CFA Domain 6: Portfolio Management Welcome to your CFA Practice Quizzes. Note: We designed a practice quiz of 20 questions for this Domain. CFA Domain 6: Portfolio Management. Please click NEXT to start your Free CFA Practice Quizzes right away. Best of Luck! 1. A client's ability to take risk is most likely determined by the client's: net worth. risk attitude. investing experience. None 2. "Two investors each initially invest ¥6 million in the same fund, which earns 5% during Year 1. At the beginning of Year 2: Investor X invests an additional ¥8 million to the fund, and Investor Y invests an additional ¥9 million to the fund. The fund's return is −2% in Year 2. After two years, which of the following best describes the investors' returns?" Investor Y will have a greater money-weighted return Both investors will have equal geometric mean returns Both investors will have negative time-weighted returns None 3. A tax-sensitive investor would like to invest $10 million in a portfolio of small-cap stocks. Which pooled investment vehicle would be most appropriate for this investor? An exchange-traded fund An open-ended mutual fund A separately managed account None 4. Relative strength analysis most appropriately measures: whether institutional investors are holding more cash than normal. the performance of one asset compared to an underlying benchmark. whether an asset is overbought or oversold based on its ratio of gains to losses. None 5. Which retirement plan most likely obligates the employer to provide future benefits? Defined benefit plan Defined contribution plan Individual retirement account None 6. The halo effect is most closely associated with which market anomaly? Bubbles Momentum Value effect None 7. When predicting the expected return of a security, the slope coefficient of the market model most likely represents the security's: beta. alpha. sigma. None 8. In portfolio management, it is assumed that the expected return is: never equal to the historical mean return. equal to the historical mean return over the next 30 years. equal to the historical mean return over a future period of unknown length. None 9. Using derivatives to modify a company's currency risk is best described as which of the following types of risk modification? Risk shifting Risk transfer Risk prevention None 10. Which of the following best describes the Investment Guidelines section of the investment policy statement? Defines the portfolio's tactical asset allocation Discusses the use of leverage to meet investment objectives Explains the client's process for hiring and firing external managers None 11. If an asset has a beta that is equal to the average beta of all assets, then its risk level is most likely: less than market risk. equal to market risk. greater than market risk. None 12. In its appeal to mass affluent investors, which of the following has been most disruptive to the wealth management industry? Hedge funds Robo-advisers Private equity funds None 13. The entire process of confirming new transactions in a distributed ledger is known as: consensus. tokenization. smart contracting. None 14. If a portfolio is fully diversified, it most likely eliminates which type of risk(s)? Systematic and nonsystematic risk Nonsystematic risk but not systematic risk Systematic risk but not nonsystematic risk None 15. "The following diagram shows indifference curves for investors with different risk aversions: It is most likely that:" Investor W is less risk averse than Investor X. Investor Y is more risk averse than Investor X. Investor W is more risk averse than Investor Z None 16. "An analyst has gathered the following data to calculate the expected return of an asset: The asset's expected return is closest to:" 7.99% 8.80% 9.05% None 17. Which of the following best describes the roles of buy-side and sell-side firms? Sell-side firms sell asset management services to buy-side firms. Buy-side firms provide independent investment research to sell-side firms. Buy-side firms are asset managers that buy trading services from sell-side firms. None 18. The rationale for combining the risk-free asset with a risky portfolio is that the correlation between the two assets is: zero. positive. negative. None 19. A client's low willingness to take risk most likely results from which of the following? The client has no current income and a short investment time horizon. The client has a long investing time horizon and modest personal net worth. The client is anxious about investing and unsure about the portfolio's returns. None 20. Which of the following is most likely an advantage of using an investment policy statement? Return objectives are expressed gross of fees. The manager can assess the client's willingness to take risk. The client receives assurance that the required rate of return will be met. None 1 out of 20 Time is Up! Time's up
