincenzo with a concern. Shultz was accused of professional misconduct. Shultz tells Vincenzo that she is innocent and will not accept the charges nor the proposed sanction levied against her. Shultz explains that she was accused of accepting outside compensation in violation of Standard IV(B)-Additional Compensation Arrangements. She states that she discussed all pertinent details with her managing director at a meeting one month before she accepted the outside compensation. At that meeting, Shultz notified the director of her intention to do independent outside work, the nature and duration of the services she intended to provide, and the total compensation she expected. The director nodded her approval and shook Shultz's hand, wishing her good luck with the endeavor. At an industry conference on ethics, Vincenzo makes the following three statements regarding what it means to be a CFA charterholder: Statement 1: Soft dollars cannot be used when managing client accounts. Statement 2: Conflicts of interest are sometimes permissible. Statement 3: Whistleblowing is always allowed. Vincenzo would like GLL to adopt the Asset Manager Code of Professional Conduct (AMC), but she recognizes that it will take time before it is fully implemented at the firm. She wonders how GLL can achieve this goal in phases. Question:Vincenzo's statement at the conference that is most likely correct is: Choices: A: Statement 1., B: Statement 2., C: Statement 3..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Mary Lee Vincenzo, CFA, is a fixed income portfolio manager who oversees the operations of GLL Investments, a major financial institution in Germany. Vincenzo observes what she believes to be a violation of the Code of Ethics and Standards of Professional Conduct by one of the managers in another department. She approaches the manager with her concerns and recommends that the manager cease the improper activity. These direct discussions with the manager are, however, unsuccessful. Vincenzo believes the Code and Standards compel her to take the following actions: Action 1: Bring the violation to the attention of the manager's supervisor or the firm's compliance department. Action 2: Step away and dissociate from the activity. Action 3: Report the violation to the relevant governmental or regulatory organization. Gertrude Shultz, CFA, an analyst with GLL, approaches Vincenzo with a concern. Shultz was accused of professional misconduct. Shultz tells Vincenzo that she is innocent and will not accept the charges nor the proposed sanction levied against her. Shultz explains that she was accused of accepting outside compensation in violation of Standard IV(B)-Additional Compensation Arrangements. She states that she discussed all pertinent details with her managing director at a meeting one month before she accepted the outside compensation. At that meeting, Shultz notified the director of her intention to do independent outside work, the nature and duration of the services she intended to provide, and the total compensation she expected. The director nodded her approval and shook Shultz's hand, wishing her good luck with the endeavor. At an industry conference on ethics, Vincenzo makes the following three statements regarding what it means to be a CFA charterholder: Statement 1: Soft dollars cannot be used when managing client accounts. Statement 2: Conflicts of interest are sometimes permissible. Statement 3: Whistleblowing is always allowed. Vincenzo would like GLL to adopt the Asset Manager Code of Professional Conduct (AMC), but she recognizes that it will take time before it is fully implemented at the firm. She wonders how GLL can achieve this goal in phases. ; Question:Over time, Vincenzo's firm, GLL, may:; Answer Choices: A: claim full compliance with parts of the AMC., B: only claim compliance with the entire AMC., C: claim general compliance with the AMC, citing any compliance deficiencies.. Answer:

B

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Mary Lee Vincenzo, CFA, is a fixed income portfolio manager who oversees the operations of GLL Investments, a major financial institution in Germany. Vincenzo observes what she believes to be a violation of the Code of Ethics and Standards of Professional Conduct by one of the managers in another department. She approaches the manager with her concerns and recommends that the manager cease the improper activity. These direct discussions with the manager are, however, unsuccessful. Vincenzo believes the Code and Standards compel her to take the following actions: Action 1: Bring the violation to the attention of the manager's supervisor or the firm's compliance department. Action 2: Step away and dissociate from the activity. Action 3: Report the violation to the relevant governmental or regulatory organization. Gertrude Shultz, CFA, an analyst with GLL, approaches Vincenzo with a concern. Shultz was accused of professional misconduct. Shultz tells Vincenzo that she is innocent and will not accept the charges nor the proposed sanction levied against her. Shultz explains that she was accused of accepting outside compensation in violation of Standard IV(B)-Additional Compensation Arrangements. She states that she discussed all pertinent details with her managing director at a meeting one month before she accepted the outside compensation. At that meeting, Shultz notified the director of her intention to do independent outside work, the nature and duration of the services she intended to provide, and the total compensation she expected. The director nodded her approval and shook Shultz's hand, wishing her good luck with the endeavor. At an industry conference on ethics, Vincenzo makes the following three statements regarding what it means to be a CFA charterholder: Statement 1: Soft dollars cannot be used when managing client accounts. Statement 2: Conflicts of interest are sometimes permissible. Statement 3: Whistleblowing is always allowed. Vincenzo would like GLL to adopt the Asset Manager Code of Professional Conduct (AMC), but she recognizes that it will take time before it is fully implemented at the firm. She wonders how GLL can achieve this goal in phases. ; Question:Over time, Vincenzo's firm, GLL, may:; Answer Choices: A: claim full compliance with parts of the AMC., B: only claim compliance with the entire AMC., C: claim general compliance with the AMC, citing any compliance deficiencies.. Answer:

Scenario: Mary Lee Vincenzo, CFA, is a fixed income portfolio manager who oversees the operations of GLL Investments, a major financial institution in Germany. Vincenzo observes what she believes to be a violation of the Code of Ethics and Standards of Professional Conduct by one of the managers in another department. She approaches the manager with her concerns and recommends that the manager cease the improper activity. These direct discussions with the manager are, however, unsuccessful. Vincenzo believes the Code and Standards compel her to take the following actions: Action 1: Bring the violation to the attention of the manager's supervisor or the firm's compliance department. Action 2: Step away and dissociate from the activity. Action 3: Report the violation to the relevant governmental or regulatory organization. Gertrude Shultz, CFA, an analyst with GLL, approaches Vincenzo with a concern. Shultz was accused of professional misconduct. Shultz tells Vincenzo that she is innocent and will not accept the charges nor the proposed sanction levied against her. Shultz explains that she was accused of accepting outside compensation in violation of Standard IV(B)-Additional Compensation Arrangements. She states that she discussed all pertinent details with her managing director at a meeting one month before she accepted the outside compensation. At that meeting, Shultz notified the director of her intention to do independent outside work, the nature and duration of the services she intended to provide, and the total compensation she expected. The director nodded her approval and shook Shultz's hand, wishing her good luck with the endeavor. At an industry conference on ethics, Vincenzo makes the following three statements regarding what it means to be a CFA charterholder: Statement 1: Soft dollars cannot be used when managing client accounts. Statement 2: Conflicts of interest are sometimes permissible. Statement 3: Whistleblowing is always allowed. Vincenzo would like GLL to adopt the Asset Manager Code of Professional Conduct (AMC), but she recognizes that it will take time before it is fully implemented at the firm. She wonders how GLL can achieve this goal in phases. Question:Over time, Vincenzo's firm, GLL, may: Choices: A: claim full compliance with parts of the AMC., B: only claim compliance with the entire AMC., C: claim general compliance with the AMC, citing any compliance deficiencies..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Dorothy Bray, CFA, is an analyst at Sadosky & Bray (S&B), a global investment counseling firm headquartered in Vancouver, British Columbia. Bray is very pleased that the firm, after a thorough internal review, can claim compliance with the CFA Institute's Asset Manager Code of Professional Conduct (AMC). In the marketing materials she develops for the firm, Bray writes that the company is proud to attain the level of professional and ethical compliance with the AMC that is granted by the CFA Institute. She points out that very few Canadian firms have attained this achievement. Bray issues a report on the Canadian shale oil industry. The report contains S&B proprietary research, industry data from subscription services, and raw statistical economic data prepared by the Canadian and Alberta governments. Bray identifies S&B's own in-house research and adequately references the sources of the industry (verified) and government (unverified) data. S&B's Director of Research, Elizabeth Donovan, CFA, holds a firm-wide (35 individuals) meeting to alert all personnel that the firm will be making significant revisions to its “buy, sell, hold” recommendations in three weeks and that confidentiality of this information is critical. In the past, changes in the firm's assessments of investment attractiveness leaked out before their scheduled announcement. Donovan hopes to avoid such leakage this time. Bray advises a group of newly hired portfolio managers, making the following statement: Statement 1: Those of you who have just passed Level III of the CFA program and are now about to become CFA charterholders will now be required to comply with the CFA Institute's: Code of Ethics, Standards of Professional Conduct, and Asset Manager Code of Professional Conduct (AMC). Donovan engages in online chat rooms where investment ideas are discussed. She is careful not to reveal any S&B material nor propriety information and acts primarily as an observer. When she does post a comment, Donovan uses a fictitious name and does not identify herself as a CFA charterholder. She notes that three other chat room participants regularly refer to themselves as: a past CFA charterholder, an inactive CFA candidate, and a CFA charterholder who passed each of the three levels on her first try. In order to assist all S&B portfolio managers in the construction of client portfolios, Donovan's research group maintains an extensive list of securities, referred to as the Approved List, that were thoroughly researched and likely to exhibit favorable future performance. S&B associates believe that the research department develops this list using a reasonable and adequate basis and that its process is both independent and objective. S&B permits portfolio managers to use securities from the list in any client portfolio, unless an expressed restriction in the client's IPS applies. ; Question:In her marketing materials and oil industry report, Bray has most likely improperly communicated:; Answer Choices: A: S&B's AMC Compliance: No; Use of Unverified Government Data: No, B: S&B's AMC Compliance: Yes; Use of Unverified Government Data: No, C: S&B's AMC Compliance: Yes; Use of Unverified Government Data: Yes. Answer:

B

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Dorothy Bray, CFA, is an analyst at Sadosky & Bray (S&B), a global investment counseling firm headquartered in Vancouver, British Columbia. Bray is very pleased that the firm, after a thorough internal review, can claim compliance with the CFA Institute's Asset Manager Code of Professional Conduct (AMC). In the marketing materials she develops for the firm, Bray writes that the company is proud to attain the level of professional and ethical compliance with the AMC that is granted by the CFA Institute. She points out that very few Canadian firms have attained this achievement. Bray issues a report on the Canadian shale oil industry. The report contains S&B proprietary research, industry data from subscription services, and raw statistical economic data prepared by the Canadian and Alberta governments. Bray identifies S&B's own in-house research and adequately references the sources of the industry (verified) and government (unverified) data. S&B's Director of Research, Elizabeth Donovan, CFA, holds a firm-wide (35 individuals) meeting to alert all personnel that the firm will be making significant revisions to its “buy, sell, hold” recommendations in three weeks and that confidentiality of this information is critical. In the past, changes in the firm's assessments of investment attractiveness leaked out before their scheduled announcement. Donovan hopes to avoid such leakage this time. Bray advises a group of newly hired portfolio managers, making the following statement: Statement 1: Those of you who have just passed Level III of the CFA program and are now about to become CFA charterholders will now be required to comply with the CFA Institute's: Code of Ethics, Standards of Professional Conduct, and Asset Manager Code of Professional Conduct (AMC). Donovan engages in online chat rooms where investment ideas are discussed. She is careful not to reveal any S&B material nor propriety information and acts primarily as an observer. When she does post a comment, Donovan uses a fictitious name and does not identify herself as a CFA charterholder. She notes that three other chat room participants regularly refer to themselves as: a past CFA charterholder, an inactive CFA candidate, and a CFA charterholder who passed each of the three levels on her first try. In order to assist all S&B portfolio managers in the construction of client portfolios, Donovan's research group maintains an extensive list of securities, referred to as the Approved List, that were thoroughly researched and likely to exhibit favorable future performance. S&B associates believe that the research department develops this list using a reasonable and adequate basis and that its process is both independent and objective. S&B permits portfolio managers to use securities from the list in any client portfolio, unless an expressed restriction in the client's IPS applies. ; Question:In her marketing materials and oil industry report, Bray has most likely improperly communicated:; Answer Choices: A: S&B's AMC Compliance: No; Use of Unverified Government Data: No, B: S&B's AMC Compliance: Yes; Use of Unverified Government Data: No, C: S&B's AMC Compliance: Yes; Use of Unverified Government Data: Yes. Answer:

Scenario: Dorothy Bray, CFA, is an analyst at Sadosky & Bray (S&B), a global investment counseling firm headquartered in Vancouver, British Columbia. Bray is very pleased that the firm, after a thorough internal review, can claim compliance with the CFA Institute's Asset Manager Code of Professional Conduct (AMC). In the marketing materials she develops for the firm, Bray writes that the company is proud to attain the level of professional and ethical compliance with the AMC that is granted by the CFA Institute. She points out that very few Canadian firms have attained this achievement. Bray issues a report on the Canadian shale oil industry. The report contains S&B proprietary research, industry data from subscription services, and raw statistical economic data prepared by the Canadian and Alberta governments. Bray identifies S&B's own in-house research and adequately references the sources of the industry (verified) and government (unverified) data. S&B's Director of Research, Elizabeth Donovan, CFA, holds a firm-wide (35 individuals) meeting to alert all personnel that the firm will be making significant revisions to its “buy, sell, hold” recommendations in three weeks and that confidentiality of this information is critical. In the past, changes in the firm's assessments of investment attractiveness leaked out before their scheduled announcement. Donovan hopes to avoid such leakage this time. Bray advises a group of newly hired portfolio managers, making the following statement: Statement 1: Those of you who have just passed Level III of the CFA program and are now about to become CFA charterholders will now be required to comply with the CFA Institute's: Code of Ethics, Standards of Professional Conduct, and Asset Manager Code of Professional Conduct (AMC). Donovan engages in online chat rooms where investment ideas are discussed. She is careful not to reveal any S&B material nor propriety information and acts primarily as an observer. When she does post a comment, Donovan uses a fictitious name and does not identify herself as a CFA charterholder. She notes that three other chat room participants regularly refer to themselves as: a past CFA charterholder, an inactive CFA candidate, and a CFA charterholder who passed each of the three levels on her first try. In order to assist all S&B portfolio managers in the construction of client portfolios, Donovan's research group maintains an extensive list of securities, referred to as the Approved List, that were thoroughly researched and likely to exhibit favorable future performance. S&B associates believe that the research department develops this list using a reasonable and adequate basis and that its process is both independent and objective. S&B permits portfolio managers to use securities from the list in any client portfolio, unless an expressed restriction in the client's IPS applies. Question:In her marketing materials and oil industry report, Bray has most likely improperly communicated: Choices: A: S&B's AMC Compliance: No; Use of Unverified Government Data: No, B: S&B's AMC Compliance: Yes; Use of Unverified Government Data: No, C: S&B's AMC Compliance: Yes; Use of Unverified Government Data: Yes.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Dorothy Bray, CFA, is an analyst at Sadosky & Bray (S&B), a global investment counseling firm headquartered in Vancouver, British Columbia. Bray is very pleased that the firm, after a thorough internal review, can claim compliance with the CFA Institute's Asset Manager Code of Professional Conduct (AMC). In the marketing materials she develops for the firm, Bray writes that the company is proud to attain the level of professional and ethical compliance with the AMC that is granted by the CFA Institute. She points out that very few Canadian firms have attained this achievement. Bray issues a report on the Canadian shale oil industry. The report contains S&B proprietary research, industry data from subscription services, and raw statistical economic data prepared by the Canadian and Alberta governments. Bray identifies S&B's own in-house research and adequately references the sources of the industry (verified) and government (unverified) data. S&B's Director of Research, Elizabeth Donovan, CFA, holds a firm-wide (35 individuals) meeting to alert all personnel that the firm will be making significant revisions to its “buy, sell, hold” recommendations in three weeks and that confidentiality of this information is critical. In the past, changes in the firm's assessments of investment attractiveness leaked out before their scheduled announcement. Donovan hopes to avoid such leakage this time. Bray advises a group of newly hired portfolio managers, making the following statement: Statement 1: Those of you who have just passed Level III of the CFA program and are now about to become CFA charterholders will now be required to comply with the CFA Institute's: Code of Ethics, Standards of Professional Conduct, and Asset Manager Code of Professional Conduct (AMC). Donovan engages in online chat rooms where investment ideas are discussed. She is careful not to reveal any S&B material nor propriety information and acts primarily as an observer. When she does post a comment, Donovan uses a fictitious name and does not identify herself as a CFA charterholder. She notes that three other chat room participants regularly refer to themselves as: a past CFA charterholder, an inactive CFA candidate, and a CFA charterholder who passed each of the three levels on her first try. In order to assist all S&B portfolio managers in the construction of client portfolios, Donovan's research group maintains an extensive list of securities, referred to as the Approved List, that were thoroughly researched and likely to exhibit favorable future performance. S&B associates believe that the research department develops this list using a reasonable and adequate basis and that its process is both independent and objective. S&B permits portfolio managers to use securities from the list in any client portfolio, unless an expressed restriction in the client's IPS applies. ; Question:In order to reduce the probability of information leakage, Donovan would least likely:; Answer Choices: A: limit the number of people possessing the assessment information., B: have all employees sign an anti-disclosure and confidentiality agreement., C: shorten the time between the new assessment decisions and dissemination.. Answer:

