Series 65 – Uniform Investment Adviser Law Exam Portfolio Management and Analysis 2

Question 1

What is the difference between technical analysis and fundamental analysis?

Accepted Answer

Technical analysis uses price and volume data to forecast future prices; fundamental analysis evaluates a company's financial health and intrinsic value

Answer

Technical analysis uses financial statements; fundamental analysis uses price charts

Answer

Technical analysis is used for bonds; fundamental analysis is used for stocks

Answer

There is no meaningful difference between the two approaches

Question 2

What is the time-weighted rate of return (TWR) designed to measure?

Accepted Answer

The compound growth rate of a portfolio that eliminates the distorting effects of client cash flows

Answer

The total dollar gain of a portfolio over a period

Answer

The return earned on the most recent investment made

Answer

The average return across all accounts managed by an adviser

Question 3

What is the difference between systematic and unsystematic risk?

Accepted Answer

Systematic risk affects the entire market and cannot be diversified away; unsystematic risk is specific to individual companies and can be reduced through diversification

Answer

Systematic risk is company-specific; unsystematic risk is market-wide

Answer

Systematic risk is only relevant for bonds; unsystematic risk applies only to stocks

Answer

There is no meaningful difference between the two types of risk

Question 4

What is a 'benchmark' used for in portfolio management?

Accepted Answer

A standard index or reference point used to evaluate the relative performance of a portfolio

Answer

A minimum return guaranteed by the adviser

Answer

The regulatory standard for investment adviser performance

Answer

A model portfolio constructed by regulators

Question 5

What is Monte Carlo simulation used for in financial planning?

Accepted Answer

To model the probability of various outcomes by running thousands of random scenarios using historical data

Answer

To calculate the exact future value of a portfolio

Answer

To determine the optimal asset allocation for a specific client

Answer

To replicate the performance of a market index

Question 6

Which portfolio management approach is described as 'top-down' investing?

Accepted Answer

Beginning with macroeconomic analysis to identify favorable sectors, then selecting individual securities within those sectors

Answer

Selecting individual stocks first, then grouping them by sector

Answer

Starting with the riskiest assets and working toward conservative holdings

Answer

Investing in the largest companies first, then smaller ones