pm — CFA Level I Practice Questions

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1. According to the Capital Asset Pricing Model (CAPM), which of the following components of an asset's total ris
2. According to the 'Two-Fund Separation' principle, all investors should hold the same portfolio of risky assets
3. According to the CAPM, which asset must have a higher required return?
4. To ensure that realized crisis correlations and empirical fat tails are automatically preserved without a para
5. A Meridian Pack risk report lists 'Tail Sparsity' as a weakn… — This most likely refers to which simulation me
6. Why does the CAPM only reward systematic risk and not idiosyncratic risk?
7. Which of the following events would most likely contribute to the systematic risk of Vesper Foods?
8. Which measure is most appropriate for evaluating the performance of a fund that represents an investor's entir
9. A portfolio manager at Meridian Pack identifies a 'Dispositi… — To mitigate this emotional bias, the manager s
10. An investor holds a portfolio with a Sharpe ratio of 0.50. If the risk-free rate is 3% and the portfolio's sta
11. The board of Apex Global is concerned that the portfolio's 9… — This specific concern is best addressed by whi
12. Which statement correctly describes the Security Market Line (SML) in equilibrium?
13. If an investor's indifference curves are very steep, they most likely:
14. The systematic variance of the portfolio is closest to:
15. Oakridge Capital observes that two assets have a correlation… — If these two assets are combined in a portfoli
16. If the correlation between the two is 0.80, the Beta (β) of the portfolio is closest to:
17. Which IPS constraint most directly addresses the impact of a high marginal tax bracket on a client's 'asset lo
18. Which of the following describes the difference between the Capital Market Line (CML) and the Security Market
19. In the CAPM framework, why is idiosyncratic risk not rewarded with a risk premium?
20. Redhook Ports experiences a strike by its local crane operat… — According to portfolio theory, this risk is:
21. The Security Market Line (SML) graphs expected return against which measure of risk?
22. If the correlation coefficient between A and B is 0.40 and the assets are equally weighted, the portfolio stan
23. When constructing a portfolio, 'risk shifting' typically refers to the use of derivatives to:
24. If the market standard deviation is 15% and the risk-free rate is 3%, the M^2 value is closest to:
25. Kestrel Grid is considering adding a transmission-asset slee… — To assess the marginal contribution of this sl
26. If a stock's returns are perfectly correlated with the market (ρ = 1.0), then its idiosyncratic risk is:
27. Kestrel Grid has a total return variance of 0.0900. If its beta is 1.2 and the market variance is 0.0400, its
28. Sable Payments identifies an asset with a negative beta. According to the CAPM, this asset's expected return s
29. If the risk-free rate is 3% and the market risk premium is 5%, the stock is most likely:
30. The investor’s utility is closest to: