Quiz 3

Which of the following are the MAIN REASONS for an investor to invest in managed funds? I -  To obtain a better return. II -  To diversify risks. III - Lack of time to look after their own investments. IV -  More freedom on stock selection. A) I, II and III only B)  I, II and IV only C) I, III and IV only D)  II, III and IV only

You Answered Correct Answer Jensen (1968) E proposed a very influential idea: when assessing mutual fund performance, we should compare funds only after accounting for the risks they take (rather than simply comparing returns). To see his argument, draw a SML, and put one dot above the SML (call it A) and one dot below it (call it B) while A and B have the same beta. (a) Describe the investment opportunities here. Buy B and sell A in a way that the portfolio has zero market beta Buy A and sell B in a way that the portfolio has zero market beta Just buy A to reach the highest possible return

How can a mutual fund manager who follows a momentum trading strategy expect to earn above - average return  1. Provided the stock price has been decreasing below the mean reversion point and other investors follow a mean reversion strategy the fund manager is likely to earn an above average return  2. If the fund manager follows a momentum strategy and buys a stock as the price is increasing while other investors follow a mean reversion strategy, then it is likely the stock price will continue to rise  3. Provided the stock price have been rising above the mean reversion point and other investors follow a mean reversion strategy, the fund manager is likely to earn an above average return  4. If the fund manager follows a momentum strategy and buys a stock as the price is increasing and other investors also follow a momentum strategy, then it is likely the stock price will continue to rise

An investor who uses only the Treynor ratio to evaluate the performance of a mutual fund is most likely to conclude:   a. Total risk is more important than systematic risk b. The fund is not well-diversified. c. A measure of market portfolio performance is essential to evaluate the fund d. The beta of the fund captures the relevant risk of the fund.

Decide whether the following statement makes sense​ (or is clearly​ true) or does not make sense​ (or is clearly​ false). Explain your reasoning. I bought a fund advertised on the web that says it uses a secret investment strategy to get an annual return twice that of​ stocks, with no risk at all.Choose the correct answer below. A.The statement does make sense because this secret investing strategy must be a new financial planning strategy that does not incorporate the three traditional investment​ considerations: liquidity,​ risk, and return. B.The statement does not make sense because investing in stocks is​ low-risk to get high​ returns, thus getting higher returns than stocks with this secret strategy must mean the fund advertised on the web is​ low-risk, not no risk. C.The statement does make sense because the strategy indicates that the return is a predictable​ amount, thus the fund advertised on the web is a​ no-risk investment. D.The statement does not make sense because…

Your friend suggests that a good way to study whether stock prices are in- formationally efficient is to analyze whether mutual fund managers can earn abnormal returns. Should her study examine the performance of fund managers gross of expenses or net of expenses (i.e., the fund return minus expenses)?

The liability / equity side of an open-ended hedge fund is composed of  __________________.      A. units and margin loans   B. units only   C. the financial instruments described in the deeds   D. Investment properties   E. marketable shares

Historically, index funds have had _________ thanmost actively managed mutual funds.a. higher feesb. less diversificationc. larger tax burdensd. better returns

A mutual fund that invest in a mix of equity and fixed income securities that provide current cash flow is a(n)

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1 . Which investor type would most likely have high tolerance for risk, long investment horizon, and low liquidity needs? a) pension funds b) commercial banks c)individuals d) mutual funds 2. Which manager most likely receives the highest compensation through fees? a) passive manager b) fixed income asset manager c) smart beta manager d) alternative asset manager 3. A no-load mutual fund will most likely charge which of the following fee? a) redemption fee b) up front fee c) management fee d) all of the above 4. The diversification between any two assets most likely to occur when which of the following conditions is met? a) Correlation between the two assets is less than 1.0 b) Correlation between the two assets is greater than 1 c) Correlation between the two assets is strictly negative d) Correlation between the two assets is strictly zero 5. When the economy is at the lowest point of the business cycle (the "through"), which are the best industries to invest in? a) Cyclical…

Which of the following statements regarding close-end investment companies, if any, is correct?1. Close-end funds continually create new shares as new monies are obtained.2. Close-end funds offer price guarantees a. 1 only.b. 2 only.c. Both 1 and 2.d. Neither 1 nor 2.

Biases and attitudes of investors and their anomalous behaviors inconsistent with traditional finance theories are studied according to: Group of answer choices C. Modigliani & Miller A. Random Walk Theory D. Modern Portfolio Theory B. Behavioral Finance

Which of the following best describes an index mutual fund? Mutual fund manager based on preset ratio of stocks and bonds. Mutual fund manage based on a person's anticipated year of retirement.  Passively managed fund design to mimic a specific market. Mutual fund that attempts to earn rates of return that exceed the return of the market.

D4)

A3) Finance You are an investor who is looking to invest into a fund. Given the following investment criteria, which fund would be the best fit? You are a long-term investor (less worried about liquidity) You still need some flexibility in being able to purchase/redeem the investment at fair value You prefer a fund that undertakes some tactical asset allocation (changing its strategy based on market conditions) You are comfortable with higher risk. Passively managed, index fund Actively managed, closed-end fund Passively managed, open-ended fund Actively managed, open-ended fund

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