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USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Given the following information evaluate the performance of Cloud Incorporated (CI) . USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Given the following information evaluate the performance of Cloud Incorporated (CI) . -Refer to Exhibit 18.9. Calculate CI's selectivity. A) 0.1225 B) 0.1000 C) 0.0525 D) 0.0475 E) 0.0325 -Refer to Exhibit 18.9. Calculate CI's selectivity.


A) 0.1225
B) 0.1000
C) 0.0525
D) 0.0475
E) 0.0325

F) All of the above
G) A) and D)

Correct Answer

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USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The last year's performance for four mutual funds is presented below. The market return was 10.70 percent, the standard deviation was 13.1 percent last year, and the risk-free rate of return was 5%. USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The last year's performance for four mutual funds is presented below. The market return was 10.70 percent, the standard deviation was 13.1 percent last year, and the risk-free rate of return was 5%. -Refer to Exhibit 18.7. Compute the Jensen Measure for the B fund. A) 1.16% B) 2.31% C) 6.90% D) 9.60% E) 10.13% -Refer to Exhibit 18.7. Compute the Jensen Measure for the B fund.


A) 1.16%
B) 2.31%
C) 6.90%
D) 9.60%
E) 10.13%

F) A) and D)
G) B) and D)

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When applying the Jensen's alpha measure, the alpha level and significance can vary greatly depending on the specification of the return-generating model.

A) True
B) False

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A portfolio manager has the following sequence of cash flows over a two-year period: A portfolio manager has the following sequence of cash flows over a two-year period: Calculate the portfolio manager's time weighted return. A) 13.56 percent B) 11.48 percent C) 15.50 percent D) 8.75 percent E) 10.67 percent Calculate the portfolio manager's time weighted return.


A) 13.56 percent
B) 11.48 percent
C) 15.50 percent
D) 8.75 percent
E) 10.67 percent

F) B) and E)
G) D) and E)

Correct Answer

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Under the performance attribution analysis method, the ____ measures the manager's ability to form specific market segment portfolios that generate superior returns relative to the way in which the comparable market segment is defined in the benchmark portfolio weighted by the manager's actual market segment investment proportions.


A) selection effect
B) allocation effect
C) distribution effect
D) diversification effect
E) attribution effect

F) A) and B)
G) A) and C)

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USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The last year's performance for four mutual funds is presented below. The market return was 10.70 percent, the standard deviation was 13.1 percent last year, and the risk-free rate of return was 5%. USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The last year's performance for four mutual funds is presented below. The market return was 10.70 percent, the standard deviation was 13.1 percent last year, and the risk-free rate of return was 5%. -Refer to Exhibit 18.7. Based on the Treynor Measure, which portfolio preformed best? A) A B) B C) C D) D E) market -Refer to Exhibit 18.7. Based on the Treynor Measure, which portfolio preformed best?


A) A
B) B
C) C
D) D
E) market

F) B) and E)
G) B) and C)

Correct Answer

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USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The data presented below has been collected at this point in time. USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The data presented below has been collected at this point in time. -Refer to Exhibit 18.4. Compute the Jensen Measure for the BBB fund. A) 2.10 B) 2.74 C) 5.43 D) 2.00 E) 1.65 -Refer to Exhibit 18.4. Compute the Jensen Measure for the BBB fund.


A) 2.10
B) 2.74
C) 5.43
D) 2.00
E) 1.65

F) D) and E)
G) A) and D)

Correct Answer

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In the evaluation of bond portfolio performance, the analysis effect refers to


A) the difference in portfolio duration and index duration.
B) the extra return attributable to acquiring bonds that are temporarily mispriced relative to risk.
C) short-run changes in the portfolio during a specific period.
D) the differential return from changing duration of the portfolio during a specific period.
E) None of these are correct.

F) B) and C)
G) A) and C)

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The portfolio performance measure that can be most affected by a benchmark error is the Sharpe measure.

A) True
B) False

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USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Consider the following information for four portfolios, the market, and the risk-free rate (RFR) : USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Consider the following information for four portfolios, the market, and the risk-free rate (RFR) : -Refer to Exhibit 18.6. Calculate the Sharpe Measure for each portfolio. A) A1 = 0.40, A2 = 0.31, A3 = 0.65, A4 = 0.66 B) A1 = 0.31, A2 = 0.66, A3 = 0.65, A4 = 0.40 C) A1 = 0.66, A2 = 0.65, A3 = 0.31, A4 = 0.40 D) A1 = 0.66, A2 = 0.31, A3 = 0.65, A4 = 0.40 E) A1 = 0.54, A2 = 0.68, A3 = 0.65, A4 = 0.40 -Refer to Exhibit 18.6. Calculate the Sharpe Measure for each portfolio.


