Q a schweser self test 08 equity portfolio management answers

Question #1 of 6 B Berg is incorrect regarding both statements.. Regarding down versus bottom-up, Berg is performing the top-down macroeconomic analysis and then relying on managers to a

Question #1 of 6

B) Berg is incorrect regarding both statements

Explanation

Berg is incorrect about both Berg is wrong on both counts A conflict between quantitative and qualitative data is worrisome and would lead to a need for more investigation or excluding that manager from consideration Regarding down versus bottom-up, Berg is performing the top-down macroeconomic analysis and then relying on managers to add value with individual security selection She is using the managers for bottom-up security selection

Question #2 of 6

A) Topic 4, competitive position

Explanation

Topic 4, competitive position, is not typically included in a manager questionnaire The section not listed in Berg's questionnaire that would usually be listed is resources and research

Question #3 of 6

C) A principal advantage of performance-based fees is that they help managers retain staff since they reward good performance

Explanation

A principal disadvantage of performance-based fees is that the increased volatility of a

manager's compensation can create problems with retaining staff The other statements are accurate

Question #4 of 6

B) Corbin is incorrect regarding both statements

Explanation

Corbin is incorrect on both points A contrarian strategy (e.g., investing in recent losers) often works as well with managers as it does with stocks Ad-valorem fees are also referred to as asset under management (AUM) fees and depend on asset value managed, not manager performance

Question #5 of 6

A) Only one is correct

Explanation

Berg is incorrect because the risks are more clearly defined in an alpha and beta separation approach than in a long-only strategy Corbin is correct that an alpha and beta separation strategy could be implemented by taking a long passive position in an index such as the S&P

500 for beta and picking up alpha in a long-short active strategy in a less efficient market

Question #6 of 6

C) The investor's total return equals the net profit or loss from the long/short position plus the profit or loss from the futures contract, all divided by the equity the investor put up for the transaction

Explanation

The first two are true The portfolio results are typically compared to the market in which the investor's capital is invested The short sale proceeds could be invested in a long position in equity futures This is unusual as the only potential alphas would be from shorting overvalued securities Usually individual undervalued securities would be purchased to earn alpha on the long positions as well But C is possible and not inconsistent with equitizing long/short The last statement is partially false It is true the profits and losses on the individual securities and futures contract are aggregated But if contracts are used to create the equity market exposure, the investor's capital is invested in cash equivalents to fully collateralize the contract position Thus, the risk-free rate is also earned