CFA一级模考题
1 . If the standard deviation of stock A is 13.
2 percent, the standard deviation of stock B is 17.6 percent, and the covariance between the two is 0, what is the correlation coefficient?
A) +1.
B) 0.31.
C) 0.
The correct answer was C
Since covariance is zero, the correlation coefficient must be zero.
2 . A mutual fund that invests in short-term debt securities and maintains a net asset value of $1.00 per share is best described as a:
A) money market fund.
B) balanced fund.
C) bond mutual fund.
The correct answer was A
Money market funds invest primarily in short-term debt securities and are managed to maintain a constant net asset value, typically one unit of currency per share. A bond mutual fund typically invests in longer-maturity securities than a money market fund. A balanced fund invests in both debt and equity securities.
3 . When the market is in equilibrium:
A) all assets plot on the CML.
B) investors own 100% of the market portfolio.
C) all assets plot on the SML.
The correct answer was C
When the market is in equilibrium, expected returns equal required returns. Since this means that all assets are correctly priced, all assets plot on the SML.
By definition, all stocks and portfolios other than the market portfolio fall below the CML. (Only the market portfolio is efficient.
4 . Which of the following statements regarding the covariance of rates of return is least accurate?
A) It is a measure of the degree to which two variables move together over time.
B) If the covariance is negative, the rates of return on two investments will always move in different directions relative to their means.
C) It is not a very useful measure of the strength of the relationship, there is absent information about the volatility of the two variables.
The correct answer was B
Negative covariance means rates of return will tend to move in opposite directions on average. For the returns to always move in opposite directions, they would have to be perfectly negatively correlated. Negative covariance by itself does not imply anything about the strength of the negative correlation.
5 . Which of the following statements about a stock's beta is CORRECT? A beta greater than one is:
A) risky, while a beta less than one is risk-free.
B) riskier than the market, while a beta less than one is less risky than the market.
C) undervalued, while a beta less than one is overvalued.
The correct answer was B
Beta is a measure of the volatility of a stock. The overall market's beta is one. A stock with higher
systematic risk than the market will have a beta greater than one, while a stock that has a lower systematic risk will have a beta less than one.。