B

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Dorothy Bray, CFA, is an analyst at Sadosky & Bray (S&B), a global investment counseling firm headquartered in Vancouver, British Columbia. Bray is very pleased that the firm, after a thorough internal review, can claim compliance with the CFA Institute's Asset Manager Code of Professional Conduct (AMC). In the marketing materials she develops for the firm, Bray writes that the company is proud to attain the level of professional and ethical compliance with the AMC that is granted by the CFA Institute. She points out that very few Canadian firms have attained this achievement. Bray issues a report on the Canadian shale oil industry. The report contains S&B proprietary research, industry data from subscription services, and raw statistical economic data prepared by the Canadian and Alberta governments. Bray identifies S&B's own in-house research and adequately references the sources of the industry (verified) and government (unverified) data. S&B's Director of Research, Elizabeth Donovan, CFA, holds a firm-wide (35 individuals) meeting to alert all personnel that the firm will be making significant revisions to its “buy, sell, hold” recommendations in three weeks and that confidentiality of this information is critical. In the past, changes in the firm's assessments of investment attractiveness leaked out before their scheduled announcement. Donovan hopes to avoid such leakage this time. Bray advises a group of newly hired portfolio managers, making the following statement: Statement 1: Those of you who have just passed Level III of the CFA program and are now about to become CFA charterholders will now be required to comply with the CFA Institute's: Code of Ethics, Standards of Professional Conduct, and Asset Manager Code of Professional Conduct (AMC). Donovan engages in online chat rooms where investment ideas are discussed. She is careful not to reveal any S&B material nor propriety information and acts primarily as an observer. When she does post a comment, Donovan uses a fictitious name and does not identify herself as a CFA charterholder. She notes that three other chat room participants regularly refer to themselves as: a past CFA charterholder, an inactive CFA candidate, and a CFA charterholder who passed each of the three levels on her first try. In order to assist all S&B portfolio managers in the construction of client portfolios, Donovan's research group maintains an extensive list of securities, referred to as the Approved List, that were thoroughly researched and likely to exhibit favorable future performance. S&B associates believe that the research department develops this list using a reasonable and adequate basis and that its process is both independent and objective. S&B permits portfolio managers to use securities from the list in any client portfolio, unless an expressed restriction in the client's IPS applies. ; Question:In order to reduce the probability of information leakage, Donovan would least likely:; Answer Choices: A: limit the number of people possessing the assessment information., B: have all employees sign an anti-disclosure and confidentiality agreement., C: shorten the time between the new assessment decisions and dissemination.. Answer:

Scenario: Dorothy Bray, CFA, is an analyst at Sadosky & Bray (S&B), a global investment counseling firm headquartered in Vancouver, British Columbia. Bray is very pleased that the firm, after a thorough internal review, can claim compliance with the CFA Institute's Asset Manager Code of Professional Conduct (AMC). In the marketing materials she develops for the firm, Bray writes that the company is proud to attain the level of professional and ethical compliance with the AMC that is granted by the CFA Institute. She points out that very few Canadian firms have attained this achievement. Bray issues a report on the Canadian shale oil industry. The report contains S&B proprietary research, industry data from subscription services, and raw statistical economic data prepared by the Canadian and Alberta governments. Bray identifies S&B's own in-house research and adequately references the sources of the industry (verified) and government (unverified) data. S&B's Director of Research, Elizabeth Donovan, CFA, holds a firm-wide (35 individuals) meeting to alert all personnel that the firm will be making significant revisions to its “buy, sell, hold” recommendations in three weeks and that confidentiality of this information is critical. In the past, changes in the firm's assessments of investment attractiveness leaked out before their scheduled announcement. Donovan hopes to avoid such leakage this time. Bray advises a group of newly hired portfolio managers, making the following statement: Statement 1: Those of you who have just passed Level III of the CFA program and are now about to become CFA charterholders will now be required to comply with the CFA Institute's: Code of Ethics, Standards of Professional Conduct, and Asset Manager Code of Professional Conduct (AMC). Donovan engages in online chat rooms where investment ideas are discussed. She is careful not to reveal any S&B material nor propriety information and acts primarily as an observer. When she does post a comment, Donovan uses a fictitious name and does not identify herself as a CFA charterholder. She notes that three other chat room participants regularly refer to themselves as: a past CFA charterholder, an inactive CFA candidate, and a CFA charterholder who passed each of the three levels on her first try. In order to assist all S&B portfolio managers in the construction of client portfolios, Donovan's research group maintains an extensive list of securities, referred to as the Approved List, that were thoroughly researched and likely to exhibit favorable future performance. S&B associates believe that the research department develops this list using a reasonable and adequate basis and that its process is both independent and objective. S&B permits portfolio managers to use securities from the list in any client portfolio, unless an expressed restriction in the client's IPS applies. Question:In order to reduce the probability of information leakage, Donovan would least likely: Choices: A: limit the number of people possessing the assessment information., B: have all employees sign an anti-disclosure and confidentiality agreement., C: shorten the time between the new assessment decisions and dissemination..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Dorothy Bray, CFA, is an analyst at Sadosky & Bray (S&B), a global investment counseling firm headquartered in Vancouver, British Columbia. Bray is very pleased that the firm, after a thorough internal review, can claim compliance with the CFA Institute's Asset Manager Code of Professional Conduct (AMC). In the marketing materials she develops for the firm, Bray writes that the company is proud to attain the level of professional and ethical compliance with the AMC that is granted by the CFA Institute. She points out that very few Canadian firms have attained this achievement. Bray issues a report on the Canadian shale oil industry. The report contains S&B proprietary research, industry data from subscription services, and raw statistical economic data prepared by the Canadian and Alberta governments. Bray identifies S&B's own in-house research and adequately references the sources of the industry (verified) and government (unverified) data. S&B's Director of Research, Elizabeth Donovan, CFA, holds a firm-wide (35 individuals) meeting to alert all personnel that the firm will be making significant revisions to its “buy, sell, hold” recommendations in three weeks and that confidentiality of this information is critical. In the past, changes in the firm's assessments of investment attractiveness leaked out before their scheduled announcement. Donovan hopes to avoid such leakage this time. Bray advises a group of newly hired portfolio managers, making the following statement: Statement 1: Those of you who have just passed Level III of the CFA program and are now about to become CFA charterholders will now be required to comply with the CFA Institute's: Code of Ethics, Standards of Professional Conduct, and Asset Manager Code of Professional Conduct (AMC). Donovan engages in online chat rooms where investment ideas are discussed. She is careful not to reveal any S&B material nor propriety information and acts primarily as an observer. When she does post a comment, Donovan uses a fictitious name and does not identify herself as a CFA charterholder. She notes that three other chat room participants regularly refer to themselves as: a past CFA charterholder, an inactive CFA candidate, and a CFA charterholder who passed each of the three levels on her first try. In order to assist all S&B portfolio managers in the construction of client portfolios, Donovan's research group maintains an extensive list of securities, referred to as the Approved List, that were thoroughly researched and likely to exhibit favorable future performance. S&B associates believe that the research department develops this list using a reasonable and adequate basis and that its process is both independent and objective. S&B permits portfolio managers to use securities from the list in any client portfolio, unless an expressed restriction in the client's IPS applies. ; Question:With regard to the requirements cited in Statement 1, Bray is most likely:; Answer Choices: A: Ethics: Correct; Standards: Correct; AMC: Correct, B: Ethics: Correct; Standards: Correct; AMC: Incorrect, C: Ethics: Incorrect; Standards: Incorrect; AMC: Incorrect. Answer:

C

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Dorothy Bray, CFA, is an analyst at Sadosky & Bray (S&B), a global investment counseling firm headquartered in Vancouver, British Columbia. Bray is very pleased that the firm, after a thorough internal review, can claim compliance with the CFA Institute's Asset Manager Code of Professional Conduct (AMC). In the marketing materials she develops for the firm, Bray writes that the company is proud to attain the level of professional and ethical compliance with the AMC that is granted by the CFA Institute. She points out that very few Canadian firms have attained this achievement. Bray issues a report on the Canadian shale oil industry. The report contains S&B proprietary research, industry data from subscription services, and raw statistical economic data prepared by the Canadian and Alberta governments. Bray identifies S&B's own in-house research and adequately references the sources of the industry (verified) and government (unverified) data. S&B's Director of Research, Elizabeth Donovan, CFA, holds a firm-wide (35 individuals) meeting to alert all personnel that the firm will be making significant revisions to its “buy, sell, hold” recommendations in three weeks and that confidentiality of this information is critical. In the past, changes in the firm's assessments of investment attractiveness leaked out before their scheduled announcement. Donovan hopes to avoid such leakage this time. Bray advises a group of newly hired portfolio managers, making the following statement: Statement 1: Those of you who have just passed Level III of the CFA program and are now about to become CFA charterholders will now be required to comply with the CFA Institute's: Code of Ethics, Standards of Professional Conduct, and Asset Manager Code of Professional Conduct (AMC). Donovan engages in online chat rooms where investment ideas are discussed. She is careful not to reveal any S&B material nor propriety information and acts primarily as an observer. When she does post a comment, Donovan uses a fictitious name and does not identify herself as a CFA charterholder. She notes that three other chat room participants regularly refer to themselves as: a past CFA charterholder, an inactive CFA candidate, and a CFA charterholder who passed each of the three levels on her first try. In order to assist all S&B portfolio managers in the construction of client portfolios, Donovan's research group maintains an extensive list of securities, referred to as the Approved List, that were thoroughly researched and likely to exhibit favorable future performance. S&B associates believe that the research department develops this list using a reasonable and adequate basis and that its process is both independent and objective. S&B permits portfolio managers to use securities from the list in any client portfolio, unless an expressed restriction in the client's IPS applies. ; Question:With regard to the requirements cited in Statement 1, Bray is most likely:; Answer Choices: A: Ethics: Correct; Standards: Correct; AMC: Correct, B: Ethics: Correct; Standards: Correct; AMC: Incorrect, C: Ethics: Incorrect; Standards: Incorrect; AMC: Incorrect. Answer:

