Part $2.$ There are twenty $(20)$ multiple choice questions in this part. Answer ANY fifteen

$(15)$ questions. Additional questions will not be graded. Each question is worth $2\mathrm{.}5$ points.

During the period Q$42007$ through Q$12009,$ the average return for a well$-$diversified,

equally weighted portfolio, including dividends, was $-48\mathrm{.}5$ percent, with standard

deviation of $30\%.$ This may be due to:

A$.$ Practically every asset class showed negative return during the period

B$.$ High correlation between asset classes at the time of crisis

C$.$ Low correlation between asset classes at the time of crisis

D$.$ Correlation has nothing to do with portfolio return or standard deviation

In a top$-$down analysis for portfolio management,

A$.$ We begin with consideration of Federal Reserve Bank interest rate policies and then

move to industry$/$sector analysis.

B$.$ We begin with sector$/$industry analysis and then move to stock sele $"$ns

C$.$ We begin with stock selection and then move to industry$/$sector a

before we do an

overall assessment of the economy

D$.$ We begin with an overall assessment of the global economy and then move to

sector$/$industry analysis followed by individual stock selections

In assessing the risk tolerance and asset allocation for different institutions, we normally

observe

A$.$ A high$-$risk tolerance for insurance companies and commercial banks with substantial

exposure to high quality fixed income investments

B$.$ A low$-$risk tolerance for insurance companies and commercial banks with substantial

exposure to high quality fixed income investments

C$.$ A low$-$risk tolerance for endowment funds with substantial exposure to emerging market

equities and hedge funds

D$.$ Since endowment funds support students' educational grants, they generally have low

risk tolerance and mostly invest in high$-$quality government bonds

A typical fee structure for a hedge fund includes,

A$.$ A high management fee, $10-20\%$

B$.$ A modest management fee plus substantial incentives or performance fees under which

the management takes a large $\%$ of the client's asset