AAFM Investment Analysis and Portfolio Management

Question 1

Which portfolio theory was developed by Harry Markowitz to optimize risk-return trade-offs?

Accepted Answer

Modern Portfolio Theory

Answer

Efficient Market Hypothesis

Answer

Capital Asset Pricing Model

Answer

Arbitrage Pricing Theory

Question 2

The Sharpe ratio measures a portfolio's excess return per unit of which type of risk?

Accepted Answer

Total risk

Answer

Systematic risk

Answer

Unsystematic risk

Answer

Liquidity risk

Question 3

Beta measures a security's sensitivity to movements in which benchmark?

Accepted Answer

The overall market index

Answer

The risk-free rate

Answer

The sector index

Answer

Inflation

Question 4

Which valuation model discounts all expected future dividends to estimate a stock's intrinsic value?

Accepted Answer

Dividend Discount Model

Answer

Price/Earnings Model

Answer

Free Cash Flow Model

Answer

Residual Income Model

Question 5

Duration measures a bond's sensitivity to changes in which variable?

Accepted Answer

Interest rates

Answer

Credit rating

Answer

Inflation expectations

Answer

Currency exchange rates

Question 6

Which asset allocation strategy periodically restores a portfolio to its target weights?

Accepted Answer

Rebalancing

Answer

Tactical asset allocation

Answer

Strategic asset allocation

Answer

Dynamic asset allocation