Scenario: Dorothy Bray, CFA, is an analyst at Sadosky & Bray (S&B), a global investment counseling firm headquartered in Vancouver, British Columbia. Bray is very pleased that the firm, after a thorough internal review, can claim compliance with the CFA Institute's Asset Manager Code of Professional Conduct (AMC). In the marketing materials she develops for the firm, Bray writes that the company is proud to attain the level of professional and ethical compliance with the AMC that is granted by the CFA Institute. She points out that very few Canadian firms have attained this achievement. Bray issues a report on the Canadian shale oil industry. The report contains S&B proprietary research, industry data from subscription services, and raw statistical economic data prepared by the Canadian and Alberta governments. Bray identifies S&B's own in-house research and adequately references the sources of the industry (verified) and government (unverified) data. S&B's Director of Research, Elizabeth Donovan, CFA, holds a firm-wide (35 individuals) meeting to alert all personnel that the firm will be making significant revisions to its “buy, sell, hold” recommendations in three weeks and that confidentiality of this information is critical. In the past, changes in the firm's assessments of investment attractiveness leaked out before their scheduled announcement. Donovan hopes to avoid such leakage this time. Bray advises a group of newly hired portfolio managers, making the following statement: Statement 1: Those of you who have just passed Level III of the CFA program and are now about to become CFA charterholders will now be required to comply with the CFA Institute's: Code of Ethics, Standards of Professional Conduct, and Asset Manager Code of Professional Conduct (AMC). Donovan engages in online chat rooms where investment ideas are discussed. She is careful not to reveal any S&B material nor propriety information and acts primarily as an observer. When she does post a comment, Donovan uses a fictitious name and does not identify herself as a CFA charterholder. She notes that three other chat room participants regularly refer to themselves as: a past CFA charterholder, an inactive CFA candidate, and a CFA charterholder who passed each of the three levels on her first try. In order to assist all S&B portfolio managers in the construction of client portfolios, Donovan's research group maintains an extensive list of securities, referred to as the Approved List, that were thoroughly researched and likely to exhibit favorable future performance. S&B associates believe that the research department develops this list using a reasonable and adequate basis and that its process is both independent and objective. S&B permits portfolio managers to use securities from the list in any client portfolio, unless an expressed restriction in the client's IPS applies. Question:With regard to the requirements cited in Statement 1, Bray is most likely: Choices: A: Ethics: Correct; Standards: Correct; AMC: Correct, B: Ethics: Correct; Standards: Correct; AMC: Incorrect, C: Ethics: Incorrect; Standards: Incorrect; AMC: Incorrect.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Dorothy Bray, CFA, is an analyst at Sadosky & Bray (S&B), a global investment counseling firm headquartered in Vancouver, British Columbia. Bray is very pleased that the firm, after a thorough internal review, can claim compliance with the CFA Institute's Asset Manager Code of Professional Conduct (AMC). In the marketing materials she develops for the firm, Bray writes that the company is proud to attain the level of professional and ethical compliance with the AMC that is granted by the CFA Institute. She points out that very few Canadian firms have attained this achievement. Bray issues a report on the Canadian shale oil industry. The report contains S&B proprietary research, industry data from subscription services, and raw statistical economic data prepared by the Canadian and Alberta governments. Bray identifies S&B's own in-house research and adequately references the sources of the industry (verified) and government (unverified) data. S&B's Director of Research, Elizabeth Donovan, CFA, holds a firm-wide (35 individuals) meeting to alert all personnel that the firm will be making significant revisions to its “buy, sell, hold” recommendations in three weeks and that confidentiality of this information is critical. In the past, changes in the firm's assessments of investment attractiveness leaked out before their scheduled announcement. Donovan hopes to avoid such leakage this time. Bray advises a group of newly hired portfolio managers, making the following statement: Statement 1: Those of you who have just passed Level III of the CFA program and are now about to become CFA charterholders will now be required to comply with the CFA Institute's: Code of Ethics, Standards of Professional Conduct, and Asset Manager Code of Professional Conduct (AMC). Donovan engages in online chat rooms where investment ideas are discussed. She is careful not to reveal any S&B material nor propriety information and acts primarily as an observer. When she does post a comment, Donovan uses a fictitious name and does not identify herself as a CFA charterholder. She notes that three other chat room participants regularly refer to themselves as: a past CFA charterholder, an inactive CFA candidate, and a CFA charterholder who passed each of the three levels on her first try. In order to assist all S&B portfolio managers in the construction of client portfolios, Donovan's research group maintains an extensive list of securities, referred to as the Approved List, that were thoroughly researched and likely to exhibit favorable future performance. S&B associates believe that the research department develops this list using a reasonable and adequate basis and that its process is both independent and objective. S&B permits portfolio managers to use securities from the list in any client portfolio, unless an expressed restriction in the client's IPS applies. ; Question:Did the following chat room participants, in the manner in which they referenced themselves, most likely violate Standard VII(B)-Reference to CFA Institute, the CFA Designation, and the CFA Program?; Answer Choices: A: Past CFA Charterholder: No; Inactive CFA Candidate: No; CFA Passed on First Try: No, B: Past CFA Charterholder: No; Inactive CFA Candidate: Yes; CFA Passed on First Try: Yes, C: Past CFA Charterholder: Yes; Inactive CFA Candidate: Yes; CFA Passed on First Try: Yes. Answer:

A

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Dorothy Bray, CFA, is an analyst at Sadosky & Bray (S&B), a global investment counseling firm headquartered in Vancouver, British Columbia. Bray is very pleased that the firm, after a thorough internal review, can claim compliance with the CFA Institute's Asset Manager Code of Professional Conduct (AMC). In the marketing materials she develops for the firm, Bray writes that the company is proud to attain the level of professional and ethical compliance with the AMC that is granted by the CFA Institute. She points out that very few Canadian firms have attained this achievement. Bray issues a report on the Canadian shale oil industry. The report contains S&B proprietary research, industry data from subscription services, and raw statistical economic data prepared by the Canadian and Alberta governments. Bray identifies S&B's own in-house research and adequately references the sources of the industry (verified) and government (unverified) data. S&B's Director of Research, Elizabeth Donovan, CFA, holds a firm-wide (35 individuals) meeting to alert all personnel that the firm will be making significant revisions to its “buy, sell, hold” recommendations in three weeks and that confidentiality of this information is critical. In the past, changes in the firm's assessments of investment attractiveness leaked out before their scheduled announcement. Donovan hopes to avoid such leakage this time. Bray advises a group of newly hired portfolio managers, making the following statement: Statement 1: Those of you who have just passed Level III of the CFA program and are now about to become CFA charterholders will now be required to comply with the CFA Institute's: Code of Ethics, Standards of Professional Conduct, and Asset Manager Code of Professional Conduct (AMC). Donovan engages in online chat rooms where investment ideas are discussed. She is careful not to reveal any S&B material nor propriety information and acts primarily as an observer. When she does post a comment, Donovan uses a fictitious name and does not identify herself as a CFA charterholder. She notes that three other chat room participants regularly refer to themselves as: a past CFA charterholder, an inactive CFA candidate, and a CFA charterholder who passed each of the three levels on her first try. In order to assist all S&B portfolio managers in the construction of client portfolios, Donovan's research group maintains an extensive list of securities, referred to as the Approved List, that were thoroughly researched and likely to exhibit favorable future performance. S&B associates believe that the research department develops this list using a reasonable and adequate basis and that its process is both independent and objective. S&B permits portfolio managers to use securities from the list in any client portfolio, unless an expressed restriction in the client's IPS applies. ; Question:Did the following chat room participants, in the manner in which they referenced themselves, most likely violate Standard VII(B)-Reference to CFA Institute, the CFA Designation, and the CFA Program?; Answer Choices: A: Past CFA Charterholder: No; Inactive CFA Candidate: No; CFA Passed on First Try: No, B: Past CFA Charterholder: No; Inactive CFA Candidate: Yes; CFA Passed on First Try: Yes, C: Past CFA Charterholder: Yes; Inactive CFA Candidate: Yes; CFA Passed on First Try: Yes. Answer:

Scenario: Dorothy Bray, CFA, is an analyst at Sadosky & Bray (S&B), a global investment counseling firm headquartered in Vancouver, British Columbia. Bray is very pleased that the firm, after a thorough internal review, can claim compliance with the CFA Institute's Asset Manager Code of Professional Conduct (AMC). In the marketing materials she develops for the firm, Bray writes that the company is proud to attain the level of professional and ethical compliance with the AMC that is granted by the CFA Institute. She points out that very few Canadian firms have attained this achievement. Bray issues a report on the Canadian shale oil industry. The report contains S&B proprietary research, industry data from subscription services, and raw statistical economic data prepared by the Canadian and Alberta governments. Bray identifies S&B's own in-house research and adequately references the sources of the industry (verified) and government (unverified) data. S&B's Director of Research, Elizabeth Donovan, CFA, holds a firm-wide (35 individuals) meeting to alert all personnel that the firm will be making significant revisions to its “buy, sell, hold” recommendations in three weeks and that confidentiality of this information is critical. In the past, changes in the firm's assessments of investment attractiveness leaked out before their scheduled announcement. Donovan hopes to avoid such leakage this time. Bray advises a group of newly hired portfolio managers, making the following statement: Statement 1: Those of you who have just passed Level III of the CFA program and are now about to become CFA charterholders will now be required to comply with the CFA Institute's: Code of Ethics, Standards of Professional Conduct, and Asset Manager Code of Professional Conduct (AMC). Donovan engages in online chat rooms where investment ideas are discussed. She is careful not to reveal any S&B material nor propriety information and acts primarily as an observer. When she does post a comment, Donovan uses a fictitious name and does not identify herself as a CFA charterholder. She notes that three other chat room participants regularly refer to themselves as: a past CFA charterholder, an inactive CFA candidate, and a CFA charterholder who passed each of the three levels on her first try. In order to assist all S&B portfolio managers in the construction of client portfolios, Donovan's research group maintains an extensive list of securities, referred to as the Approved List, that were thoroughly researched and likely to exhibit favorable future performance. S&B associates believe that the research department develops this list using a reasonable and adequate basis and that its process is both independent and objective. S&B permits portfolio managers to use securities from the list in any client portfolio, unless an expressed restriction in the client's IPS applies. Question:Did the following chat room participants, in the manner in which they referenced themselves, most likely violate Standard VII(B)-Reference to CFA Institute, the CFA Designation, and the CFA Program? Choices: A: Past CFA Charterholder: No; Inactive CFA Candidate: No; CFA Passed on First Try: No, B: Past CFA Charterholder: No; Inactive CFA Candidate: Yes; CFA Passed on First Try: Yes, C: Past CFA Charterholder: Yes; Inactive CFA Candidate: Yes; CFA Passed on First Try: Yes.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. ; Question:Using Exhibit 1, which of the following statements is least likely to have an impact regarding reallocation of investments in Reid's portfolio?; Answer Choices: A: Capital account balances are trending and sustainable., B: Markets are becoming more or less globally integrated., C: Monetary and fiscal policies are consistent with long-term stability and the phases of the business cycle.. Answer:

A

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. ; Question:Using Exhibit 1, which of the following statements is least likely to have an impact regarding reallocation of investments in Reid's portfolio?; Answer Choices: A: Capital account balances are trending and sustainable., B: Markets are becoming more or less globally integrated., C: Monetary and fiscal policies are consistent with long-term stability and the phases of the business cycle.. Answer:

Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. Question:Using Exhibit 1, which of the following statements is least likely to have an impact regarding reallocation of investments in Reid's portfolio? Choices: A: Capital account balances are trending and sustainable., B: Markets are becoming more or less globally integrated., C: Monetary and fiscal policies are consistent with long-term stability and the phases of the business cycle..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. ; Question:Based on the information provided by Gonzalez, the expected rate of return for Country A's equities is closest to:; Answer Choices: A: 9.3%, B: 9.8%, C: 10.1%. Answer:

C

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. ; Question:Based on the information provided by Gonzalez, the expected rate of return for Country A's equities is closest to:; Answer Choices: A: 9.3%, B: 9.8%, C: 10.1%. Answer:

Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. Question:Based on the information provided by Gonzalez, the expected rate of return for Country A's equities is closest to: Choices: A: 9.3%, B: 9.8%, C: 10.1%.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. ; Question:Using the Singer-Terhaar model for the Country B investment, the net impact of the changes on the risk premium estimate for this market will be closest to:; Answer Choices: A: 43 bps., B: 66 bps., C: 79 bps.. Answer:

B

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. ; Question:Using the Singer-Terhaar model for the Country B investment, the net impact of the changes on the risk premium estimate for this market will be closest to:; Answer Choices: A: 43 bps., B: 66 bps., C: 79 bps.. Answer:

Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. Question:Using the Singer-Terhaar model for the Country B investment, the net impact of the changes on the risk premium estimate for this market will be closest to: Choices: A: 43 bps., B: 66 bps., C: 79 bps..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. ; Question:Which of the following information provided by Gonzalez is least likely required for a calculation of the Taylor rule?; Answer Choices: A: Expected and target inflation rates., B: Expected and trend nominal GDP growth rates., C: The real policy rate that would be targeted if growth is expected to be at trend and inflation on target.. Answer:

B

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. ; Question:Which of the following information provided by Gonzalez is least likely required for a calculation of the Taylor rule?; Answer Choices: A: Expected and target inflation rates., B: Expected and trend nominal GDP growth rates., C: The real policy rate that would be targeted if growth is expected to be at trend and inflation on target.. Answer:

Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. Question:Which of the following information provided by Gonzalez is least likely required for a calculation of the Taylor rule? Choices: A: Expected and target inflation rates., B: Expected and trend nominal GDP growth rates., C: The real policy rate that would be targeted if growth is expected to be at trend and inflation on target..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. ; Question:For Country C, which of the following trends is most likely to occur for current money market rates and those in the short-term future?; Answer Choices: A: Declining; pace may be expected to accelerate., B: Moving up; pace may be expected to accelerate., C: Above average and rising; expectations tempered by eventual peak/decline.. Answer:

B

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. ; Question:For Country C, which of the following trends is most likely to occur for current money market rates and those in the short-term future?; Answer Choices: A: Declining; pace may be expected to accelerate., B: Moving up; pace may be expected to accelerate., C: Above average and rising; expectations tempered by eventual peak/decline.. Answer:

Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. Question:For Country C, which of the following trends is most likely to occur for current money market rates and those in the short-term future? Choices: A: Declining; pace may be expected to accelerate., B: Moving up; pace may be expected to accelerate., C: Above average and rising; expectations tempered by eventual peak/decline..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. ; Question:Based on the information presented, the preferred reallocation of Reid's portfolio assets between Country D and Country E is most likely:; Answer Choices: A: to Country D, since a secularly rising current account surplus generally puts downward pressure on asset prices in order to induce a lower saving rate in the surplus country to lessen the narrowing surplus., B: to Country E, since a secularly rising current account deficit generally puts downward pressure on asset prices in order to induce a lower saving rate in the surplus country to mitigate the narrowing surplus., C: to Country E, since a secularly rising current account deficit generally puts upward pressure on real required returns in order to induce a higher saving rate in the deficit country and to attract the increased flow of capital from abroad required to fund the deficit.. Answer:

C

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. ; Question:Based on the information presented, the preferred reallocation of Reid's portfolio assets between Country D and Country E is most likely:; Answer Choices: A: to Country D, since a secularly rising current account surplus generally puts downward pressure on asset prices in order to induce a lower saving rate in the surplus country to lessen the narrowing surplus., B: to Country E, since a secularly rising current account deficit generally puts downward pressure on asset prices in order to induce a lower saving rate in the surplus country to mitigate the narrowing surplus., C: to Country E, since a secularly rising current account deficit generally puts upward pressure on real required returns in order to induce a higher saving rate in the deficit country and to attract the increased flow of capital from abroad required to fund the deficit.. Answer:

