What is the meaning of the Standard I-A of Professionalism “Knowledge of the Law?
Roberto Velasco, passed the CFA levels I and II in his first attempt, and he recently registered for the Level III exam. Roberto works for a global investment firm known as Alpha Searchers, and his company adopted the Code of Ethics and the Standards of Professional Conduct three years ago. Which one of the following
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How can we reduce risk through diversification in a portfolio basis?
Which of the following performance measures represents the ratio of the standard deviation of an equally weighted portfolio to the standard deviation of a randomly selected security of this portfolio? a) Volatility ratio. b) Diversification ratio. c) Naïve ratio. https://vimeo.com/manage/videos/944899947
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What is the difference between MBOs (management buyouts) and MBIs (management buyins)?
Within private equity strategies, the CFA Institute differentiates among leverage buyouts, venture capital, and growth capital. Leverage buyouts can be segregated into MBOs and MBIs. Which of the following sentences better reflects the main difference between both types of leverage buyouts? a) In MBOs (Management BuyOuts), the current management team is being replaced and the
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What are the main operational advantages of derivatives compared to stop markets?
Derivative transactions offer a number of operational advantages to cash or spot markets in many instances. Which of the following sentences better reflects these operational advantages of financial derivatives? a) Lower transaction costs, lower upfront cash requirement, leverage, and short positions. b) Lower risk, higher performance, leverage, and short positions. c) Lower transaction costs, lower
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What is the meaning of “fallen angels” in terms credit quality in fixed-income securities?
Which of the following sentences better explains the concept of a “fallen angel” in terms of creditworthiness of bonds, according to the CFA Institute? a) Fallen angels are high-yield (speculative grade) bond issuers whose credit quality has deteriorated in the last 12 months. b) Fallen angels are formerly investment-grade issuers whose credit quality has deteriorated
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What is the relationship between informationally efficient markets and active vs. passive investments?
According to the EMH (Efficient Market Hypothesis) proposed by Nobel Prize winner Eugene Fama, informationally efficient markets are those in which asset prices reflect new information quickly and rationally. Mark the correct sentence in terms of active vs. passive investments, and efficient vs. inefficient markets. a) If we suppose market are efficient, prices should react
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How should we report intangible assets?
Intangible assets are those lacking physical form, such as patents and trademarks. Regarding the reporting of intangible assets in the balance sheet, we need to remember some relevant rules. Which of the following sentences is correct? a) Intangible assets must be reported as separated identifiable assets, and we can use either the cost model or
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How to differentiate between fiscal policy and monetary policy?
Which of the following sentences better reflects the difference between monetary and fiscal policy? a) Fiscal policy is related changes in government spending and target interest rates with an objective of affecting the level of aggregate expenditures. b) Fiscal policy is related changes in government spending and taxes with an objective of affecting the level
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What are the main advantages and disadvantages of the arithmetic mean?
In statistics, within the measures of central tendency we can find the median, the mode, and the mean, and inside this last measure, we can differentiate between arithmetic, geometric, weighted, and harmonic mean. Mark the correct sentence regarding the main advantages of the arithmetic mean? a) Given a population or a sample, both the
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