I searched Risk Budgeting, and found this thread…I copied some of the questions and pasted here. Source: http://www.analystforum.com/phorums/read.php?13,1138264,1138300#msg-1138300 Q1: You have performed an attribution analysis on the Gibbons Tech Fund and have concluded that the fund manager’s total value added was 0.874%. Which of the following statements correctly identifies a potential shortcoming in attribution analysis? A) Fund allocations may have changed drastically during the period. B) The returns are not risk adjusted. C) The benchmark may not match the portfolio. Q2: Which of the following lines of argument has/have been put forth to justify the establishment of the Global Investment Performance Standards (GIPS)? A) Enhancing competition in global markets. B) All of these choices are correct. C) Enhancing the consistency in performance presentation for inter-country holdings. Q3: A portfolio manager has decided to pursue a contingent immunization strategy over a four-year time horizon. He just purchased at par $26 million worth of 6% semiannual coupon, 8-year bonds. Current rates of return for immunized strategies are 6% and the portfolio manager is willing to accept a return of 5%. Given that the required terminal value is $31,678,475, and if the immunized rates rise to 7% immediately, which of the following is most accurate? The dollar safety margin is: A) negative (-$1,423,980) and the portfolio manager must switch to immunization. B) positive ($6,158,602) and the portfolio manager can continue with contingent immunization. C) positive ($370,765) and the portfolio manager can continue with contingent immunization Q4: An investor would like to track an index and is considering using optimization. Optimization is characterized by: A) the use of a factor model and infrequent rebalancing. B) the use of a matrix model and frequent rebalancing. C) the use of a factor model and frequent rebalancing. Q5: Which of the following trading tactics would most likely be used by an information-motivated trader? A) Liquidity-at-any-cost. B) Need-trustworthy-agent. C) Costs-are-not-important. Q6: Which of the following is the best method of estimating the future dividend payout ratio for a stock market series? Estimate the: A) dividend payout ratio using historical dividend payout ratios. B) dividend payment using historical dividends and then relate this to the estimated earnings. C) earnings for firms and their level of capital investment, from which the retention ratio and hence dividend payout ratio can be derived. Q7: Which of the following would NOT result in higher dividend growth rates? A) Lower financial leverage. B) Higher retention ratios. C) Lower asset use compared to sales. Q8: What is risk budgeting? A) Determination of a risk measure that the portfolio can take. B) Determination of the amount of risk the portfolio can take. C) Identification of sources of portfolio risk. Q9: Which of the following best characterizes the relationship between technological progress, the growth in capital stock, and economic output in the BRIC countries? A) Technological progress can have a large impact on economic growth but the growth in capital stock is less important for economic growth. B) Both technological progress and the growth in capital stock can have a large impact on economic growth. C) The growth in capital stock can have a large impact on economic growth but technological progress is less important for economic growth. Q10: Which of the following statements best characterizes the difference between rebalancing to consistently maintain an asset class’s target portfolio weight versus rebalancing to within an allowed range? Rebalancing to consistently maintain an asset class’s target portfolio weight: A) will result in higher trading costs. B) will always have lower tracking error. C) require more monitoring of the portfolio than rebalancing within an allowed range.
Deriv thanks a mil mayne 1 C 2C 3 4C 5C 6A 7B 8B 9B 10A
1.)C 2.)A 3.)C 4.)C 5.)A 6.)B 7.)B 8.)C 9.)B 10.)A
I’ll give it a go – but first, I’m pretty sure question 3 is from the QBank. You might want to edit it out due to copyright gibberish. Plus, I think the QBank has that question wrong. 1.B 2. A 4. C (?) 5. A 6. A (?) 7. A 8. B 9. A 10. A
The questions were extracted from another thread in AF as described in the beginning…Hope Mosaic Theory apply here.
2B for sure , not 2C
1A 2B 3B (guess) 4A 5A 6C 7B 8B 9B 10A
5C is correct
on the GIPS one… i don’t think the “inter-country” qualifier is correct. I think that is too narrow. On 1 i picked C, but both B and C look right to me… so not sure. I mean, benchmark attribution definitely doesn’t consider risk unless it is somehow implied in the benchmark as far as i can tell. But i KNOW that if you pick the wrong benchmark it throws off the results, so C seemed safer. 5 was tricky =/
markCFAIL Wrote: ------------------------------------------------------- > on the GIPS one… i don’t think the > “inter-country” qualifier is correct. I think > that is too narrow. > That’s my thoughts as well. Thanks for these, Deriv.
- C 2. B 3. ??? 4. C 5. C? 6. B? 7. B 8. B 9. B? 10. A what are the right answers?
- C 2. B 3. C 4. A 5. C 6. C 7. B 8. B 9. B 10. A
man, you bros missed alot. I remember these questions from Schweser.
The answers can be found in the thread I posted at the beginning…the two confirmed each other’s answers, so I believe their answers are reliable…Please correct me I’m wrong. Note: Q1 and Q2 look questionable, including Q5. ------------- 1. B 2. B 3. C 4. C 5. A 6. B 7. A 8. C 9. A 10. A
I struggle to find a correct answer for Q8. Risk Budgeting allocates capital based on the risk a portfolio can take, it doesn’t identify the sources of portfolio risk. Q1 is missing some background. Was that the whole question? Some questions are not relevant to level 3 (Q6 and Q7)
why is capital stock not important to BRICS? Also, 7.) is ridiculous. Retention rate x ROE is how you calculate growth in EARNINGS. If you retain more, eg higher RR, you REINVEST more into the company and pay LESS dividends. Where did you get these shit questions?
I think he got them from that #%@#!%# Schweser Q-bank but dont quote me on it.
markCFAIL Wrote: ------------------------------------------------------- > why is capital stock not important to BRICS? > > Also, 7.) is ridiculous. Retention rate x ROE is > how you calculate growth in EARNINGS. If you > retain more, eg higher RR, you REINVEST more into > the company and pay LESS dividends. > > Where did you get these shit questions? Yes, you pay less dividends, but the dividend *growth* is higher.
don’t think so. If you retain more earnings, you have less earnings to pay out as dividends as more are reinvested. Growth is higher because you are reinvesting into the business in lieu of paying dividends. Although earnings growth is higher, the assumption that dividend growth is higher requires the firm to maintain a stable payout despite the fact that they are choosing to reinvest more into the business and have less available to pay earnings. As mentioned in the question earlier, firms typically try to maintain a stable $ amount rather than a payout ratio. If this is the case, and you suddenly retain more earnings and pay out a lower % dividends (same dollar amount), then there would be no growth, it would remain flat.