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
Leer másWhat 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
Leer másWhat 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
Leer másHow 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
Leer másHow 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
Leer másWhat 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
Leer másWhat are the two CFA Institute institutions responsible for both the Code and Standards?
All CFA Institute members and candidates enrolled in the CFA Program are required to comply with the Code of Ethics and with the Standards of Professional Conduct. The two CFA Institute institutions responsible for enforcement of both the Code and Standards are: a) PSP and DCP. b) PCP and DRC. c) PRP and DSC. https://vimeo.com/manage/videos/938321929
Leer másWhat is the CAL (Capital Allocation Line) in Portfolio Theory?
In portfolio theory we use different graphical representations to illustrate the key concepts. Which of the following sentences better represents the CAL (Capital Allocation Line? a) A line describing the combination of expected return and beta available to an investor from combining the optimal portfolio of risky assets with the risk-free asset. b) A line
Leer másWhat is the difference between the IRR and the MOIC in alternative investment performance?
Suppose a private equity (PE) firm makes an initial investment in company Epsilon of $5 million. Then, at the end of the first year, the firm needs to place additional capital for an amount of $2.5 million, and at the end of the fourth year, another additional capital investment of $1.5 million. Finally, the position
Leer másWhat are the main differences between futures and forwards?
When dealing with derivatives, we classify them into contingent claims and firm commitments. Futures and forwards are two of most well-known derivatives. Which of the following sentences is correct in relation to the differential characteristics between futures and options? a) Futures are an exchange-traded firm commitment derivative, while forwards are OTC (Over The Counter) contingent
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