Question 1

According to Modern Portfolio Theory (MPT), portfolios below the efficient frontier are not efficient because:

Options :

A : They attract additional charges

B : Risk-free assets are not profitable

C : The investor assumes proportionately higher risk for lower incremental returns

D : A greater return could be achieved for the same risk

Answer: D

Question 2

Which of the following underlies the pillars of risk tolerance?

Options :

A : Psychological traits

B : Sociological traits

C : Education

D : Experience

Answer: A

Question 3

A rise in living standards will tend to:

Options :

A : Reduce the demand for commodities

B : Have no effect on commodities

C : Increase government participation in the commodities markets

D : Create an increased demand for commodities

Answer: D

Question 4

A stockbroking firm receives both buy and sell orders for the same security but from different clients. How can they best avoid a conflict of interest?

Options :

A : Withdraw their services for the transaction

B : Place orders as they are received from the clients

C : Openly disclose all orders received to the clients

D : Process the sell orders before the buy orders

Answer: B

Question 5

How does standard deviation provide investors with a measure of historical volatility?

Options :

A : By the analysis of historical share price movements

B : Through the measurement of the highs and lows of each asset

C : By measuring the degree of fluctuation around the mean

D : Through the measurement of share price movements compared to the benchmark

Answer: C

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