Scenario: Joseph Dawson, CFA, is a portfolio manager for Dunsby & Hillman, an investment firm that invests in US and non-US assets. One of his clients, Mary Reid, has a well-diversified portfolio with investments in various asset classes and in different countries worldwide. The investments are in five specific countries, referred to below as countries A through E. Reid closely follows her portfolio. She notices several economic events occurring in the markets in which she has investments. She expresses concern to Dawson about the possible effects these events may have on her portfolio. As part of the annual review for his clients, Dawson meets with Linda Gonzalez, a member of the investment strategy committee in his firm. Gonzalez monitors relevant global financial events and their possible effects on the financial markets. Dawson asks Gonzalez for insights and information regarding the countries where Reid has investments. Gonzalez provides information for those countries, which is summarized in Exhibit 1. For Country A, Dawson questions whether the allocation of equities in that country should be increased in Reid's portfolio. Among other factors, Gonzalez states that Country A has an expansion rate of 0.35% per year for P/E multiples. In addition, Gonzalez has also monitored the annual long-term corporate earnings growth rate, the rate of net share repurchases for equities, and the dividend yield. Gonzalez informs Dawson that the equities in Country B, an emerging market, have become more fully integrated with the global investment market. As a result, Gonzalez believes that Country B has a lower required rate of return. Her research also shows that Country B's overall volatility will decrease. Gonzalez has also compiled previous and new estimates of the financial aspects of Country B as shown in Exhibit 1. While further exploring options for his clients, Dawson learns of the Taylor rule and asks Gonzalez about it. Gonzalez states that the investment strategy committee compiles data that may be needed to determine the Taylor rule for a particular country, including: 1) the real policy rate that would be targeted if growth is expected to be at trend and inflation on target, 2) the expected and target inflation rates, and 3) the expected and trend nominal and real GDP growth rates. Exhibit 1: Country Information Country A: Expansion rate for P/E multiples of 0.35% per year | Based on a 1 percentage point premium for corporate earnings growth over Gonzalez's expected Country A (nominal) GDP growth rate of 4.5%, the annual long-term corporate earnings growth rate is 5.5% | The rate of net share repurchases for Country A equities is 1.5% | Based on the country's main stock index, equities have a 2.75% dividend yield. Country B: 2020 Estimated Data: Volatility: 17% | Correlation with global market: 0.6 | Degree of integration: 0.65 | Sharpe ratio (global and segmented markets): 0.25 | 2021 Projected Data: Volatility: 21% | Correlation with global market: 0.5 | Degree of integration: 0.55 | Sharpe ratio (global and segmented markets): 0.25 Country C: The economy is in early expansion stage | The front section of the yield curve is increasingly sloping upward | The back half of the yield curve is a flat curve | The central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Country D: Secularly rising current account surplus. Country E: Secularly rising current account deficit. Gonzalez's research shows that the economy of Country C (in which Reid has an equity investment) is in an early expansion stage. The front section of Country C's yield curve is increasingly sloping upward, while the back half exhibits a flat curve. Additionally, Country C's central bank is deemphasizing its quantitative easing program and is purchasing fewer government bonds. Gonzalez has also examined the national savings and investment totals for Countries D and E. Reid understands that a country's current account balance is the difference between national saving and investment. However, she is unsure about how a current account surplus or current account deficit might impact the allocation of investments between Countries D and E. When asked by Dawson, Gonzalez stated that her research shows that Country D has a secularly rising current account surplus while Country E has a secularly rising current account deficit. Question:Based on the information presented, the preferred reallocation of Reid's portfolio assets between Country D and Country E is most likely: Choices: A: to Country D, since a secularly rising current account surplus generally puts downward pressure on asset prices in order to induce a lower saving rate in the surplus country to lessen the narrowing surplus., B: to Country E, since a secularly rising current account deficit generally puts downward pressure on asset prices in order to induce a lower saving rate in the surplus country to mitigate the narrowing surplus., C: to Country E, since a secularly rising current account deficit generally puts upward pressure on real required returns in order to induce a higher saving rate in the deficit country and to attract the increased flow of capital from abroad required to fund the deficit..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Sammiah Kumar is a seasoned consultant at Delphi Consulting. Delphi serves more than 200 high-net-worth clients with aggregate assets in excess of $5 billion. The firm has substantial staff resources in market and manager research. Kumar is meeting with his new clients, Manuel and Kelly Garcia. The Garcias are married, both are healthy and both are 55 years old. Manuel is employed at a regional utility company as an executive overseeing renewable energy development. He plans to retire in about five years. Kelly recently retired from her teaching job to take care of their only child, Spencer, age 20, who has physical limitations from a car accident that occurred in the previous year. The Garcias have both taxable and tax-advantaged investment portfolios worth a combined total of $2,500,000. They are considering adding new asset classes to their current portfolio. Possible additions are shown in Exhibit 1. Exhibit 1: Possible Additions | Composition Equity | Global public equity and global private equity Fixed Income | Global investment-grade bonds and global high-yield bonds Alternatives | Direct real estate investments and Bitcoin Kumar states that, for purpose of asset allocation, the following criteria should be met: • asset classes should be diversifying, • asset classes should be mutually exclusive, and • assets within an asset class should be relatively homogeneous. The Garcias own real estate valued at $1,000,000, with a $500,000 outstanding mortgage loan. They plan to set up a special needs trust for Spencer with a present value of $2 million to be funded in five years. Kumar estimates Manuel's pre-retirement earnings from the utility company have a present value of $1,500,000. He estimates the Garcias' future expected consumption expenditures have a total present value of $2,000,000. In addition, the Garcias expect to receive a tax-free inheritance within the coming year, which has an estimated present value of $1,000,000. Kumar uses this information to prepare an economic balance sheet for the Garcias. nKumar recognizes the Garcias' very strong desire to fund a trust for their son. Kumar recommends the Garcias use a goals-based approach to achieve this goal and offers three possible portfolios for consideration. Selected data on the three portfolios are presented in Exhibit 2. Exhibit 2: Possible Portfolio Allocations Portfolio A: Global Cash: 10% | Global Bonds: 20% | Global Equities: 50% | Diversifying Strategies*: 20% Portfolio B: Global Cash: 20% | Global Bonds: 40% | Global Equities: 30% | Diversifying Strategies*: 10% Portfolio C: Global Cash: 30% | Global Bonds: 60% | Global Equities: 10% | Diversifying Strategies*: 0% *Diversifying strategies consist of hedge funds, managed futures, and private equity. Kumar prepares an Investment Policy Statement (IPS) for the Garcias' review. Kelly notes the following statement in the IPS: Statement 1: Clients agree to delegate full authority to Delphi Consulting to manage their investment portfolio as specified in this IPS, which includes selections of active and passive managers for each of the main and sub-asset classes, among others. ; Question:With regard to asset allocation, which of the possible asset classes shown in Exhibit 1 is most likely to meet the three criteria Kumar mentioned?; Answer Choices: A: Equity., B: Fixed Income., C: Alternatives.. Answer:

B

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Sammiah Kumar is a seasoned consultant at Delphi Consulting. Delphi serves more than 200 high-net-worth clients with aggregate assets in excess of $5 billion. The firm has substantial staff resources in market and manager research. Kumar is meeting with his new clients, Manuel and Kelly Garcia. The Garcias are married, both are healthy and both are 55 years old. Manuel is employed at a regional utility company as an executive overseeing renewable energy development. He plans to retire in about five years. Kelly recently retired from her teaching job to take care of their only child, Spencer, age 20, who has physical limitations from a car accident that occurred in the previous year. The Garcias have both taxable and tax-advantaged investment portfolios worth a combined total of $2,500,000. They are considering adding new asset classes to their current portfolio. Possible additions are shown in Exhibit 1. Exhibit 1: Possible Additions | Composition Equity | Global public equity and global private equity Fixed Income | Global investment-grade bonds and global high-yield bonds Alternatives | Direct real estate investments and Bitcoin Kumar states that, for purpose of asset allocation, the following criteria should be met: • asset classes should be diversifying, • asset classes should be mutually exclusive, and • assets within an asset class should be relatively homogeneous. The Garcias own real estate valued at $1,000,000, with a $500,000 outstanding mortgage loan. They plan to set up a special needs trust for Spencer with a present value of $2 million to be funded in five years. Kumar estimates Manuel's pre-retirement earnings from the utility company have a present value of $1,500,000. He estimates the Garcias' future expected consumption expenditures have a total present value of $2,000,000. In addition, the Garcias expect to receive a tax-free inheritance within the coming year, which has an estimated present value of $1,000,000. Kumar uses this information to prepare an economic balance sheet for the Garcias. nKumar recognizes the Garcias' very strong desire to fund a trust for their son. Kumar recommends the Garcias use a goals-based approach to achieve this goal and offers three possible portfolios for consideration. Selected data on the three portfolios are presented in Exhibit 2. Exhibit 2: Possible Portfolio Allocations Portfolio A: Global Cash: 10% | Global Bonds: 20% | Global Equities: 50% | Diversifying Strategies*: 20% Portfolio B: Global Cash: 20% | Global Bonds: 40% | Global Equities: 30% | Diversifying Strategies*: 10% Portfolio C: Global Cash: 30% | Global Bonds: 60% | Global Equities: 10% | Diversifying Strategies*: 0% *Diversifying strategies consist of hedge funds, managed futures, and private equity. Kumar prepares an Investment Policy Statement (IPS) for the Garcias' review. Kelly notes the following statement in the IPS: Statement 1: Clients agree to delegate full authority to Delphi Consulting to manage their investment portfolio as specified in this IPS, which includes selections of active and passive managers for each of the main and sub-asset classes, among others. ; Question:With regard to asset allocation, which of the possible asset classes shown in Exhibit 1 is most likely to meet the three criteria Kumar mentioned?; Answer Choices: A: Equity., B: Fixed Income., C: Alternatives.. Answer:

Scenario: Sammiah Kumar is a seasoned consultant at Delphi Consulting. Delphi serves more than 200 high-net-worth clients with aggregate assets in excess of $5 billion. The firm has substantial staff resources in market and manager research. Kumar is meeting with his new clients, Manuel and Kelly Garcia. The Garcias are married, both are healthy and both are 55 years old. Manuel is employed at a regional utility company as an executive overseeing renewable energy development. He plans to retire in about five years. Kelly recently retired from her teaching job to take care of their only child, Spencer, age 20, who has physical limitations from a car accident that occurred in the previous year. The Garcias have both taxable and tax-advantaged investment portfolios worth a combined total of $2,500,000. They are considering adding new asset classes to their current portfolio. Possible additions are shown in Exhibit 1. Exhibit 1: Possible Additions | Composition Equity | Global public equity and global private equity Fixed Income | Global investment-grade bonds and global high-yield bonds Alternatives | Direct real estate investments and Bitcoin Kumar states that, for purpose of asset allocation, the following criteria should be met: • asset classes should be diversifying, • asset classes should be mutually exclusive, and • assets within an asset class should be relatively homogeneous. The Garcias own real estate valued at $1,000,000, with a $500,000 outstanding mortgage loan. They plan to set up a special needs trust for Spencer with a present value of $2 million to be funded in five years. Kumar estimates Manuel's pre-retirement earnings from the utility company have a present value of $1,500,000. He estimates the Garcias' future expected consumption expenditures have a total present value of $2,000,000. In addition, the Garcias expect to receive a tax-free inheritance within the coming year, which has an estimated present value of $1,000,000. Kumar uses this information to prepare an economic balance sheet for the Garcias. nKumar recognizes the Garcias' very strong desire to fund a trust for their son. Kumar recommends the Garcias use a goals-based approach to achieve this goal and offers three possible portfolios for consideration. Selected data on the three portfolios are presented in Exhibit 2. Exhibit 2: Possible Portfolio Allocations Portfolio A: Global Cash: 10% | Global Bonds: 20% | Global Equities: 50% | Diversifying Strategies*: 20% Portfolio B: Global Cash: 20% | Global Bonds: 40% | Global Equities: 30% | Diversifying Strategies*: 10% Portfolio C: Global Cash: 30% | Global Bonds: 60% | Global Equities: 10% | Diversifying Strategies*: 0% *Diversifying strategies consist of hedge funds, managed futures, and private equity. Kumar prepares an Investment Policy Statement (IPS) for the Garcias' review. Kelly notes the following statement in the IPS: Statement 1: Clients agree to delegate full authority to Delphi Consulting to manage their investment portfolio as specified in this IPS, which includes selections of active and passive managers for each of the main and sub-asset classes, among others. Question:With regard to asset allocation, which of the possible asset classes shown in Exhibit 1 is most likely to meet the three criteria Kumar mentioned? Choices: A: Equity., B: Fixed Income., C: Alternatives..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Sammiah Kumar is a seasoned consultant at Delphi Consulting. Delphi serves more than 200 high-net-worth clients with aggregate assets in excess of $5 billion. The firm has substantial staff resources in market and manager research. Kumar is meeting with his new clients, Manuel and Kelly Garcia. The Garcias are married, both are healthy and both are 55 years old. Manuel is employed at a regional utility company as an executive overseeing renewable energy development. He plans to retire in about five years. Kelly recently retired from her teaching job to take care of their only child, Spencer, age 20, who has physical limitations from a car accident that occurred in the previous year. The Garcias have both taxable and tax-advantaged investment portfolios worth a combined total of $2,500,000. They are considering adding new asset classes to their current portfolio. Possible additions are shown in Exhibit 1. Exhibit 1: Possible Additions | Composition Equity | Global public equity and global private equity Fixed Income | Global investment-grade bonds and global high-yield bonds Alternatives | Direct real estate investments and Bitcoin Kumar states that, for purpose of asset allocation, the following criteria should be met: • asset classes should be diversifying, • asset classes should be mutually exclusive, and • assets within an asset class should be relatively homogeneous. The Garcias own real estate valued at $1,000,000, with a $500,000 outstanding mortgage loan. They plan to set up a special needs trust for Spencer with a present value of $2 million to be funded in five years. Kumar estimates Manuel's pre-retirement earnings from the utility company have a present value of $1,500,000. He estimates the Garcias' future expected consumption expenditures have a total present value of $2,000,000. In addition, the Garcias expect to receive a tax-free inheritance within the coming year, which has an estimated present value of $1,000,000. Kumar uses this information to prepare an economic balance sheet for the Garcias. nKumar recognizes the Garcias' very strong desire to fund a trust for their son. Kumar recommends the Garcias use a goals-based approach to achieve this goal and offers three possible portfolios for consideration. Selected data on the three portfolios are presented in Exhibit 2. Exhibit 2: Possible Portfolio Allocations Portfolio A: Global Cash: 10% | Global Bonds: 20% | Global Equities: 50% | Diversifying Strategies*: 20% Portfolio B: Global Cash: 20% | Global Bonds: 40% | Global Equities: 30% | Diversifying Strategies*: 10% Portfolio C: Global Cash: 30% | Global Bonds: 60% | Global Equities: 10% | Diversifying Strategies*: 0% *Diversifying strategies consist of hedge funds, managed futures, and private equity. Kumar prepares an Investment Policy Statement (IPS) for the Garcias' review. Kelly notes the following statement in the IPS: Statement 1: Clients agree to delegate full authority to Delphi Consulting to manage their investment portfolio as specified in this IPS, which includes selections of active and passive managers for each of the main and sub-asset classes, among others. ; Question:Using the economic balance sheet approach, the Garcias' economic net worth is closest to:; Answer Choices: A: $500,000, B: $1,500,000, C: $5,000,000. Answer:

