Test your knowledge

CFA Level III
#1

Which of the following characteristics of asset classes is most desirable? Asset classes should: A) have an index. B) be negatively correlated. C) be mutually exhaustive. Which of the following statements regarding the Human Capital equation is least accurate? A) The amount of human capital is based on an investor’s current annual inflows. B) The expectancy of receiving a bonus is incorporated into the numerator. C) Volatility is included in the denominator.

#2

C ? does this mean mutally exclusive A

#3

C A

#4

c, a

#5

agree C A I think exhaustive means they cover major invest-able assets (you aren’t leaving anything out). That differs from mutually exclusive where there is no overlap (you aren’t including anything in two classes).

#6

C A

#7

Blahhhhh. You guys are good. Your answer: B was incorrect. The correct answer was C) be mutually exhaustive. One of the desired characteristics of asset classes is that they should be mutually exhaustive- or cover most of the investable assets. They also should not be highly (positively or negatively) correlated with each other. Your answer: B was incorrect. The correct answer was A) The amount of human capital is based on an investor’s current annual inflows. The amount of human capital (HCt) is based on future income expectations and not just current income.

#8

CA as well. I didn’t cheat either - I always look at the 1st post scribble my answer and then submit

#9

If you think about question 2, volatility is captured by the assumed discount rate, and human capital relates to future expected earnings, so both B and C are true. Key word is future not current since that would basically be accounted for by your financial capital.

#10

CA (without cheating - it’s not possible to be the first one to answer with mvwt9 around)

#11

Magix Wrote: ------------------------------------------------------- > CA (without cheating - it’s not possible to be the > first one to answer with mvwt9 around) Ha ha. I will hold my answers from now on.

#12

did not get the meaning of numerator and denominator thing, but hey, value added, thanks for the explanation: