1.Which of the following portfolio cannot lie on the efficient frontier as described by Markowitz?

Portfolio

Expected Return

Standard Deviation

W

9%

21%

X

5%

7%

Y

15%

36%

Z

12%

15%

____

A)Portfolio W

B)Portfolio X

C)Portfolio Y

D)Portfolio Z

2.Stocks A, B, and C each have the same expected return and standard deviation.The following shows the correlations between returns on these stocks.

Stock A

Stock B

Stock C

Stock A

+1.0

Stock B

+0.9

+1.0

Stock C

+0.1

-0.8

+1.0

With this information, which of the following portfolio constructed from these stocks would have the lowest risk?

____

A)One equally invested in Stocks A and B

B)One equally invested in Stocks A and C

C)One equally invested in Stocks B and C

D)One totally invested in Stock C

(The following information relates to Questions 3 and 4)

Consider two stocks, Stock I with an expected return of 17% and a standard deviation of 54% and Stock J with an expected return of 15% and a standard deviation of 78%.The correlation between the two stocks is -0.4.

3.What is the weight of each stock I and J, respectively in the minimum variance portfolio?

____

A)29.16%; 70.84%

B)62.81%; 37.19%

C)51.97%; 48.03%

D)37.19%; 62.81%

4.What is the expected return of the minimum variance portfolio consisting of Stocks I and J?

____

A)15.74%

B)10.68%

C)12.62%

D)16.26%

5.An investor purchases 100 shares for $8 on March 1, 2020, then sells the shares for $6.50 on March 21, 2020.If the investor repurchases the shares on April 10, 2020 for $6.50 and holds them until May, what is the loss incurred?

____

A)Capital loss of $150

B)Superficial loss of $150

C)Capital loss of $1.50

D)There is no loss

6.A(n) ____ approach adjusts the asset mix between risk-free assets and risky assets as market conditions change by selling equities when markets fall and buying when they rise.

____

A)Constant weighting

B)Insured

C)Tactical

D)Dynamic

7.Which of the following factor will be the least considered when establishing investment objectives?

____

A)Ethical considerations

B)Inflation

C)Risk

D)Liquidity

8.An investor purchases a newly issued unit for $25.This package is composed of one preferred share and one common share.At the time of issue, the preferred shares trade for $9 and the common for $18.What is the adjusted cost base of each if the investor decides to sell both shares?

____

A)Preferred is $8.33 while common is $16.67

B)Preferred is $9.00 while common is $18.00

C)Preferred is $9.72 while common is $19.44

D)Undetermined with insufficient information

Margaret is a 25-year-old artificial intelligence entrepreneur.She just sold her business and netted $5 million after all tax considerations.She has no plans to reenter the workforce in the near future and indefinitely if possible.She would really like to enjoy life and live off her windfall.She has never contributed to an RRSP or a company pension plan.

9.Margaret's primary investment objective(s) should focus on ____, while relevant secondary objective should include____.

____

A)Growth and income; tax minimization

B)Tax minimization; growth

C)Preservation of capital and income; tax minimization

D)Liquidity; growth

10.The most appropriate investment mix for Margaret from the following would be

____

A)20% cash, 50% fixed income, 30% equities

B)10% cash, 30% fixed income, 60% equities

C)40% cash, 50% fixed income, 10% equities

D)30% cash, 50% fixed income, 20% equities

11.The volatility in returns associated with changes in market conditions is known as what type of risk.

____

A)Diversifiable risk

B)Cyclical risk

C)Systematic risk

D)Natural risk

12.An investor is in the 24% marginal federal tax bracket receiving $200 in dividends from a Canadian corporation.How much federal tax must be paid on this income? The grossed-up factor is 38% and the dividend tax credit rate is 15.02%.

____

A)$63.33

B)$39.17

C)$24.78

D)$48.00

13.Which of the following can be classified as a fiduciary relationship?

____

A)The relationship between lawyer and client

B)The relationship between mother and child

C)Both (A) and (B)

D)Neither (A) nor (B)

14.Which of the following desirable characteristic should be included in a financial planning pyramid?

____

A)Covering necessities

B)Accommodating small lifestyle changes

C)Not intimidating

D)All of the above

15.Which of the following statement best reflects the importance of the asset allocation decision to the investment process?The asset allocation decision

____

A)Helps the investor decide on realistic investment goals

B)Identifies the specific securities to include in a portfolio

C)Determines most of the portfolio's returns and volatility over time

D)Creates a standard by which to establish an appropriate investment time horizon

16.A stock has a beta of 0.9 and an expected return of 10%.The risk-free rate is 7% and the market is expected to return 11%.This stock is

____

A)Underpriced

B)Overpriced

C)Properly priced

D)Cannot say

17.Allocations to alternatives are believed to increase a portfolio's risk-adjusted return.Infrastructure investments serves as safe havens in times of crisis because they provide

____

A)Inflation hedge

B)Stable growing income

C)Risk diversification

D)All of the above

18.Which of the following investment strategy is likely the most relevant in the decision to short sell a particular stock?

____

A)Market timing

B)Asset allocation

C)Security selection

D)Tax strategy

19.You plan to buy a common stock and hold it for one year.You expect to receive both $1.50 from dividends and $26 from the sale of the stock at the end of the year.To earn a 15% rate of return, what is the maximum price you would pay for the stock today?

____

A)$28.82

B)$23.91

C)$25.50

D)$21.16

20.Which of the following investment constraint is expected to have the most fundamental impact on the investment decision process for a typical investor?

____

A)Investor's tax status

B)Investor's time horizon

C)Investor's need for liquidity

D)Investor's attitude toward risk

21.YYZ has an expected return of 25% and YQR has an expected return of 20%.What is the likely investment decision for a risk-averse investor?

____

A)Invest all funds in YYZ

B)Invest all funds in YQR

C)Do not invest any fund in YYZ and YQR

D)Invest funds partly in YYZ and partly in YQR

22.Four factors are identified.Its sensitivity () to each factor and the risk-free premium associated (RP) are given.GDP growth: = 0.6, RP = 4%.Inflation rate: = 0.8, RP = 2%.Gold prices: = -0.7, RP = 5%.S&P 500 Index return: = 1.3, RP = 9%.Risk-free rate = 3%.Based on APT formula, the expected return of a stock approximately is

____

A)10.4%

B)15.2%

C)12.1%

D)None of the above

23.Efficient market hypothesis concludes that investors are ____ choosing an appropriate asset allocation and investing in a well-diversified portfolio of ____ managed funds.

_____

A)Better off; passively

B)Worse off; passively

C)Better off; actively

D)Worse off; actively

24.An investor with a portfolio located on the capital market line to the left of the market portfolio has

_____

A)A lending portfolio

B)A borrowing portfolio

C)Lower nonsystematic risk than the market portfolio

D)Higher nonsystematic risk than the market portfolio

25.You purchase a stock for $26 and hold it for five years.The annual dividend per share for this stock is $2.50.If you sell the stock at the end of the fifth year for $24, what is your corresponding annual holding period yield on this stock?

_____

A)40.38%

B)20.19%

C)-16.59%

D)None of the above