Reference no: EM132713013

Problem 1: Which of the following is a style related to fixed-income portfolio managers?

A) Credit quality

B) Spread traders

C) Both (A) and (B)

D) Neither (A) nor (B)

Problem 2: A "value" manager would invest in stocks with relatively ____ P/E ratios and ____ dividend yields.

A) High; high

B) High; low

C) Low; low

D) Low; high

Problem 3: What is the main danger in comparing mutual fund performance?

A) The funds may have two different investment objectives

B) Historical returns provide no guarantee of future returns

C) A fund's asset allocation may not be taken into consideration

D) Comparisons with stock market indexes may not account for dividend reinvestment

Problem 4: The combination of securities in a portfolio is determined using the following guideline:

A) The investor's primary objectives determine the asset allocation strategy; the investor's secondary objectives determine specific securities that are selected

B) The investor's primary objectives determine specific securities that are selected; the investor's secondary objectives determine the asset allocation strategy

C) Neither (A) nor (B)

D) Both (A) and (B) depending on the investor's level of risk tolerance

Problem 5: A $20 million investment is made in year 1 and the fund increases by 30%. Based on a 10% incentive fee, how much money will the manager earn?

A) $2 million

B) $2.6 million

C) $0.6 million

D) $1 million

Problem 6: Aggressive bond investors are more focused on the capital gains that arise from a change in interest rates. If rates are expected to fall, the short-term speculator can buy ____ and ____ issues to achieve maximum returns if the interest rate forecast is correct.

A) Short-term; low-coupon

B) Long-term; high-coupon

C) Short-term; high-coupon

D) Long-term; low-coupon