Question 1

In a long/short portfolio, the key thing is for the&#10;A) long portfolio to outperform the short&#10;B) short portfolio to outperform the long&#10;C) long portfolio and short portfolio to perform equally well&#10;D) portfolio to be purchased with cash rather than on margin

Accepted Answer

In a long/short portfolio, the goal is for the long positions to outperform the short positions, generating a positive return from the difference in performance.

Question 2

A trend in the securities business is toward&#10;A) elimination of odd lots&#10;B) elimination of stock options&#10;C) elimination of futures contracts&#10;D) elimination of stock certificates

Accepted Answer

The trend in the securities business is towards dematerialization, which involves eliminating physical stock certificates in favor of electronic records.

Question 3

Short selling involves&#10;A) borrowing money&#10;B) the sale of borrowed shares&#10;C) a bullish outlook on the market&#10;D) all of the above

Accepted Answer

Short selling involves selling shares that have been borrowed with the expectation that their price will decline, allowing them to be bought back at a lower price for a profit.

Question 4

Who pays the dividends on borrowed shares that are sold short?&#10;A) The brokerage firm&#10;B) The issuing corporation&#10;C) The borrower&#10;D) No one

Accepted Answer

The borrower of the shares is responsible for paying any dividends to the lender when the shares are sold short.

Question 5

Stock lending is facilitated by&#10;A) arbitrageurs&#10;B) stock loan finders&#10;C) investment bankers&#10;D) municipal officers

Accepted Answer

Stock loan finders are specialized entities that facilitate the lending of stocks by matching lenders with borrowers.

Question 6

An area of abuse in stock lending is&#10;A) the loan of shares long-term&#10;B) the booking of paper gains&#10;C) usurious interest rates&#10;D) lending shares held in a cash account

Accepted Answer

Lending shares held in a cash account is an area of abuse because it involves using shares without the explicit consent of the account holder, potentially violating the terms of the account.

Question 7

Program trading involves all of the following except&#10;A) portfolio trading&#10;B) dividend capture&#10;C) computerized trading&#10;D) computer decision making

Accepted Answer

Dividend capture is not typically associated with program trading, which primarily involves portfolio trading, computerized trading, and computer decision making.

Question 8

A recent article by Fama and French questions which of the following paradigms in finance?&#10;A) The efficient market hypothesis&#10;B) The time value of money&#10;C) Beta&#10;D) The riskfree rate

Accepted Answer

The answer of A recent article by Fama and French...

Question 9

Security analysts and portfolio managers will most likely have the designation of&#10;A) CFP&#10;B) CFA&#10;C) AAII&#10;D) AARP

Accepted Answer

CFA (Chartered Financial Analyst) is a designation for security analysts and portfolio managers.

Question 10

Which of the following is NOT one of the four motivating factors behind the CFA program?&#10;A) Technical competence&#10;B) Accurate presentation standards&#10;C) Fungible duties&#10;D) High ethical standard of conduct

Accepted Answer

The CFA program focuses on technical competence, accurate presentation standards, and high ethical standards, but "fungible duties" is not a recognized motivating factor.

Question 11

The primary requirement to receive a CFA designation is&#10;A) an undergraduate degree and 26 hours of post-graduate courses&#10;B) passing a 4-hour comprehensive exam&#10;C) passing three 6-hour exams, one each year over three years&#10;D) 5 years of work experience

Accepted Answer

The answer of The primary requirement to receive a CFA...

Deck 25: Contemporary Issues in Portfolio Management