B

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Sammiah Kumar is a seasoned consultant at Delphi Consulting. Delphi serves more than 200 high-net-worth clients with aggregate assets in excess of $5 billion. The firm has substantial staff resources in market and manager research. Kumar is meeting with his new clients, Manuel and Kelly Garcia. The Garcias are married, both are healthy and both are 55 years old. Manuel is employed at a regional utility company as an executive overseeing renewable energy development. He plans to retire in about five years. Kelly recently retired from her teaching job to take care of their only child, Spencer, age 20, who has physical limitations from a car accident that occurred in the previous year. The Garcias have both taxable and tax-advantaged investment portfolios worth a combined total of $2,500,000. They are considering adding new asset classes to their current portfolio. Possible additions are shown in Exhibit 1. Exhibit 1: Possible Additions | Composition Equity | Global public equity and global private equity Fixed Income | Global investment-grade bonds and global high-yield bonds Alternatives | Direct real estate investments and Bitcoin Kumar states that, for purpose of asset allocation, the following criteria should be met: • asset classes should be diversifying, • asset classes should be mutually exclusive, and • assets within an asset class should be relatively homogeneous. The Garcias own real estate valued at $1,000,000, with a $500,000 outstanding mortgage loan. They plan to set up a special needs trust for Spencer with a present value of $2 million to be funded in five years. Kumar estimates Manuel's pre-retirement earnings from the utility company have a present value of $1,500,000. He estimates the Garcias' future expected consumption expenditures have a total present value of $2,000,000. In addition, the Garcias expect to receive a tax-free inheritance within the coming year, which has an estimated present value of $1,000,000. Kumar uses this information to prepare an economic balance sheet for the Garcias. nKumar recognizes the Garcias' very strong desire to fund a trust for their son. Kumar recommends the Garcias use a goals-based approach to achieve this goal and offers three possible portfolios for consideration. Selected data on the three portfolios are presented in Exhibit 2. Exhibit 2: Possible Portfolio Allocations Portfolio A: Global Cash: 10% | Global Bonds: 20% | Global Equities: 50% | Diversifying Strategies*: 20% Portfolio B: Global Cash: 20% | Global Bonds: 40% | Global Equities: 30% | Diversifying Strategies*: 10% Portfolio C: Global Cash: 30% | Global Bonds: 60% | Global Equities: 10% | Diversifying Strategies*: 0% *Diversifying strategies consist of hedge funds, managed futures, and private equity. Kumar prepares an Investment Policy Statement (IPS) for the Garcias' review. Kelly notes the following statement in the IPS: Statement 1: Clients agree to delegate full authority to Delphi Consulting to manage their investment portfolio as specified in this IPS, which includes selections of active and passive managers for each of the main and sub-asset classes, among others. ; Question:Using the economic balance sheet approach, the Garcias' economic net worth is closest to:; Answer Choices: A: $500,000, B: $1,500,000, C: $5,000,000. Answer:

Scenario: Sammiah Kumar is a seasoned consultant at Delphi Consulting. Delphi serves more than 200 high-net-worth clients with aggregate assets in excess of $5 billion. The firm has substantial staff resources in market and manager research. Kumar is meeting with his new clients, Manuel and Kelly Garcia. The Garcias are married, both are healthy and both are 55 years old. Manuel is employed at a regional utility company as an executive overseeing renewable energy development. He plans to retire in about five years. Kelly recently retired from her teaching job to take care of their only child, Spencer, age 20, who has physical limitations from a car accident that occurred in the previous year. The Garcias have both taxable and tax-advantaged investment portfolios worth a combined total of $2,500,000. They are considering adding new asset classes to their current portfolio. Possible additions are shown in Exhibit 1. Exhibit 1: Possible Additions | Composition Equity | Global public equity and global private equity Fixed Income | Global investment-grade bonds and global high-yield bonds Alternatives | Direct real estate investments and Bitcoin Kumar states that, for purpose of asset allocation, the following criteria should be met: • asset classes should be diversifying, • asset classes should be mutually exclusive, and • assets within an asset class should be relatively homogeneous. The Garcias own real estate valued at $1,000,000, with a $500,000 outstanding mortgage loan. They plan to set up a special needs trust for Spencer with a present value of $2 million to be funded in five years. Kumar estimates Manuel's pre-retirement earnings from the utility company have a present value of $1,500,000. He estimates the Garcias' future expected consumption expenditures have a total present value of $2,000,000. In addition, the Garcias expect to receive a tax-free inheritance within the coming year, which has an estimated present value of $1,000,000. Kumar uses this information to prepare an economic balance sheet for the Garcias. nKumar recognizes the Garcias' very strong desire to fund a trust for their son. Kumar recommends the Garcias use a goals-based approach to achieve this goal and offers three possible portfolios for consideration. Selected data on the three portfolios are presented in Exhibit 2. Exhibit 2: Possible Portfolio Allocations Portfolio A: Global Cash: 10% | Global Bonds: 20% | Global Equities: 50% | Diversifying Strategies*: 20% Portfolio B: Global Cash: 20% | Global Bonds: 40% | Global Equities: 30% | Diversifying Strategies*: 10% Portfolio C: Global Cash: 30% | Global Bonds: 60% | Global Equities: 10% | Diversifying Strategies*: 0% *Diversifying strategies consist of hedge funds, managed futures, and private equity. Kumar prepares an Investment Policy Statement (IPS) for the Garcias' review. Kelly notes the following statement in the IPS: Statement 1: Clients agree to delegate full authority to Delphi Consulting to manage their investment portfolio as specified in this IPS, which includes selections of active and passive managers for each of the main and sub-asset classes, among others. Question:Using the economic balance sheet approach, the Garcias' economic net worth is closest to: Choices: A: $500,000, B: $1,500,000, C: $5,000,000.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Sammiah Kumar is a seasoned consultant at Delphi Consulting. Delphi serves more than 200 high-net-worth clients with aggregate assets in excess of $5 billion. The firm has substantial staff resources in market and manager research. Kumar is meeting with his new clients, Manuel and Kelly Garcia. The Garcias are married, both are healthy and both are 55 years old. Manuel is employed at a regional utility company as an executive overseeing renewable energy development. He plans to retire in about five years. Kelly recently retired from her teaching job to take care of their only child, Spencer, age 20, who has physical limitations from a car accident that occurred in the previous year. The Garcias have both taxable and tax-advantaged investment portfolios worth a combined total of $2,500,000. They are considering adding new asset classes to their current portfolio. Possible additions are shown in Exhibit 1. Exhibit 1: Possible Additions | Composition Equity | Global public equity and global private equity Fixed Income | Global investment-grade bonds and global high-yield bonds Alternatives | Direct real estate investments and Bitcoin Kumar states that, for purpose of asset allocation, the following criteria should be met: • asset classes should be diversifying, • asset classes should be mutually exclusive, and • assets within an asset class should be relatively homogeneous. The Garcias own real estate valued at $1,000,000, with a $500,000 outstanding mortgage loan. They plan to set up a special needs trust for Spencer with a present value of $2 million to be funded in five years. Kumar estimates Manuel's pre-retirement earnings from the utility company have a present value of $1,500,000. He estimates the Garcias' future expected consumption expenditures have a total present value of $2,000,000. In addition, the Garcias expect to receive a tax-free inheritance within the coming year, which has an estimated present value of $1,000,000. Kumar uses this information to prepare an economic balance sheet for the Garcias. nKumar recognizes the Garcias' very strong desire to fund a trust for their son. Kumar recommends the Garcias use a goals-based approach to achieve this goal and offers three possible portfolios for consideration. Selected data on the three portfolios are presented in Exhibit 2. Exhibit 2: Possible Portfolio Allocations Portfolio A: Global Cash: 10% | Global Bonds: 20% | Global Equities: 50% | Diversifying Strategies*: 20% Portfolio B: Global Cash: 20% | Global Bonds: 40% | Global Equities: 30% | Diversifying Strategies*: 10% Portfolio C: Global Cash: 30% | Global Bonds: 60% | Global Equities: 10% | Diversifying Strategies*: 0% *Diversifying strategies consist of hedge funds, managed futures, and private equity. Kumar prepares an Investment Policy Statement (IPS) for the Garcias' review. Kelly notes the following statement in the IPS: Statement 1: Clients agree to delegate full authority to Delphi Consulting to manage their investment portfolio as specified in this IPS, which includes selections of active and passive managers for each of the main and sub-asset classes, among others. ; Question:Based on Exhibit 2, which portfolio best meets the Garcias' goal to fund a special needs trust for their son?; Answer Choices: A: Portfolio A., B: Portfolio B., C: Portfolio C.. Answer:

C

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Sammiah Kumar is a seasoned consultant at Delphi Consulting. Delphi serves more than 200 high-net-worth clients with aggregate assets in excess of $5 billion. The firm has substantial staff resources in market and manager research. Kumar is meeting with his new clients, Manuel and Kelly Garcia. The Garcias are married, both are healthy and both are 55 years old. Manuel is employed at a regional utility company as an executive overseeing renewable energy development. He plans to retire in about five years. Kelly recently retired from her teaching job to take care of their only child, Spencer, age 20, who has physical limitations from a car accident that occurred in the previous year. The Garcias have both taxable and tax-advantaged investment portfolios worth a combined total of $2,500,000. They are considering adding new asset classes to their current portfolio. Possible additions are shown in Exhibit 1. Exhibit 1: Possible Additions | Composition Equity | Global public equity and global private equity Fixed Income | Global investment-grade bonds and global high-yield bonds Alternatives | Direct real estate investments and Bitcoin Kumar states that, for purpose of asset allocation, the following criteria should be met: • asset classes should be diversifying, • asset classes should be mutually exclusive, and • assets within an asset class should be relatively homogeneous. The Garcias own real estate valued at $1,000,000, with a $500,000 outstanding mortgage loan. They plan to set up a special needs trust for Spencer with a present value of $2 million to be funded in five years. Kumar estimates Manuel's pre-retirement earnings from the utility company have a present value of $1,500,000. He estimates the Garcias' future expected consumption expenditures have a total present value of $2,000,000. In addition, the Garcias expect to receive a tax-free inheritance within the coming year, which has an estimated present value of $1,000,000. Kumar uses this information to prepare an economic balance sheet for the Garcias. nKumar recognizes the Garcias' very strong desire to fund a trust for their son. Kumar recommends the Garcias use a goals-based approach to achieve this goal and offers three possible portfolios for consideration. Selected data on the three portfolios are presented in Exhibit 2. Exhibit 2: Possible Portfolio Allocations Portfolio A: Global Cash: 10% | Global Bonds: 20% | Global Equities: 50% | Diversifying Strategies*: 20% Portfolio B: Global Cash: 20% | Global Bonds: 40% | Global Equities: 30% | Diversifying Strategies*: 10% Portfolio C: Global Cash: 30% | Global Bonds: 60% | Global Equities: 10% | Diversifying Strategies*: 0% *Diversifying strategies consist of hedge funds, managed futures, and private equity. Kumar prepares an Investment Policy Statement (IPS) for the Garcias' review. Kelly notes the following statement in the IPS: Statement 1: Clients agree to delegate full authority to Delphi Consulting to manage their investment portfolio as specified in this IPS, which includes selections of active and passive managers for each of the main and sub-asset classes, among others. ; Question:Based on Exhibit 2, which portfolio best meets the Garcias' goal to fund a special needs trust for their son?; Answer Choices: A: Portfolio A., B: Portfolio B., C: Portfolio C.. Answer:

Scenario: Sammiah Kumar is a seasoned consultant at Delphi Consulting. Delphi serves more than 200 high-net-worth clients with aggregate assets in excess of $5 billion. The firm has substantial staff resources in market and manager research. Kumar is meeting with his new clients, Manuel and Kelly Garcia. The Garcias are married, both are healthy and both are 55 years old. Manuel is employed at a regional utility company as an executive overseeing renewable energy development. He plans to retire in about five years. Kelly recently retired from her teaching job to take care of their only child, Spencer, age 20, who has physical limitations from a car accident that occurred in the previous year. The Garcias have both taxable and tax-advantaged investment portfolios worth a combined total of $2,500,000. They are considering adding new asset classes to their current portfolio. Possible additions are shown in Exhibit 1. Exhibit 1: Possible Additions | Composition Equity | Global public equity and global private equity Fixed Income | Global investment-grade bonds and global high-yield bonds Alternatives | Direct real estate investments and Bitcoin Kumar states that, for purpose of asset allocation, the following criteria should be met: • asset classes should be diversifying, • asset classes should be mutually exclusive, and • assets within an asset class should be relatively homogeneous. The Garcias own real estate valued at $1,000,000, with a $500,000 outstanding mortgage loan. They plan to set up a special needs trust for Spencer with a present value of $2 million to be funded in five years. Kumar estimates Manuel's pre-retirement earnings from the utility company have a present value of $1,500,000. He estimates the Garcias' future expected consumption expenditures have a total present value of $2,000,000. In addition, the Garcias expect to receive a tax-free inheritance within the coming year, which has an estimated present value of $1,000,000. Kumar uses this information to prepare an economic balance sheet for the Garcias. nKumar recognizes the Garcias' very strong desire to fund a trust for their son. Kumar recommends the Garcias use a goals-based approach to achieve this goal and offers three possible portfolios for consideration. Selected data on the three portfolios are presented in Exhibit 2. Exhibit 2: Possible Portfolio Allocations Portfolio A: Global Cash: 10% | Global Bonds: 20% | Global Equities: 50% | Diversifying Strategies*: 20% Portfolio B: Global Cash: 20% | Global Bonds: 40% | Global Equities: 30% | Diversifying Strategies*: 10% Portfolio C: Global Cash: 30% | Global Bonds: 60% | Global Equities: 10% | Diversifying Strategies*: 0% *Diversifying strategies consist of hedge funds, managed futures, and private equity. Kumar prepares an Investment Policy Statement (IPS) for the Garcias' review. Kelly notes the following statement in the IPS: Statement 1: Clients agree to delegate full authority to Delphi Consulting to manage their investment portfolio as specified in this IPS, which includes selections of active and passive managers for each of the main and sub-asset classes, among others. Question:Based on Exhibit 2, which portfolio best meets the Garcias' goal to fund a special needs trust for their son? Choices: A: Portfolio A., B: Portfolio B., C: Portfolio C..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Sammiah Kumar is a seasoned consultant at Delphi Consulting. Delphi serves more than 200 high-net-worth clients with aggregate assets in excess of $5 billion. The firm has substantial staff resources in market and manager research. Kumar is meeting with his new clients, Manuel and Kelly Garcia. The Garcias are married, both are healthy and both are 55 years old. Manuel is employed at a regional utility company as an executive overseeing renewable energy development. He plans to retire in about five years. Kelly recently retired from her teaching job to take care of their only child, Spencer, age 20, who has physical limitations from a car accident that occurred in the previous year. The Garcias have both taxable and tax-advantaged investment portfolios worth a combined total of $2,500,000. They are considering adding new asset classes to their current portfolio. Possible additions are shown in Exhibit 1. Exhibit 1: Possible Additions | Composition Equity | Global public equity and global private equity Fixed Income | Global investment-grade bonds and global high-yield bonds Alternatives | Direct real estate investments and Bitcoin Kumar states that, for purpose of asset allocation, the following criteria should be met: • asset classes should be diversifying, • asset classes should be mutually exclusive, and • assets within an asset class should be relatively homogeneous. The Garcias own real estate valued at $1,000,000, with a $500,000 outstanding mortgage loan. They plan to set up a special needs trust for Spencer with a present value of $2 million to be funded in five years. Kumar estimates Manuel's pre-retirement earnings from the utility company have a present value of $1,500,000. He estimates the Garcias' future expected consumption expenditures have a total present value of $2,000,000. In addition, the Garcias expect to receive a tax-free inheritance within the coming year, which has an estimated present value of $1,000,000. Kumar uses this information to prepare an economic balance sheet for the Garcias. nKumar recognizes the Garcias' very strong desire to fund a trust for their son. Kumar recommends the Garcias use a goals-based approach to achieve this goal and offers three possible portfolios for consideration. Selected data on the three portfolios are presented in Exhibit 2. Exhibit 2: Possible Portfolio Allocations Portfolio A: Global Cash: 10% | Global Bonds: 20% | Global Equities: 50% | Diversifying Strategies*: 20% Portfolio B: Global Cash: 20% | Global Bonds: 40% | Global Equities: 30% | Diversifying Strategies*: 10% Portfolio C: Global Cash: 30% | Global Bonds: 60% | Global Equities: 10% | Diversifying Strategies*: 0% *Diversifying strategies consist of hedge funds, managed futures, and private equity. Kumar prepares an Investment Policy Statement (IPS) for the Garcias' review. Kelly notes the following statement in the IPS: Statement 1: Clients agree to delegate full authority to Delphi Consulting to manage their investment portfolio as specified in this IPS, which includes selections of active and passive managers for each of the main and sub-asset classes, among others. ; Question:Regarding Statement 1, which factor is least likely to influence Kumar's decisions to select passive or active strategies for the Garcias' investment portfolio?; Answer Choices: A: Tax status., B: Risk budgeting., C: Beliefs concerning market informational efficiency.. Answer:

