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ABA CTFA Practice Test - Questions Answers, Page 45

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A set of possible values that a random variable can assume and their associated probabilities of occurrence are referred to as __________.

A.
Probability distribution
A.
Probability distribution
Answers
B.
The expected return
B.
The expected return
Answers
C.
The standard deviation
C.
The standard deviation
Answers
D.
Co-efficient of variation
D.
Co-efficient of variation
Answers
Suggested answer: A

A statistical measure of the variability of a distribution around its mean is referred to as __________.

A.
Probability distribution
A.
Probability distribution
Answers
B.
The expected return
B.
The expected return
Answers
C.
The standard deviation
C.
The standard deviation
Answers
D.
Co-efficient of variation
D.
Co-efficient of variation
Answers
Suggested answer: C

The weighted average of possible returns, with the weights being the probabilities of occurrence is referred to as __________.

A.
Probability distribution
A.
Probability distribution
Answers
B.
The expected return
B.
The expected return
Answers
C.
The standard deviation
C.
The standard deviation
Answers
D.
Co-efficient of variation
D.
Co-efficient of variation
Answers
Suggested answer: B

Which of the following statements regarding covariance is correct?

A.
Covariance always lies in the range -1 to +1
A.
Covariance always lies in the range -1 to +1
Answers
B.
Covariance, because it involves a squared value, must always be a positive number (or zero)
B.
Covariance, because it involves a squared value, must always be a positive number (or zero)
Answers
C.
Low co-variances among returns for different securities leads to high portfolio risk
C.
Low co-variances among returns for different securities leads to high portfolio risk
Answers
D.
Co-variances can take on positive, negative, or zero values
D.
Co-variances can take on positive, negative, or zero values
Answers
Suggested answer: D

Total portfolio risk is __________.

A.
Equal to systematic risk plus non-diversifiable risk
A.
Equal to systematic risk plus non-diversifiable risk
Answers
B.
Equal to avoidable risk plus diversifiable risk
B.
Equal to avoidable risk plus diversifiable risk
Answers
C.
Equal to systematic risk plus unavoidable risk
C.
Equal to systematic risk plus unavoidable risk
Answers
D.
Equal to systematic risk plus diversifiable risk
D.
Equal to systematic risk plus diversifiable risk
Answers
Suggested answer: D

It is a market condition normally associated with investor optimism, economic recovery, and expansion; characterized by generally rising securities prices.

A.
Bear market
A.
Bear market
Answers
B.
Bull market
B.
Bull market
Answers
C.
OTC
C.
OTC
Answers
D.
Dealers market
D.
Dealers market
Answers
Suggested answer: B

______________ is a condition of the markets typically associated with investor pessimism and economic slowdown; characterized by generally falling securities prices.

A.
Bear market
A.
Bear market
Answers
B.
Bull market
B.
Bull market
Answers
C.
OTC
C.
OTC
Answers
D.
Dealers market
D.
Dealers market
Answers
Suggested answer: B

A person who buys and sells securities on behalf of clients and gives them investment advice and information is called:

A.
Stockholder
A.
Stockholder
Answers
B.
Account executive
B.
Account executive
Answers
C.
Financial consultant
C.
Financial consultant
Answers
D.
All are one and the same
D.
All are one and the same
Answers
Suggested answer: D

A broker is:

A.
Far more than a salesperson
A.
Far more than a salesperson
Answers
B.
Mostly interested in his own commission
B.
Mostly interested in his own commission
Answers
C.
May not be socially known
C.
May not be socially known
Answers
D.
Can trade your stock without your permission
D.
Can trade your stock without your permission
Answers
Suggested answer: A, B

A broker who, in addition to executing clients' transactions, offers a full array of brokerage services is:

A.
Full-service broker
A.
Full-service broker
Answers
B.
Discount broker
B.
Discount broker
Answers
C.
Online broker
C.
Online broker
Answers
D.
OTC broker
D.
OTC broker
Answers
Suggested answer: A
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