Free CFA Level 2 Practice Exams 2015 Questions and Answers on Portfolio Management

Taking some direct training courses often makes many CFA candidates confused about what they are learning from the study material. Don’t worry! Online testing resources can lend you a hand! Free CFA Level 2 Practice Exams 2015 Questions and Answers on Portfolio Management is the test we would like to recommend for you. CFA candidates who have not enough basic knowledge about investment can pay a visit to these free CFA practice sample questions. Those questions are designed in the nice format so that learners can grasp all the content of this topic in the CFA curriculum. Besides, you also have the chance to explore other CFA sample questions in many CFA practice exams at this site. Portfolio management will be a not tough subject if you have a true learning method with hard working. Hope you pass the next exam and please share your thoughts in the comment below!
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Cov(i,j) = Beta(i),Beta(j)*VarMkt

• Under the market model, how to you calculate covariance btw two assets?
• How to calculate an adjusted beta?
• Under the market model, how do you calculate the variance of asset i?
• Under the market model, what is the equation for expected return ?

1.) The expected value of the error term is zero. 2.) Errors are uncorrelated with the market return3.) Firm specific surprises are uncorrelated across assets.

• What are the 3 assumptions of the market model?
• What are the assumptions of the market model?
• What are the components of active risk ?
• How many sources of risk are there in the Market Model?

R(Rent Shop) = .14 + 1.5F1 + .08F2 + Error rnt shpR( Carpets) = .08 + 1.2F1 + .2(F2) + Error cpts Assuming .75 weighted to rent shop, and .25 to carpet shop, simply combine them using respective weights.RP = .125 + 1.425F .....etc ....

• How to calculate the information ratio?
• How to calculate expected return for a portfolio given 2 macro economic models?
• What is the intercept in the macro-economic factor model?
• How to calculate the Beta Coefficient?

Unlike CAPM, APT does not require that one of the risk factors is the market portfolio.

• What is a distinctive advantage of the Arbitrage Pricing Theory over CAPM?
• What is the intercept in the macro-economic factor model?
• What is another term for the slope of the CML?
• What is the intercept and slope of the CAL?

CAPM return can be viewed as the inimum return that investors should be willing to accept, commensurate with the risk associated with the asset.

• What are the components of active risk ?
• How to calculate an adjusted beta?
• How to calculate the Beta Coefficient?
• How can the CAPM return be interpreted ?

APT is a cross sectional equilibrium pricing model that explains the variation across assets expected returns during a single time period. Multifactor model is a time series regression that explains variation over time. APT is an equilibrium model that assumes no arb. while macro is an ad hoc model. APT intercept is the risk free rate while the intercept from the macroeconomic model is expected return.

• Fundamental factor models
• Macro economic factor models
• Statistical factor models
• Differences btw APT model and Multifactor models

The market price of risk. This = the sharp ratio for the market portfolio.

• What is another term for the slope of the CML?
• What is the intercept and slope of the CAL?
• What are some differences btw the CAL and CML?
• What is the market model equation

Standardized sensitivities in fundimental factor models are calculated directly from the attribute, rather than being estimated. Macroenocomic factors are surprises. Fundimental factor models have more factors typcically. Intercept term of macroeconomic model = the stocks expected return. No interpretation for the fundimental factor model intercept.

• Macro economic factor models
• Differences btw APT model and Multifactor models
• What is the intercept in the macro-economic factor model?
• Differences btw macro-economic factor model vs fundimental factor model?

Assume asset returns are explained by the returns from multiple firm specific factors. (PE/Mkt Cap, leverage ratio, etc)

• Fundamental factor models
• Macro economic factor models
• Statistical factor models
• Formula for the CAL

The expected return.

• What is the intercept and slope of the CAL?
• What are the 3 assumptions of the market model?
• What is the intercept in the macro-economic factor model?
• Macro economic factor models

Variance(i) = Beta(i)^2*Beta(mkt)^2 + E^2 **Where E^2 = error variance AKA "unsystematic risk"

• Under the market model, what is the equation for expected return ?
• Under the market model, how do you calculate the variance of asset i?
• How to calculate the Beta Coefficient?
• Under the market model, how to you calculate covariance btw two assets?

The CML is the capital allocation line in a world in which all investors agree on the expected returns, standard deviations, and correlations of all assets (homogeneous expectations).

• Capital Allocation Line
• CML "Capital Market Line"
• Fundamental factor models
• What is the market model equation

Only 2. They are 1.) Unanticipated macroeconomic events (systematic risk)2.) Firm specific events (unsystematic risk)

• How many sources of risk are there in the Market Model?
• What are the assumptions of the market model?
• What are the 3 assumptions of the market model?
• How can the CAPM return be interpreted ?