B

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Sammiah Kumar is a seasoned consultant at Delphi Consulting. Delphi serves more than 200 high-net-worth clients with aggregate assets in excess of $5 billion. The firm has substantial staff resources in market and manager research. Kumar is meeting with his new clients, Manuel and Kelly Garcia. The Garcias are married, both are healthy and both are 55 years old. Manuel is employed at a regional utility company as an executive overseeing renewable energy development. He plans to retire in about five years. Kelly recently retired from her teaching job to take care of their only child, Spencer, age 20, who has physical limitations from a car accident that occurred in the previous year. The Garcias have both taxable and tax-advantaged investment portfolios worth a combined total of $2,500,000. They are considering adding new asset classes to their current portfolio. Possible additions are shown in Exhibit 1. Exhibit 1: Possible Additions | Composition Equity | Global public equity and global private equity Fixed Income | Global investment-grade bonds and global high-yield bonds Alternatives | Direct real estate investments and Bitcoin Kumar states that, for purpose of asset allocation, the following criteria should be met: • asset classes should be diversifying, • asset classes should be mutually exclusive, and • assets within an asset class should be relatively homogeneous. The Garcias own real estate valued at $1,000,000, with a $500,000 outstanding mortgage loan. They plan to set up a special needs trust for Spencer with a present value of $2 million to be funded in five years. Kumar estimates Manuel's pre-retirement earnings from the utility company have a present value of $1,500,000. He estimates the Garcias' future expected consumption expenditures have a total present value of $2,000,000. In addition, the Garcias expect to receive a tax-free inheritance within the coming year, which has an estimated present value of $1,000,000. Kumar uses this information to prepare an economic balance sheet for the Garcias. nKumar recognizes the Garcias' very strong desire to fund a trust for their son. Kumar recommends the Garcias use a goals-based approach to achieve this goal and offers three possible portfolios for consideration. Selected data on the three portfolios are presented in Exhibit 2. Exhibit 2: Possible Portfolio Allocations Portfolio A: Global Cash: 10% | Global Bonds: 20% | Global Equities: 50% | Diversifying Strategies*: 20% Portfolio B: Global Cash: 20% | Global Bonds: 40% | Global Equities: 30% | Diversifying Strategies*: 10% Portfolio C: Global Cash: 30% | Global Bonds: 60% | Global Equities: 10% | Diversifying Strategies*: 0% *Diversifying strategies consist of hedge funds, managed futures, and private equity. Kumar prepares an Investment Policy Statement (IPS) for the Garcias' review. Kelly notes the following statement in the IPS: Statement 1: Clients agree to delegate full authority to Delphi Consulting to manage their investment portfolio as specified in this IPS, which includes selections of active and passive managers for each of the main and sub-asset classes, among others. ; Question:Regarding Statement 1, which factor is least likely to influence Kumar's decisions to select passive or active strategies for the Garcias' investment portfolio?; Answer Choices: A: Tax status., B: Risk budgeting., C: Beliefs concerning market informational efficiency.. Answer:

Scenario: Sammiah Kumar is a seasoned consultant at Delphi Consulting. Delphi serves more than 200 high-net-worth clients with aggregate assets in excess of $5 billion. The firm has substantial staff resources in market and manager research. Kumar is meeting with his new clients, Manuel and Kelly Garcia. The Garcias are married, both are healthy and both are 55 years old. Manuel is employed at a regional utility company as an executive overseeing renewable energy development. He plans to retire in about five years. Kelly recently retired from her teaching job to take care of their only child, Spencer, age 20, who has physical limitations from a car accident that occurred in the previous year. The Garcias have both taxable and tax-advantaged investment portfolios worth a combined total of $2,500,000. They are considering adding new asset classes to their current portfolio. Possible additions are shown in Exhibit 1. Exhibit 1: Possible Additions | Composition Equity | Global public equity and global private equity Fixed Income | Global investment-grade bonds and global high-yield bonds Alternatives | Direct real estate investments and Bitcoin Kumar states that, for purpose of asset allocation, the following criteria should be met: • asset classes should be diversifying, • asset classes should be mutually exclusive, and • assets within an asset class should be relatively homogeneous. The Garcias own real estate valued at $1,000,000, with a $500,000 outstanding mortgage loan. They plan to set up a special needs trust for Spencer with a present value of $2 million to be funded in five years. Kumar estimates Manuel's pre-retirement earnings from the utility company have a present value of $1,500,000. He estimates the Garcias' future expected consumption expenditures have a total present value of $2,000,000. In addition, the Garcias expect to receive a tax-free inheritance within the coming year, which has an estimated present value of $1,000,000. Kumar uses this information to prepare an economic balance sheet for the Garcias. nKumar recognizes the Garcias' very strong desire to fund a trust for their son. Kumar recommends the Garcias use a goals-based approach to achieve this goal and offers three possible portfolios for consideration. Selected data on the three portfolios are presented in Exhibit 2. Exhibit 2: Possible Portfolio Allocations Portfolio A: Global Cash: 10% | Global Bonds: 20% | Global Equities: 50% | Diversifying Strategies*: 20% Portfolio B: Global Cash: 20% | Global Bonds: 40% | Global Equities: 30% | Diversifying Strategies*: 10% Portfolio C: Global Cash: 30% | Global Bonds: 60% | Global Equities: 10% | Diversifying Strategies*: 0% *Diversifying strategies consist of hedge funds, managed futures, and private equity. Kumar prepares an Investment Policy Statement (IPS) for the Garcias' review. Kelly notes the following statement in the IPS: Statement 1: Clients agree to delegate full authority to Delphi Consulting to manage their investment portfolio as specified in this IPS, which includes selections of active and passive managers for each of the main and sub-asset classes, among others. Question:Regarding Statement 1, which factor is least likely to influence Kumar's decisions to select passive or active strategies for the Garcias' investment portfolio? Choices: A: Tax status., B: Risk budgeting., C: Beliefs concerning market informational efficiency..

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Hudson Kelly, CFA, is an options strategy analyst at Quant Analytics, Inc., focusing on managing the portfolios of high-net-worth clients. Kelly is reviewing the IPSs for several clients to devise strategies to meet their short- and long-term objectives. Kelly meets with Noah Jacobs, a client whose portfolio is concentrated in a single stock, Brookline Corporation (BKLN). Jacobs is confident about the long-term performance of the stock and does not want to sell any shares. Using the BKLN shares, Jacobs wants to generate an immediate cash flow of $100,000 to pay for his son's college tuition. Kelly is tasked to come up with an option strategy that does not use naked option positions. Three-month option contract prices and Greeks for BKLN are shown in Exhibit 1. Exhibit 1: Three-Month Option Contract Prices & Greeks for BKLN Call Vega: 0.198 | Call Delta: 0.761 | Call Premium: 23.05 | Exercise Price: 490 | Put Premium: 2.82 | Put Delta: –0.346 | Put Vega: 0.198 Call Vega: 0.214 | Call Delta: 0.651 | Call Premium: 15.55 | Exercise Price: 500 | Put Premium: 5.26 | Put Delta: –0.421 | Put Vega: 0.214 Call Vega: 0.320 | Call Delta: 0.506 | Call Premium: 9.70 | Exercise Price: 510 | Put Premium: 9.22 | Put Delta: –0.514 | Put Vega: 0.320 Call Vega: 0.225 | Call Delta: 0.382 | Call Premium: 5.75 | Exercise Price: 520 | Put Premium: 15.65 | Put Delta: –0.612 | Put Vega: 0.225 Call Vega: 0.190 | Call Delta: 0.272 | Call Premium: 3.40 | Exercise Price: 530 | Put Premium: 22.80 | Put Delta: –0.745 | Put Vega: 0.190 Call Vega: 0.175 | Call Delta: 0.213 | Call Premium: 2.51 | Exercise Price: 540 | Put Premium: 31.30 | Put Delta: –0.891 | Put Vega: 0.175 BKLN current stock price = $510.40 Liz McPherson, a high-net-worth client, is following BKLN and is tracking its earnings history for the last few quarters. McPherson is expecting the revenue of BKLN to peak due to advancements in technology. Although the overall stock market is performing well and rising, there could be a potential downside for BKLN's industry. Kelly recommends that McPherson establish an at-the-money (ATM) straddle strategy to benefit from possible extreme movements in the BKLN stock price. Kelly meets with Anusha Bandla, another high-net-worth client, who expects very little price movement in BKLN. Bandla evaluates the options strategies to take advantage of BKLN's volatility and makes the following three statements: Statement 1: For a 1% move in the options volatility, the value of an ATM straddle would change by $0.506. Statement 2: A short volatility strategy can be established by implementing an ATM straddle. Statement 3: To protect downside risk, a collar strategy can be implemented by adding a long put to a covered call position. ; Question:The number of BKLN covered call contracts with an exercise price of $540 required to generate the needed cash flow is closest to:; Answer Choices: A: 104, B: 295, C: 399. Answer:

C

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Hudson Kelly, CFA, is an options strategy analyst at Quant Analytics, Inc., focusing on managing the portfolios of high-net-worth clients. Kelly is reviewing the IPSs for several clients to devise strategies to meet their short- and long-term objectives. Kelly meets with Noah Jacobs, a client whose portfolio is concentrated in a single stock, Brookline Corporation (BKLN). Jacobs is confident about the long-term performance of the stock and does not want to sell any shares. Using the BKLN shares, Jacobs wants to generate an immediate cash flow of $100,000 to pay for his son's college tuition. Kelly is tasked to come up with an option strategy that does not use naked option positions. Three-month option contract prices and Greeks for BKLN are shown in Exhibit 1. Exhibit 1: Three-Month Option Contract Prices & Greeks for BKLN Call Vega: 0.198 | Call Delta: 0.761 | Call Premium: 23.05 | Exercise Price: 490 | Put Premium: 2.82 | Put Delta: –0.346 | Put Vega: 0.198 Call Vega: 0.214 | Call Delta: 0.651 | Call Premium: 15.55 | Exercise Price: 500 | Put Premium: 5.26 | Put Delta: –0.421 | Put Vega: 0.214 Call Vega: 0.320 | Call Delta: 0.506 | Call Premium: 9.70 | Exercise Price: 510 | Put Premium: 9.22 | Put Delta: –0.514 | Put Vega: 0.320 Call Vega: 0.225 | Call Delta: 0.382 | Call Premium: 5.75 | Exercise Price: 520 | Put Premium: 15.65 | Put Delta: –0.612 | Put Vega: 0.225 Call Vega: 0.190 | Call Delta: 0.272 | Call Premium: 3.40 | Exercise Price: 530 | Put Premium: 22.80 | Put Delta: –0.745 | Put Vega: 0.190 Call Vega: 0.175 | Call Delta: 0.213 | Call Premium: 2.51 | Exercise Price: 540 | Put Premium: 31.30 | Put Delta: –0.891 | Put Vega: 0.175 BKLN current stock price = $510.40 Liz McPherson, a high-net-worth client, is following BKLN and is tracking its earnings history for the last few quarters. McPherson is expecting the revenue of BKLN to peak due to advancements in technology. Although the overall stock market is performing well and rising, there could be a potential downside for BKLN's industry. Kelly recommends that McPherson establish an at-the-money (ATM) straddle strategy to benefit from possible extreme movements in the BKLN stock price. Kelly meets with Anusha Bandla, another high-net-worth client, who expects very little price movement in BKLN. Bandla evaluates the options strategies to take advantage of BKLN's volatility and makes the following three statements: Statement 1: For a 1% move in the options volatility, the value of an ATM straddle would change by $0.506. Statement 2: A short volatility strategy can be established by implementing an ATM straddle. Statement 3: To protect downside risk, a collar strategy can be implemented by adding a long put to a covered call position. ; Question:The number of BKLN covered call contracts with an exercise price of $540 required to generate the needed cash flow is closest to:; Answer Choices: A: 104, B: 295, C: 399. Answer:

