Practice Test GeeksAmerican Academy of Financial Management (AAFM) Practice Test
← All AAFM Flashcard Decks

Investment Analysis and Portfolio Management Flashcards

6 cards from real AAFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 Investment Analysis and Portfolio Management flashcards as text

  1. Which portfolio theory was developed by Harry Markowitz to optimize risk-return trade-offs?

    Answer: Modern Portfolio Theory

    Modern Portfolio Theory, developed by Markowitz in 1952, shows how investors can construct portfolios to maximize expected return for a given level of risk.

  2. The Sharpe ratio measures a portfolio's excess return per unit of which type of risk?

    Answer: Total risk

    The Sharpe ratio divides excess return over the risk-free rate by the portfolio's standard deviation, representing total risk.

  3. Beta measures a security's sensitivity to movements in which benchmark?

    Answer: The overall market index

    Beta quantifies how much a security's returns move relative to a broad market index such as the S&P 500.

  4. Which valuation model discounts all expected future dividends to estimate a stock's intrinsic value?

    Answer: Dividend Discount Model

    The Dividend Discount Model values a stock as the present value of all its expected future dividends.

  5. Duration measures a bond's sensitivity to changes in which variable?

    Answer: Interest rates

    Duration quantifies the approximate percentage price change in a bond for a 1% change in interest rates.

  6. Which asset allocation strategy periodically restores a portfolio to its target weights?

    Answer: Rebalancing

    Rebalancing involves buying or selling assets to return the portfolio to its originally intended strategic allocation.