A) A1 = 0.40, A2 = 0.31, A3 = 0.65, A4 = 0.66
B) A1 = 0.31, A2 = 0.66, A3 = 0.65, A4 = 0.40
C) A1 = 0.66, A2 = 0.65, A3 = 0.31, A4 = 0.40
D) A1 = 0.66, A2 = 0.31, A3 = 0.65, A4 = 0.40
E) A1 = 0.54, A2 = 0.68, A3 = 0.65, A4 = 0.40

F) B) and C)
G) A) and B)

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Overall performance is the total return above the risk-free rate.

A) True
B) False

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Global Investment Performance Standards (GIPS) , were intended to accomplish which of the following goals?


A) to assess the quality of services provided by money managers by looking at adjustments made to the content of their portfolios
B) to measure both unsystematic and systematic risk
C) to establish investment industry best practices for calculating and presenting investment performance that promote investor interests and instill investor confidence
D) to measure portfolio performance on the basis of return per unit of risk
E) to measure portfolio performance on the basis of historic average differential return per unit of historic variability of differential return

F) None of the above
G) All of the above

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The two questions when assessing the performance measurement of an investment manager include:


A) did the manager follow the client's policy statement?
B) did the manager completely diversify the portfolio to eliminate all unsystematic risk?
C) why did the portfolio manager perform as he or she did?
D) did the manager have the ability to derive above-average risk adjusted returns?
E) did the manager deliver on expectations and produce an additional alpha component?

F) A) and B)
G) B) and E)

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USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Consider the data presented below on three mutual funds and the market. USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Consider the data presented below on three mutual funds and the market. -Refer to Exhibit 18.3. Compute the Treynor Measure for the CCC fund. A) 14.7 B) 15.3 C) 19.1 D) 17.0 E) 12.7 -Refer to Exhibit 18.3. Compute the Treynor Measure for the CCC fund.


A) 14.7
B) 15.3
C) 19.1
D) 17.0
E) 12.7

F) A) and B)
G) D) and E)

Correct Answer

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USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) An analyst is considering investing in funds A, B, C, and D. The market portfolio, M, is expected to be 11 percent next period, and the risk-free rate of return is 3 percent. The market portfolio had a standard deviation over the past ten years of 0.20. The analyst gathered the following information on the four funds. USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) An analyst is considering investing in funds A, B, C, and D. The market portfolio, M, is expected to be 11 percent next period, and the risk-free rate of return is 3 percent. The market portfolio had a standard deviation over the past ten years of 0.20. The analyst gathered the following information on the four funds. -Refer to Exhibit 18.8. Rank the four funds and market portfolio in order from highest to lowest based on their Treynor performance measures. A) A, B, C, D, M B) B, C, M, D, A C) C, A, M, D, B D) D, A, B, M, C E) D, B, A, C, M -Refer to Exhibit 18.8. Rank the four funds and market portfolio in order from highest to lowest based on their Treynor performance measures.


A) A, B, C, D, M
B) B, C, M, D, A
C) C, A, M, D, B
D) D, A, B, M, C
E) D, B, A, C, M

F) A) and B)
G) B) and E)

Correct Answer

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According to Global Investment Performance Standards (GIPS), time-weighted rates of return must be used.

A) True
B) False

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The ranking differences between the Sharpe, Treynor, and Jensen performance measures occur because of the differences in diversification.

A) True
B) False

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The advantage of evaluating a fund's alpha using a multifactor approach is that it is designed to control for market style (SMB and HML) and momentum (MOM) risk.

A) True
B) False

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The information ratio permits only relative assessments of performance for different portfolios in a style class.

A) True
B) False

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Which of the following statements concerning performance measures is false?


A) The Sharpe measure examines both unsystematic and systematic risk.
B) The Treynor measure examines systematic risk.
C) The Jensen measure examines systematic risk.
D) All three measures examine both unsystematic and systematic risk.
E) None of these are correct.

F) D) and E)
G) A) and E)

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