Scenario: Hudson Kelly, CFA, is an options strategy analyst at Quant Analytics, Inc., focusing on managing the portfolios of high-net-worth clients. Kelly is reviewing the IPSs for several clients to devise strategies to meet their short- and long-term objectives. Kelly meets with Noah Jacobs, a client whose portfolio is concentrated in a single stock, Brookline Corporation (BKLN). Jacobs is confident about the long-term performance of the stock and does not want to sell any shares. Using the BKLN shares, Jacobs wants to generate an immediate cash flow of $100,000 to pay for his son's college tuition. Kelly is tasked to come up with an option strategy that does not use naked option positions. Three-month option contract prices and Greeks for BKLN are shown in Exhibit 1. Exhibit 1: Three-Month Option Contract Prices & Greeks for BKLN Call Vega: 0.198 | Call Delta: 0.761 | Call Premium: 23.05 | Exercise Price: 490 | Put Premium: 2.82 | Put Delta: –0.346 | Put Vega: 0.198 Call Vega: 0.214 | Call Delta: 0.651 | Call Premium: 15.55 | Exercise Price: 500 | Put Premium: 5.26 | Put Delta: –0.421 | Put Vega: 0.214 Call Vega: 0.320 | Call Delta: 0.506 | Call Premium: 9.70 | Exercise Price: 510 | Put Premium: 9.22 | Put Delta: –0.514 | Put Vega: 0.320 Call Vega: 0.225 | Call Delta: 0.382 | Call Premium: 5.75 | Exercise Price: 520 | Put Premium: 15.65 | Put Delta: –0.612 | Put Vega: 0.225 Call Vega: 0.190 | Call Delta: 0.272 | Call Premium: 3.40 | Exercise Price: 530 | Put Premium: 22.80 | Put Delta: –0.745 | Put Vega: 0.190 Call Vega: 0.175 | Call Delta: 0.213 | Call Premium: 2.51 | Exercise Price: 540 | Put Premium: 31.30 | Put Delta: –0.891 | Put Vega: 0.175 BKLN current stock price = $510.40 Liz McPherson, a high-net-worth client, is following BKLN and is tracking its earnings history for the last few quarters. McPherson is expecting the revenue of BKLN to peak due to advancements in technology. Although the overall stock market is performing well and rising, there could be a potential downside for BKLN's industry. Kelly recommends that McPherson establish an at-the-money (ATM) straddle strategy to benefit from possible extreme movements in the BKLN stock price. Kelly meets with Anusha Bandla, another high-net-worth client, who expects very little price movement in BKLN. Bandla evaluates the options strategies to take advantage of BKLN's volatility and makes the following three statements: Statement 1: For a 1% move in the options volatility, the value of an ATM straddle would change by $0.506. Statement 2: A short volatility strategy can be established by implementing an ATM straddle. Statement 3: To protect downside risk, a collar strategy can be implemented by adding a long put to a covered call position. Question:The number of BKLN covered call contracts with an exercise price of $540 required to generate the needed cash flow is closest to: Choices: A: 104, B: 295, C: 399.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Hudson Kelly, CFA, is an options strategy analyst at Quant Analytics, Inc., focusing on managing the portfolios of high-net-worth clients. Kelly is reviewing the IPSs for several clients to devise strategies to meet their short- and long-term objectives. Kelly meets with Noah Jacobs, a client whose portfolio is concentrated in a single stock, Brookline Corporation (BKLN). Jacobs is confident about the long-term performance of the stock and does not want to sell any shares. Using the BKLN shares, Jacobs wants to generate an immediate cash flow of $100,000 to pay for his son's college tuition. Kelly is tasked to come up with an option strategy that does not use naked option positions. Three-month option contract prices and Greeks for BKLN are shown in Exhibit 1. Exhibit 1: Three-Month Option Contract Prices & Greeks for BKLN Call Vega: 0.198 | Call Delta: 0.761 | Call Premium: 23.05 | Exercise Price: 490 | Put Premium: 2.82 | Put Delta: –0.346 | Put Vega: 0.198 Call Vega: 0.214 | Call Delta: 0.651 | Call Premium: 15.55 | Exercise Price: 500 | Put Premium: 5.26 | Put Delta: –0.421 | Put Vega: 0.214 Call Vega: 0.320 | Call Delta: 0.506 | Call Premium: 9.70 | Exercise Price: 510 | Put Premium: 9.22 | Put Delta: –0.514 | Put Vega: 0.320 Call Vega: 0.225 | Call Delta: 0.382 | Call Premium: 5.75 | Exercise Price: 520 | Put Premium: 15.65 | Put Delta: –0.612 | Put Vega: 0.225 Call Vega: 0.190 | Call Delta: 0.272 | Call Premium: 3.40 | Exercise Price: 530 | Put Premium: 22.80 | Put Delta: –0.745 | Put Vega: 0.190 Call Vega: 0.175 | Call Delta: 0.213 | Call Premium: 2.51 | Exercise Price: 540 | Put Premium: 31.30 | Put Delta: –0.891 | Put Vega: 0.175 BKLN current stock price = $510.40 Liz McPherson, a high-net-worth client, is following BKLN and is tracking its earnings history for the last few quarters. McPherson is expecting the revenue of BKLN to peak due to advancements in technology. Although the overall stock market is performing well and rising, there could be a potential downside for BKLN's industry. Kelly recommends that McPherson establish an at-the-money (ATM) straddle strategy to benefit from possible extreme movements in the BKLN stock price. Kelly meets with Anusha Bandla, another high-net-worth client, who expects very little price movement in BKLN. Bandla evaluates the options strategies to take advantage of BKLN's volatility and makes the following three statements: Statement 1: For a 1% move in the options volatility, the value of an ATM straddle would change by $0.506. Statement 2: A short volatility strategy can be established by implementing an ATM straddle. Statement 3: To protect downside risk, a collar strategy can be implemented by adding a long put to a covered call position. ; Question:The percentage change in BKLN's share price for the straddle strategy to breakeven is closest to:; Answer Choices: A: 1.90%, B: 3.71%, C: 6.12%. Answer:

B

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Hudson Kelly, CFA, is an options strategy analyst at Quant Analytics, Inc., focusing on managing the portfolios of high-net-worth clients. Kelly is reviewing the IPSs for several clients to devise strategies to meet their short- and long-term objectives. Kelly meets with Noah Jacobs, a client whose portfolio is concentrated in a single stock, Brookline Corporation (BKLN). Jacobs is confident about the long-term performance of the stock and does not want to sell any shares. Using the BKLN shares, Jacobs wants to generate an immediate cash flow of $100,000 to pay for his son's college tuition. Kelly is tasked to come up with an option strategy that does not use naked option positions. Three-month option contract prices and Greeks for BKLN are shown in Exhibit 1. Exhibit 1: Three-Month Option Contract Prices & Greeks for BKLN Call Vega: 0.198 | Call Delta: 0.761 | Call Premium: 23.05 | Exercise Price: 490 | Put Premium: 2.82 | Put Delta: –0.346 | Put Vega: 0.198 Call Vega: 0.214 | Call Delta: 0.651 | Call Premium: 15.55 | Exercise Price: 500 | Put Premium: 5.26 | Put Delta: –0.421 | Put Vega: 0.214 Call Vega: 0.320 | Call Delta: 0.506 | Call Premium: 9.70 | Exercise Price: 510 | Put Premium: 9.22 | Put Delta: –0.514 | Put Vega: 0.320 Call Vega: 0.225 | Call Delta: 0.382 | Call Premium: 5.75 | Exercise Price: 520 | Put Premium: 15.65 | Put Delta: –0.612 | Put Vega: 0.225 Call Vega: 0.190 | Call Delta: 0.272 | Call Premium: 3.40 | Exercise Price: 530 | Put Premium: 22.80 | Put Delta: –0.745 | Put Vega: 0.190 Call Vega: 0.175 | Call Delta: 0.213 | Call Premium: 2.51 | Exercise Price: 540 | Put Premium: 31.30 | Put Delta: –0.891 | Put Vega: 0.175 BKLN current stock price = $510.40 Liz McPherson, a high-net-worth client, is following BKLN and is tracking its earnings history for the last few quarters. McPherson is expecting the revenue of BKLN to peak due to advancements in technology. Although the overall stock market is performing well and rising, there could be a potential downside for BKLN's industry. Kelly recommends that McPherson establish an at-the-money (ATM) straddle strategy to benefit from possible extreme movements in the BKLN stock price. Kelly meets with Anusha Bandla, another high-net-worth client, who expects very little price movement in BKLN. Bandla evaluates the options strategies to take advantage of BKLN's volatility and makes the following three statements: Statement 1: For a 1% move in the options volatility, the value of an ATM straddle would change by $0.506. Statement 2: A short volatility strategy can be established by implementing an ATM straddle. Statement 3: To protect downside risk, a collar strategy can be implemented by adding a long put to a covered call position. ; Question:The percentage change in BKLN's share price for the straddle strategy to breakeven is closest to:; Answer Choices: A: 1.90%, B: 3.71%, C: 6.12%. Answer:

Scenario: Hudson Kelly, CFA, is an options strategy analyst at Quant Analytics, Inc., focusing on managing the portfolios of high-net-worth clients. Kelly is reviewing the IPSs for several clients to devise strategies to meet their short- and long-term objectives. Kelly meets with Noah Jacobs, a client whose portfolio is concentrated in a single stock, Brookline Corporation (BKLN). Jacobs is confident about the long-term performance of the stock and does not want to sell any shares. Using the BKLN shares, Jacobs wants to generate an immediate cash flow of $100,000 to pay for his son's college tuition. Kelly is tasked to come up with an option strategy that does not use naked option positions. Three-month option contract prices and Greeks for BKLN are shown in Exhibit 1. Exhibit 1: Three-Month Option Contract Prices & Greeks for BKLN Call Vega: 0.198 | Call Delta: 0.761 | Call Premium: 23.05 | Exercise Price: 490 | Put Premium: 2.82 | Put Delta: –0.346 | Put Vega: 0.198 Call Vega: 0.214 | Call Delta: 0.651 | Call Premium: 15.55 | Exercise Price: 500 | Put Premium: 5.26 | Put Delta: –0.421 | Put Vega: 0.214 Call Vega: 0.320 | Call Delta: 0.506 | Call Premium: 9.70 | Exercise Price: 510 | Put Premium: 9.22 | Put Delta: –0.514 | Put Vega: 0.320 Call Vega: 0.225 | Call Delta: 0.382 | Call Premium: 5.75 | Exercise Price: 520 | Put Premium: 15.65 | Put Delta: –0.612 | Put Vega: 0.225 Call Vega: 0.190 | Call Delta: 0.272 | Call Premium: 3.40 | Exercise Price: 530 | Put Premium: 22.80 | Put Delta: –0.745 | Put Vega: 0.190 Call Vega: 0.175 | Call Delta: 0.213 | Call Premium: 2.51 | Exercise Price: 540 | Put Premium: 31.30 | Put Delta: –0.891 | Put Vega: 0.175 BKLN current stock price = $510.40 Liz McPherson, a high-net-worth client, is following BKLN and is tracking its earnings history for the last few quarters. McPherson is expecting the revenue of BKLN to peak due to advancements in technology. Although the overall stock market is performing well and rising, there could be a potential downside for BKLN's industry. Kelly recommends that McPherson establish an at-the-money (ATM) straddle strategy to benefit from possible extreme movements in the BKLN stock price. Kelly meets with Anusha Bandla, another high-net-worth client, who expects very little price movement in BKLN. Bandla evaluates the options strategies to take advantage of BKLN's volatility and makes the following three statements: Statement 1: For a 1% move in the options volatility, the value of an ATM straddle would change by $0.506. Statement 2: A short volatility strategy can be established by implementing an ATM straddle. Statement 3: To protect downside risk, a collar strategy can be implemented by adding a long put to a covered call position. Question:The percentage change in BKLN's share price for the straddle strategy to breakeven is closest to: Choices: A: 1.90%, B: 3.71%, C: 6.12%.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Hudson Kelly, CFA, is an options strategy analyst at Quant Analytics, Inc., focusing on managing the portfolios of high-net-worth clients. Kelly is reviewing the IPSs for several clients to devise strategies to meet their short- and long-term objectives. Kelly meets with Noah Jacobs, a client whose portfolio is concentrated in a single stock, Brookline Corporation (BKLN). Jacobs is confident about the long-term performance of the stock and does not want to sell any shares. Using the BKLN shares, Jacobs wants to generate an immediate cash flow of $100,000 to pay for his son's college tuition. Kelly is tasked to come up with an option strategy that does not use naked option positions. Three-month option contract prices and Greeks for BKLN are shown in Exhibit 1. Exhibit 1: Three-Month Option Contract Prices & Greeks for BKLN Call Vega: 0.198 | Call Delta: 0.761 | Call Premium: 23.05 | Exercise Price: 490 | Put Premium: 2.82 | Put Delta: –0.346 | Put Vega: 0.198 Call Vega: 0.214 | Call Delta: 0.651 | Call Premium: 15.55 | Exercise Price: 500 | Put Premium: 5.26 | Put Delta: –0.421 | Put Vega: 0.214 Call Vega: 0.320 | Call Delta: 0.506 | Call Premium: 9.70 | Exercise Price: 510 | Put Premium: 9.22 | Put Delta: –0.514 | Put Vega: 0.320 Call Vega: 0.225 | Call Delta: 0.382 | Call Premium: 5.75 | Exercise Price: 520 | Put Premium: 15.65 | Put Delta: –0.612 | Put Vega: 0.225 Call Vega: 0.190 | Call Delta: 0.272 | Call Premium: 3.40 | Exercise Price: 530 | Put Premium: 22.80 | Put Delta: –0.745 | Put Vega: 0.190 Call Vega: 0.175 | Call Delta: 0.213 | Call Premium: 2.51 | Exercise Price: 540 | Put Premium: 31.30 | Put Delta: –0.891 | Put Vega: 0.175 BKLN current stock price = $510.40 Liz McPherson, a high-net-worth client, is following BKLN and is tracking its earnings history for the last few quarters. McPherson is expecting the revenue of BKLN to peak due to advancements in technology. Although the overall stock market is performing well and rising, there could be a potential downside for BKLN's industry. Kelly recommends that McPherson establish an at-the-money (ATM) straddle strategy to benefit from possible extreme movements in the BKLN stock price. Kelly meets with Anusha Bandla, another high-net-worth client, who expects very little price movement in BKLN. Bandla evaluates the options strategies to take advantage of BKLN's volatility and makes the following three statements: Statement 1: For a 1% move in the options volatility, the value of an ATM straddle would change by $0.506. Statement 2: A short volatility strategy can be established by implementing an ATM straddle. Statement 3: To protect downside risk, a collar strategy can be implemented by adding a long put to a covered call position. ; Question:Given the information in Exhibit 1, the minimum cost of implementing a bullish seagull strategy, using strike prices of $490 and $530, is closest to:; Answer Choices: A: $16.83, B: $22.47, C: $23.63. Answer:

