Title Portfolio Management - Question.pdf ✅

CFA Program Level I for February 2024 1 Portfolio Management 1. Which of the following statements about pension plans is most accurate? A. Defined benefit plans typically have a low risk tolerance. B. Defined contribution plans typically have a low risk tolerance. C. The sponsor of a defined benefit plan specifies the obligation owed to participants. 2. The process of risk management is best described as the set of decisions that maximizes a company's value while: A. minimizing the risk taken. B. bearing a tolerable level of risk. C. predicting the potential risk correctly. 3. Which of the following is least consistent with effective risk governance? A. Taking an enterprise-wide view B. Defining the enterprise's risk tolerance C. Following a bottom-up process to direct risk management activities 4. With regard to an investment policy statement, which of the following statements about return objectives is most accurate? A. A return objective cannot be a required rate of return. B. Return objectives must be set independent of risk objectives. C. When setting a relative return objective, a good benchmark should be investable. 5. The correlation between the risk-free asset and the optimal risky portfolio is expected to be: A. negative. B. zero.
CFA Program Level I for February 2024 2 C. positive. 6. An investor who can lend and borrow at the risk-free rate builds a portfolio using the risk- free asset and the market portfolio. The risk-free rate is 3% and the expected market return is 15%. If the expected portfolio return is 18%, the investor's portfolio is: A. a lending portfolio. B. a leveraged portfolio. C. the optimal risky portfolio. 7. An analyst gathers the following information about a company: Payables turnover 8 Inventory turnover 2 Receivables turnover 10 If all purchases and sales were made on credit, the cash conversion cycle (based on a 360-day year) is: A. less than the utility generated for a risk-averse investor. B. equal to the utility generated for a risk-averse investor. C. greater than the utility generated for a risk-averse investor. 8. A risk-neutral investor most likely seeks to maximize: A. both risk and return. B. retum irrespective of risk. C. return for a given level of risk.

CFA Program Level I for February 2024 4 13. Which of the following can best be explained by overconfidence when predicting companies' earnings growth rates? A. Base-rate neglect B. The value anomaly C. The disposition effect 14. Which of the following is most likely developed by combining a client's investment objectives and constraints with long-term capital market expectations? A. Risk budget B. Strategic asset allocation C. Investment policy statement 15. The diversification ratio of a portfolio is best described as the ratio of the: A. standard deviation of the equally weighted portfolio's returns to the average standard deviation of the individual securities' returns. B. standard deviation of the market-capitalization-weighted portfolio's returns to the standard deviation of the equally weighted portfolio's returns. C. average standard deviation of the individual securities' returns to the standard deviation of the market-capitalization- weighted portfolio's returns. 16. In regard to the asset allocation process, a top-down analysis most likely begins with an examination of A. macroeconomic growth. B. a company's board of directors. C. the expected growth of a company's competitors. 17. Which of the following is most likely a consequence of the illusion of control bias? A. An investor's portfolio turnover is too low. B. The investor's portfolio contains concentrated positions in companies.