THROUGH 79 RELATE TO PORTFOLIO MANAGEMENT. (10.5 MINUTES)...

Questions 73 through 79 relate to Portfolio Management. (10.5 minutes)

A financial firm employs machine learning to model its risk exposures. The machine identifies a number of risk

relationships in the input data, but the firm's management believes some of these relationships are spurious. If so, it

is most likely that the model:

A)

exhibits overfitting.

B)

treats true parameters as noise.

C)

is not complex enough to describe the data.

Question #74 of 120 Question ID: 1146138

On average, which of the following types of investors has the shortest investment horizon?

Endowment fund.

Defined benefit plan.

Property and casualty insurer.

Question #75 of 120 Question ID: 1151636

A portfolio is invested 30% in Asset A with the remainder invested in Asset B. Asset A has an expected return of 6% and

variance of returns of 0.031, while Asset B has an expected return of 7% and variance of returns of 0.045. The covariance

between the returns of the two assets is 0.03735. The standard deviation of returns for the portfolio is closest to:

18%.

20%.

22%.

Question #76 of 120 Question ID: 1146140

Open-end mutual funds differ from closed-end funds in that:

open-end funds stand ready to redeem their shares,

while closed- end funds do not.

closed-end funds require active management, while

open-end funds do not.

open-end funds issue shares that are then traded in

secondary markets, while closed-end funds do not.

Question #77 of 120 Question ID: 1146143

According to the CAPM, a rational investor would be least likely to choose as his optimal portfolio:

a 100% allocation to the risk-free asset.

the global minimum variance portfolio.

a 130% allocation to the market portfolio.

Question #78 of 120 Question ID: 1146146

The risk-free rate is 5% and the expected market risk premium is 10%. A portfolio manager is projecting a return of 20%

on a portfolio with a beta of 1.5. After adjusting for its systematic risk, this portfolio is expected to:

equal the market’s performance.

outperform the market.

underperform the market.

Question #79 of 120 Question ID: 1146149

A manager states that the objectives of a firm's risk management process should be to:

Identify the firm's risk tolerance.

Identify and measure risks faced by the organization.

Minimize or eliminate these risks.

Which of these objectives is least appropriate in a risk management process?

Minimizing or eliminating risks.

Question #80 of 120 Question ID: 1146172