Portfolio Managers Cert. Free Demo Test 9

The investment prescription that emerges from capital market theory is that every investor will take exposure to “Portfolio M.” Portfolio M represents the market portfolio, which includes all risky assets in the market. This concept is a key element of Modern Portfolio Theory (MPT).

To calculate the percentage change in the factor-weighted index, you use the formula:

Percentage Change=(New Index Value – Old Index ValueOld Index Value)×100Percentage Change=(Old Index ValueNew Index Value – Old Index Value​)×100

The factor-weighted index is the sum of the products of stock prices and their respective ratios of annual revenues.

Initial Index Value: $1\times 200+2\times 400+3\times 800=200+800+2400=3400$

Final Index Value: $1\times 400+2\times 600+3\times 900=400+1200+2700=4300$

Percentage Change: (4300−34003400)×100=9003400×100≈26.47%(34004300−3400​)×100=3400900​×100≈26.47%

Investors with a “Celebrity” personality are the ones who tend to keep bringing up the latest hot topics and may not have their own original ideas about investments. They often follow popular trends and are influenced by public opinion or market hype.

Once a bonus issue is announced, it cannot be withdrawn. A bonus issue is a distribution of free additional shares to existing shareholders, and once it has been communicated to the public, it is typically considered a firm commitment.

The “Sales and Marketing Team” reaches out to investors through mass media, marketing campaigns, and distribution channels. This team is responsible for promoting the company’s products or services and attracting investors through various outreach strategies.

Mark to market margin is the “Notional loss” which an outstanding trade has suffered. This margin represents the theoretical loss that would be incurred if the trade were to be closed at the current market value.

To identify value stocks, the following primary criteria (screens) may be used: Low Price-to-Earnings ratio, Low PEG ratio (Price/Earnings to Growth ratio), and Low Price-to-Book ratio. These metrics help investors identify stocks that may be undervalued relative to their earnings, growth prospects, or book value.