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: 1146138On 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: 1151636A 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: 1146140Open-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: 1146143According 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: 1146146The 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: 1146149A 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
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