Page | 1
FIN 501 CHAPTERS 11, 12, 13 2026
LATEST QUESTIONS AND ANSWERS|
ACE YOUR GRADES.
Which of the following statements about Jensen's measure are
correct?
I. Through its use of the capital asset pricing model, Jensen's
measure automatically adjusts for market return.
II. In general, the higher the Jensen's measure, the better a
portfolio has performed.
III. Jensen's measure is referred to as alpha.
IV. A positive Jensen's measure indicates an investment has
underperformed the market on a risk-adjusted basis. - correct
answer -I, II and III only
The process of selling certain issues in a portfolio and purchasing
new ones to replace them is known as
A) portfolio revision.
B) market timing.
C) red herring baiting.
D) dollar cost averaging. - correct answer -A
, Page | 2
Which one of the following statements concerning formula plans
is correct?
A) The use of subjective judgment is important to the routine
administration of most formula plans.
B) Formula plans are based on the adherence to a mechanical
set of rules with regard to when to buy and/or sell.
C) The objective of most formula plans is to maximize profits.
D) Securities with very stable prices are best suited to nearly all
formula plans. - correct answer -B
Dollar cost averaging is a procedure by which an investor
A) buys more stock as its price increases.
B) times investments in order to buy low and sell high.
C) invests a fixed dollar amount in a security at fixed intervals.
D) maintains a constant ratio of conservative and aggressive
investments. - correct answer -C
Which one of the following statements is correct concerning dollar
cost averaging plans?
A) Dollar cost averaging is an active trading strategy.
B) Dollar cost averaging is a short-term trading strategy.
C) The goal of dollar cost averaging is current dividend income.
, Page | 3
D) The goal of dollar cost averaging is long-term capital
appreciation. - correct answer -D
The general theory of dollar cost averaging is
A) to time the market to take advantage of low stock prices.
B) to buy more stock when prices are low and less when prices
are high.
C) to equal the performance of market averages at the lowest
dollar cost.
D) to sell as markets decline and buy as they begin to rise. -
correct answer -B
Dollar cost averaging is likely to work best with a mutual fund
A) whose NAV fluctuates widely, but trends upward.
B) whose NAV remains relatively constant, like a money market
fund.
C) whose NAV fluctuates widely, but trends downward.
D) whose NAV fluctuates within a narrow range and is relatively
trendless. - correct answer -A
, Page | 4
The formula plan that requires maintaining a target dollar
investment in the speculative portion of an investor's portfolio is
the
A) most passive of all the formula plans.
B) target return plan.
C) constant ratio plan.
D) constant dollar plan. - correct answer -D
If a constant-dollar plan portfolio is profitable over the long run,
the ________ in value over time.
A) conservative portion will increase
B) conservative portion will remain constant
C) aggressive portion will decrease
D) entire portfolio will remain constant - correct answer -A
The constant-ratio plan
A) requires the establishment of trigger points for portfolio
rebalancing.
B) utilizes a predetermined ratio between desired current yield
and expected capital gains.
C) strictly adheres to a buy-and-hold strategy.
D) is an attempt to time the cyclical movements of the market. -
correct answer -A
FIN 501 CHAPTERS 11, 12, 13 2026
LATEST QUESTIONS AND ANSWERS|
ACE YOUR GRADES.
Which of the following statements about Jensen's measure are
correct?
I. Through its use of the capital asset pricing model, Jensen's
measure automatically adjusts for market return.
II. In general, the higher the Jensen's measure, the better a
portfolio has performed.
III. Jensen's measure is referred to as alpha.
IV. A positive Jensen's measure indicates an investment has
underperformed the market on a risk-adjusted basis. - correct
answer -I, II and III only
The process of selling certain issues in a portfolio and purchasing
new ones to replace them is known as
A) portfolio revision.
B) market timing.
C) red herring baiting.
D) dollar cost averaging. - correct answer -A
, Page | 2
Which one of the following statements concerning formula plans
is correct?
A) The use of subjective judgment is important to the routine
administration of most formula plans.
B) Formula plans are based on the adherence to a mechanical
set of rules with regard to when to buy and/or sell.
C) The objective of most formula plans is to maximize profits.
D) Securities with very stable prices are best suited to nearly all
formula plans. - correct answer -B
Dollar cost averaging is a procedure by which an investor
A) buys more stock as its price increases.
B) times investments in order to buy low and sell high.
C) invests a fixed dollar amount in a security at fixed intervals.
D) maintains a constant ratio of conservative and aggressive
investments. - correct answer -C
Which one of the following statements is correct concerning dollar
cost averaging plans?
A) Dollar cost averaging is an active trading strategy.
B) Dollar cost averaging is a short-term trading strategy.
C) The goal of dollar cost averaging is current dividend income.
, Page | 3
D) The goal of dollar cost averaging is long-term capital
appreciation. - correct answer -D
The general theory of dollar cost averaging is
A) to time the market to take advantage of low stock prices.
B) to buy more stock when prices are low and less when prices
are high.
C) to equal the performance of market averages at the lowest
dollar cost.
D) to sell as markets decline and buy as they begin to rise. -
correct answer -B
Dollar cost averaging is likely to work best with a mutual fund
A) whose NAV fluctuates widely, but trends upward.
B) whose NAV remains relatively constant, like a money market
fund.
C) whose NAV fluctuates widely, but trends downward.
D) whose NAV fluctuates within a narrow range and is relatively
trendless. - correct answer -A
, Page | 4
The formula plan that requires maintaining a target dollar
investment in the speculative portion of an investor's portfolio is
the
A) most passive of all the formula plans.
B) target return plan.
C) constant ratio plan.
D) constant dollar plan. - correct answer -D
If a constant-dollar plan portfolio is profitable over the long run,
the ________ in value over time.
A) conservative portion will increase
B) conservative portion will remain constant
C) aggressive portion will decrease
D) entire portfolio will remain constant - correct answer -A
The constant-ratio plan
A) requires the establishment of trigger points for portfolio
rebalancing.
B) utilizes a predetermined ratio between desired current yield
and expected capital gains.
C) strictly adheres to a buy-and-hold strategy.
D) is an attempt to time the cyclical movements of the market. -
correct answer -A
