HKSI Paper 12 (Asset Management) English Free Trial Set Two
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HKSI Paper 12 English Preview
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Question 1 of 10
1. Question
Which of the following statement is true in regards to before the research process begins?
I. It is important to match the individual’s investment objectives with the skills required from an investment manager.
II. The investor’s investment objectives and constraints should be clearly identified.
III. The manager’s investment style should be clearly expressed and understood.
IV. The client’s investment objectives from institutional investors should be expressed directly to the manager.
Correct
Before the research process begins, it is critical to match the individual’s investment objectives with the skills required from an investment manager. The investor’s investment objectives and constraints should be clearly identified and the manager’s investment style should be clearly expressed and understood. In the case of institutional investors, the client’s investment objectives should be expressed directly to the manager.
Incorrect
Before the research process begins, it is critical to match the individual’s investment objectives with the skills required from an investment manager. The investor’s investment objectives and constraints should be clearly identified and the manager’s investment style should be clearly expressed and understood. In the case of institutional investors, the client’s investment objectives should be expressed directly to the manager.
Question 2 of 10
2. Question
A market is strong form efficient when its prices fully reflect all information from public and private sources. Private information is that created by which of the following?
I. Government officials
II. Corporate employees
III. Competitors which has not yet been made publicly available
IV. Acquirers which has not yet been made publicly available
Correct
A market is strong form efficient when its prices fully reflect all information from public and private sources. Private information is that created by government officials, corporate employees, competitors or acquirers which has not yet been made publicly available and will materially affect the security’s price.
Incorrect
A market is strong form efficient when its prices fully reflect all information from public and private sources. Private information is that created by government officials, corporate employees, competitors or acquirers which has not yet been made publicly available and will materially affect the security’s price.
Question 3 of 10
3. Question
Simple interest calculates the interest paid on the initial investment sum, known as?
I. The principal
II. The sum
III. The return
IV. The distribution
Correct
Simple interest calculates the interest paid on the initial investment sum, known as the principal.
Incorrect
Simple interest calculates the interest paid on the initial investment sum, known as the principal.
Question 4 of 10
4. Question
A guaranteed fund may pay 11% per annum return, but if inflation is 3% per annum, the real return is reduced to approximately how many per cent per annum?
I. 10% per annum
II. 6% per annum
III. 9% per annum
IV. 8% per annum
Correct
a guaranteed fund may pay 11 per cent per annum return, but if inflation is 3 per cent per annum, the real return is reduced to approximately 8 per cent per annum.
Incorrect
a guaranteed fund may pay 11 per cent per annum return, but if inflation is 3 per cent per annum, the real return is reduced to approximately 8 per cent per annum.
Question 5 of 10
5. Question
CAPM focuses on measuring systematic risk (via beta) and looking at how it affects returns and security prices. Consequently, CAPM proposes which of the following?
I. Investors require a return greater than the risk-free rate as compensation for taking on systematic risk.
II. Investors do not require a premium for unsystematic risk because this can be diversified away by holding a wide portfolio of securities.
III. Investors require a higher return from securities that have a greater systematic risk than the “market average”.
IV. Investors require general economic conditions, impact of monetary or fiscal policies to coincide with their unsystematic risk of securities.
Correct
CAPM focuses on measuring systematic risk (via beta) and looking at how it affects returns and security prices. Consequently, CAPM proposes that:
• investors require a return greater than the risk-free rate as compensation for taking on systematic risk;
• investors do not require a premium for unsystematic risk because this can be diversified away by holding a wide portfolio of securities; and
• investors require a higher return from securities that have a greater systematic risk than the “market average” (i.e. those securities with a beta above 1).
Incorrect
CAPM focuses on measuring systematic risk (via beta) and looking at how it affects returns and security prices. Consequently, CAPM proposes that:
• investors require a return greater than the risk-free rate as compensation for taking on systematic risk;
• investors do not require a premium for unsystematic risk because this can be diversified away by holding a wide portfolio of securities; and
• investors require a higher return from securities that have a greater systematic risk than the “market average” (i.e. those securities with a beta above 1).
Question 6 of 10
6. Question
A synthetic ETF manager may use a replication strategy of buying which of the following on an underlying index to track its performance?
I. Total return swaps
II. Futures
III. Forwards
IV. Options
Correct
A synthetic ETF manager may use a replication strategy of buying total return swaps, futures, forwards or options on an underlying index to track its performance.
Incorrect
A synthetic ETF manager may use a replication strategy of buying total return swaps, futures, forwards or options on an underlying index to track its performance.
Question 7 of 10
7. Question
An asset manager wants to bear only the market risk of the underlying portfolio, but not the currency risk in cases where the managed fund is denominated in a different currency from the underlying securities in the portfolio. He can reduce or eliminate such risk by doing which of the following
I. Entering into currency forward contracts to sell the currencies of the underlying securities
II. Buy the currency of the managed fund
III. Sell it’s international currency to get in better position in the underlying securities
IV. Buy various currency to cross trading
Correct
An asset manager wants to bear only the market risk of the underlying portfolio, but not the currency risk in cases where the managed fund is denominated in a different currency from the underlying securities in the portfolio. He can reduce or eliminate such risk by entering into currency forward contracts to sell the currencies of the underlying securities and buy the currency of the managed fund.
Incorrect
An asset manager wants to bear only the market risk of the underlying portfolio, but not the currency risk in cases where the managed fund is denominated in a different currency from the underlying securities in the portfolio. He can reduce or eliminate such risk by entering into currency forward contracts to sell the currencies of the underlying securities and buy the currency of the managed fund.
Question 8 of 10
8. Question
Investment management style is defined by which of the following?
I. Philosophy
II. The rationale for selecting securities
III. The aptitude for avoiding unnecessary risks
IV. The general performance pattern of a manager
Correct
Investment management style is defined by the philosophy, the rationale for selecting securities and the general performance pattern of a manager.
Incorrect
Investment management style is defined by the philosophy, the rationale for selecting securities and the general performance pattern of a manager.
Question 9 of 10
9. Question
Which of the following is(are) component(s) of measuring the total return of a stock?
I. Capital appreciation
II. Stock admittance
III. Intermittent income
IV. Value inflation
Correct
Capital appreciation and intermittent income are the two components of measuring the total return of a stock.
Incorrect
Capital appreciation and intermittent income are the two components of measuring the total return of a stock.
Question 10 of 10
10. Question
The top-down and bottom-up styles are one-directional approaches in allocating funds across which of the following?
I. Asset classes
II. Indices
III. Industries
IV. Stocks
Correct
The top-down and bottom-up styles are one-directional approaches in allocating funds across different asset classes, industries and stocks.
Incorrect
The top-down and bottom-up styles are one-directional approaches in allocating funds across different asset classes, industries and stocks.
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