A

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Hudson Kelly, CFA, is an options strategy analyst at Quant Analytics, Inc., focusing on managing the portfolios of high-net-worth clients. Kelly is reviewing the IPSs for several clients to devise strategies to meet their short- and long-term objectives. Kelly meets with Noah Jacobs, a client whose portfolio is concentrated in a single stock, Brookline Corporation (BKLN). Jacobs is confident about the long-term performance of the stock and does not want to sell any shares. Using the BKLN shares, Jacobs wants to generate an immediate cash flow of $100,000 to pay for his son's college tuition. Kelly is tasked to come up with an option strategy that does not use naked option positions. Three-month option contract prices and Greeks for BKLN are shown in Exhibit 1. Exhibit 1: Three-Month Option Contract Prices & Greeks for BKLN Call Vega: 0.198 | Call Delta: 0.761 | Call Premium: 23.05 | Exercise Price: 490 | Put Premium: 2.82 | Put Delta: –0.346 | Put Vega: 0.198 Call Vega: 0.214 | Call Delta: 0.651 | Call Premium: 15.55 | Exercise Price: 500 | Put Premium: 5.26 | Put Delta: –0.421 | Put Vega: 0.214 Call Vega: 0.320 | Call Delta: 0.506 | Call Premium: 9.70 | Exercise Price: 510 | Put Premium: 9.22 | Put Delta: –0.514 | Put Vega: 0.320 Call Vega: 0.225 | Call Delta: 0.382 | Call Premium: 5.75 | Exercise Price: 520 | Put Premium: 15.65 | Put Delta: –0.612 | Put Vega: 0.225 Call Vega: 0.190 | Call Delta: 0.272 | Call Premium: 3.40 | Exercise Price: 530 | Put Premium: 22.80 | Put Delta: –0.745 | Put Vega: 0.190 Call Vega: 0.175 | Call Delta: 0.213 | Call Premium: 2.51 | Exercise Price: 540 | Put Premium: 31.30 | Put Delta: –0.891 | Put Vega: 0.175 BKLN current stock price = $510.40 Liz McPherson, a high-net-worth client, is following BKLN and is tracking its earnings history for the last few quarters. McPherson is expecting the revenue of BKLN to peak due to advancements in technology. Although the overall stock market is performing well and rising, there could be a potential downside for BKLN's industry. Kelly recommends that McPherson establish an at-the-money (ATM) straddle strategy to benefit from possible extreme movements in the BKLN stock price. Kelly meets with Anusha Bandla, another high-net-worth client, who expects very little price movement in BKLN. Bandla evaluates the options strategies to take advantage of BKLN's volatility and makes the following three statements: Statement 1: For a 1% move in the options volatility, the value of an ATM straddle would change by $0.506. Statement 2: A short volatility strategy can be established by implementing an ATM straddle. Statement 3: To protect downside risk, a collar strategy can be implemented by adding a long put to a covered call position. ; Question:Given the information in Exhibit 1, the minimum cost of implementing a bullish seagull strategy, using strike prices of $490 and $530, is closest to:; Answer Choices: A: $16.83, B: $22.47, C: $23.63. Answer:

Scenario: Hudson Kelly, CFA, is an options strategy analyst at Quant Analytics, Inc., focusing on managing the portfolios of high-net-worth clients. Kelly is reviewing the IPSs for several clients to devise strategies to meet their short- and long-term objectives. Kelly meets with Noah Jacobs, a client whose portfolio is concentrated in a single stock, Brookline Corporation (BKLN). Jacobs is confident about the long-term performance of the stock and does not want to sell any shares. Using the BKLN shares, Jacobs wants to generate an immediate cash flow of $100,000 to pay for his son's college tuition. Kelly is tasked to come up with an option strategy that does not use naked option positions. Three-month option contract prices and Greeks for BKLN are shown in Exhibit 1. Exhibit 1: Three-Month Option Contract Prices & Greeks for BKLN Call Vega: 0.198 | Call Delta: 0.761 | Call Premium: 23.05 | Exercise Price: 490 | Put Premium: 2.82 | Put Delta: –0.346 | Put Vega: 0.198 Call Vega: 0.214 | Call Delta: 0.651 | Call Premium: 15.55 | Exercise Price: 500 | Put Premium: 5.26 | Put Delta: –0.421 | Put Vega: 0.214 Call Vega: 0.320 | Call Delta: 0.506 | Call Premium: 9.70 | Exercise Price: 510 | Put Premium: 9.22 | Put Delta: –0.514 | Put Vega: 0.320 Call Vega: 0.225 | Call Delta: 0.382 | Call Premium: 5.75 | Exercise Price: 520 | Put Premium: 15.65 | Put Delta: –0.612 | Put Vega: 0.225 Call Vega: 0.190 | Call Delta: 0.272 | Call Premium: 3.40 | Exercise Price: 530 | Put Premium: 22.80 | Put Delta: –0.745 | Put Vega: 0.190 Call Vega: 0.175 | Call Delta: 0.213 | Call Premium: 2.51 | Exercise Price: 540 | Put Premium: 31.30 | Put Delta: –0.891 | Put Vega: 0.175 BKLN current stock price = $510.40 Liz McPherson, a high-net-worth client, is following BKLN and is tracking its earnings history for the last few quarters. McPherson is expecting the revenue of BKLN to peak due to advancements in technology. Although the overall stock market is performing well and rising, there could be a potential downside for BKLN's industry. Kelly recommends that McPherson establish an at-the-money (ATM) straddle strategy to benefit from possible extreme movements in the BKLN stock price. Kelly meets with Anusha Bandla, another high-net-worth client, who expects very little price movement in BKLN. Bandla evaluates the options strategies to take advantage of BKLN's volatility and makes the following three statements: Statement 1: For a 1% move in the options volatility, the value of an ATM straddle would change by $0.506. Statement 2: A short volatility strategy can be established by implementing an ATM straddle. Statement 3: To protect downside risk, a collar strategy can be implemented by adding a long put to a covered call position. Question:Given the information in Exhibit 1, the minimum cost of implementing a bullish seagull strategy, using strike prices of $490 and $530, is closest to: Choices: A: $16.83, B: $22.47, C: $23.63.

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Scenario: Hudson Kelly, CFA, is an options strategy analyst at Quant Analytics, Inc., focusing on managing the portfolios of high-net-worth clients. Kelly is reviewing the IPSs for several clients to devise strategies to meet their short- and long-term objectives. Kelly meets with Noah Jacobs, a client whose portfolio is concentrated in a single stock, Brookline Corporation (BKLN). Jacobs is confident about the long-term performance of the stock and does not want to sell any shares. Using the BKLN shares, Jacobs wants to generate an immediate cash flow of $100,000 to pay for his son's college tuition. Kelly is tasked to come up with an option strategy that does not use naked option positions. Three-month option contract prices and Greeks for BKLN are shown in Exhibit 1. Exhibit 1: Three-Month Option Contract Prices & Greeks for BKLN Call Vega: 0.198 | Call Delta: 0.761 | Call Premium: 23.05 | Exercise Price: 490 | Put Premium: 2.82 | Put Delta: –0.346 | Put Vega: 0.198 Call Vega: 0.214 | Call Delta: 0.651 | Call Premium: 15.55 | Exercise Price: 500 | Put Premium: 5.26 | Put Delta: –0.421 | Put Vega: 0.214 Call Vega: 0.320 | Call Delta: 0.506 | Call Premium: 9.70 | Exercise Price: 510 | Put Premium: 9.22 | Put Delta: –0.514 | Put Vega: 0.320 Call Vega: 0.225 | Call Delta: 0.382 | Call Premium: 5.75 | Exercise Price: 520 | Put Premium: 15.65 | Put Delta: –0.612 | Put Vega: 0.225 Call Vega: 0.190 | Call Delta: 0.272 | Call Premium: 3.40 | Exercise Price: 530 | Put Premium: 22.80 | Put Delta: –0.745 | Put Vega: 0.190 Call Vega: 0.175 | Call Delta: 0.213 | Call Premium: 2.51 | Exercise Price: 540 | Put Premium: 31.30 | Put Delta: –0.891 | Put Vega: 0.175 BKLN current stock price = $510.40 Liz McPherson, a high-net-worth client, is following BKLN and is tracking its earnings history for the last few quarters. McPherson is expecting the revenue of BKLN to peak due to advancements in technology. Although the overall stock market is performing well and rising, there could be a potential downside for BKLN's industry. Kelly recommends that McPherson establish an at-the-money (ATM) straddle strategy to benefit from possible extreme movements in the BKLN stock price. Kelly meets with Anusha Bandla, another high-net-worth client, who expects very little price movement in BKLN. Bandla evaluates the options strategies to take advantage of BKLN's volatility and makes the following three statements: Statement 1: For a 1% move in the options volatility, the value of an ATM straddle would change by $0.506. Statement 2: A short volatility strategy can be established by implementing an ATM straddle. Statement 3: To protect downside risk, a collar strategy can be implemented by adding a long put to a covered call position. ; Question:Which of Bandla's statements is least likely correct?; Answer Choices: A: Statement 1., B: Statement 2., C: Statement 3.. Answer:

A

2021 Mock PM

Carefully read the scenario provided and the subsequent question. Your task is to analyze the scenario and select the most appropriate answer from the options A, B and C. Please respond with the exact answer, A, B or C only. Do not be verbose or provide extra information. Scenario: Hudson Kelly, CFA, is an options strategy analyst at Quant Analytics, Inc., focusing on managing the portfolios of high-net-worth clients. Kelly is reviewing the IPSs for several clients to devise strategies to meet their short- and long-term objectives. Kelly meets with Noah Jacobs, a client whose portfolio is concentrated in a single stock, Brookline Corporation (BKLN). Jacobs is confident about the long-term performance of the stock and does not want to sell any shares. Using the BKLN shares, Jacobs wants to generate an immediate cash flow of $100,000 to pay for his son's college tuition. Kelly is tasked to come up with an option strategy that does not use naked option positions. Three-month option contract prices and Greeks for BKLN are shown in Exhibit 1. Exhibit 1: Three-Month Option Contract Prices & Greeks for BKLN Call Vega: 0.198 | Call Delta: 0.761 | Call Premium: 23.05 | Exercise Price: 490 | Put Premium: 2.82 | Put Delta: –0.346 | Put Vega: 0.198 Call Vega: 0.214 | Call Delta: 0.651 | Call Premium: 15.55 | Exercise Price: 500 | Put Premium: 5.26 | Put Delta: –0.421 | Put Vega: 0.214 Call Vega: 0.320 | Call Delta: 0.506 | Call Premium: 9.70 | Exercise Price: 510 | Put Premium: 9.22 | Put Delta: –0.514 | Put Vega: 0.320 Call Vega: 0.225 | Call Delta: 0.382 | Call Premium: 5.75 | Exercise Price: 520 | Put Premium: 15.65 | Put Delta: –0.612 | Put Vega: 0.225 Call Vega: 0.190 | Call Delta: 0.272 | Call Premium: 3.40 | Exercise Price: 530 | Put Premium: 22.80 | Put Delta: –0.745 | Put Vega: 0.190 Call Vega: 0.175 | Call Delta: 0.213 | Call Premium: 2.51 | Exercise Price: 540 | Put Premium: 31.30 | Put Delta: –0.891 | Put Vega: 0.175 BKLN current stock price = $510.40 Liz McPherson, a high-net-worth client, is following BKLN and is tracking its earnings history for the last few quarters. McPherson is expecting the revenue of BKLN to peak due to advancements in technology. Although the overall stock market is performing well and rising, there could be a potential downside for BKLN's industry. Kelly recommends that McPherson establish an at-the-money (ATM) straddle strategy to benefit from possible extreme movements in the BKLN stock price. Kelly meets with Anusha Bandla, another high-net-worth client, who expects very little price movement in BKLN. Bandla evaluates the options strategies to take advantage of BKLN's volatility and makes the following three statements: Statement 1: For a 1% move in the options volatility, the value of an ATM straddle would change by $0.506. Statement 2: A short volatility strategy can be established by implementing an ATM straddle. Statement 3: To protect downside risk, a collar strategy can be implemented by adding a long put to a covered call position. ; Question:Which of Bandla's statements is least likely correct?; Answer Choices: A: Statement 1., B: Statement 2., C: Statement 3.. Answer:

Scenario: Hudson Kelly, CFA, is an options strategy analyst at Quant Analytics, Inc., focusing on managing the portfolios of high-net-worth clients. Kelly is reviewing the IPSs for several clients to devise strategies to meet their short- and long-term objectives. Kelly meets with Noah Jacobs, a client whose portfolio is concentrated in a single stock, Brookline Corporation (BKLN). Jacobs is confident about the long-term performance of the stock and does not want to sell any shares. Using the BKLN shares, Jacobs wants to generate an immediate cash flow of $100,000 to pay for his son's college tuition. Kelly is tasked to come up with an option strategy that does not use naked option positions. Three-month option contract prices and Greeks for BKLN are shown in Exhibit 1. Exhibit 1: Three-Month Option Contract Prices & Greeks for BKLN Call Vega: 0.198 | Call Delta: 0.761 | Call Premium: 23.05 | Exercise Price: 490 | Put Premium: 2.82 | Put Delta: –0.346 | Put Vega: 0.198 Call Vega: 0.214 | Call Delta: 0.651 | Call Premium: 15.55 | Exercise Price: 500 | Put Premium: 5.26 | Put Delta: –0.421 | Put Vega: 0.214 Call Vega: 0.320 | Call Delta: 0.506 | Call Premium: 9.70 | Exercise Price: 510 | Put Premium: 9.22 | Put Delta: –0.514 | Put Vega: 0.320 Call Vega: 0.225 | Call Delta: 0.382 | Call Premium: 5.75 | Exercise Price: 520 | Put Premium: 15.65 | Put Delta: –0.612 | Put Vega: 0.225 Call Vega: 0.190 | Call Delta: 0.272 | Call Premium: 3.40 | Exercise Price: 530 | Put Premium: 22.80 | Put Delta: –0.745 | Put Vega: 0.190 Call Vega: 0.175 | Call Delta: 0.213 | Call Premium: 2.51 | Exercise Price: 540 | Put Premium: 31.30 | Put Delta: –0.891 | Put Vega: 0.175 BKLN current stock price = $510.40 Liz McPherson, a high-net-worth client, is following BKLN and is tracking its earnings history for the last few quarters. McPherson is expecting the revenue of BKLN to peak due to advancements in technology. Although the overall stock market is performing well and rising, there could be a potential downside for BKLN's industry. Kelly recommends that McPherson establish an at-the-money (ATM) straddle strategy to benefit from possible extreme movements in the BKLN stock price. Kelly meets with Anusha Bandla, another high-net-worth client, who expects very little price movement in BKLN. Bandla evaluates the options strategies to take advantage of BKLN's volatility and makes the following three statements: Statement 1: For a 1% move in the options volatility, the value of an ATM straddle would change by $0.506. Statement 2: A short volatility strategy can be established by implementing an ATM straddle. Statement 3: To protect downside risk, a collar strategy can be implemented by adding a long put to a covered call position. Question:Which of Bandla's statements is least likely correct? Choices: A: Statement 1., B: Statement 2., C: Statement 3..