Class No.

_____

University of Santo Tomas FINAL EXAMINATION

College of Commerce & Bus.Admin. (Portfolio Management )(FIN 106)
Department of Financial ManagementSecond Semester, AY 2015-2016

Name: __________________________________YR & Section ______________ Test I. ____x 2 = ______

Test II___. x 2 = ______

Total

I. True or False (40 pts) II. Stem Options (50 points) =======

1. ___________ 11._________ 1. __________ 16. __________

2. ___________ 12. __________ 2.__________ 17. __________

3. ___________ 13. __________ 3.__________ 18. __________

4. __________ 14. __________ 4.__________ 19. __________

5. __________ 15. __________ 5.__________ 20. __________

6. __________ 16. __________ 6.__________ 21. __________

7. __________ 17. __________ 7.__________ 22. __________

8. __________ 18. __________ 8.__________ 23. __________

9. __________ 19. __________ 9.__________ 24. __________

10._________ 20.__________ 10._________ 25. __________

11._________ 26. __________

12. _________ 27.__________

13. _________ 28. __________

14. _________ 29.___________

15. _________ 30.__________

 Class No. _____
University of Santo Tomas FINALEXAMINATION
College of Commerce & Bus.Admin. (Portfolio Management) (FIN 106)
Department of Financial ManagementSecond Semester, AY 2017-2018

Name: _____________________________________________-_YR &Section _______ Score:________

INSTRUCTIONS:

Please indicate your Class No. based on the Attendance Sheet on the upper right hand portion of the Test
Questionnaire & Answer Sheet.
Transfer all your final answers on the Answer Sheet provided. Use UPPER CASE LETTERS.
Erasures on the Answer Sheet are absolutely prohibited but you can mark on the questionnaires as much
as you want.
Use only blue or black ink.

I. TRUE OR FALSE: Write TRUE if the statement is correct, otherwise write the word FALSE. (2 pts each)

1. An exchange traded fund (ETF) has a net asset value per share and a prevailing market price which could be at a
premium or discount
2. Hedge funds are typically exempt or has less regulatory and reporting requirements relative to publicly listed
companies
3. If we lack the superior analysis skills, and the market is deemed efficient, we should probably use passively managed
funds.
4. Tracking error measures the extent to which return fluctuations in the managed portfolio are not correlated with
return fluctuations in the benchmark.

5. Interest rate anticipation is perhaps the riskiest active management strategy because it involves relying on uncertain
forecasts of future interest rates. The idea is to preserve capital when an increase in interest rates is anticipated and
achieve attractive capital gains when interest rates are expected to decline.

6. A Barbell Strategy is an investment strategy primarily applicable to fixed-income investing, in which half the portfolio
is made up of long-term bonds and the other half comprises very short-term bonds. Essentially nothing is in the belly of
the curve.

7. A fixed income Buy and Hold strategys objective is to construct a portfolio of bonds that will equal the performance
of a specified bond index.
8. Under interest-rate anticipation strategy, a fund manager will shorten portfolio duration and/or look for an attractive
cushion bond when anticipating a decline in interest rates.
9. Bond Laddering is a fixed income strategy that involves purchasing multiple bonds, each with different maturity dates.
Under this strategy, the bonds' maturity dates are evenly spaced across several years so that the proceeds are
reinvested at regular intervals as the bonds mature.

10. You are a fixed income fund manager employing an interest rate anticipation strategy. You expect BSP to adopt an
accommodative monetary policy. Therefore, you should lengthen your portfolio duration.
II. STEM OPTIONS: Write the CAPITAL LETTER of the best answer. (2 pts each)

1. John Lopez is a passive investor whose objective is to have a fund directly managed by
a professional investment company. He doesnt have the expertise nor the time to
monitor or time the market. Therefore, he is most suitable for a:
a. Exchange traded fund
b. Customized fund
c. Completeness fund
d. Index mutual fund
2. Hiro is computing the return fluctuation of a portfolio vis--vis its benchmark. It revealed a
tracking error of 5.2%. We can reasonably assume that this is an actively managed
fund.
a. Yes
b. No
c. It depends
d. Undetermined
3. Mike Garcia, CFA is computing the return fluctuation of an Equity IndexTracker portfolio
vis--vis the PSEi. It revealed a tracking error of .0000234%. We can say that the Fund
a. Is an actively managed fund
b. Not a passive fund since tracking error is not zero
c. Very closely mirrors the Index
d. Undeterminable
4. An index portfolio construction technique whereby all securities in the index are
purchased to their weights.
a. Quadratic optimization
b. Full replication indexing
c. Sampling
d. Completeness fund
5. Harry actively manages a bond portfolio. In an anticipated scenario whereby policy rates
will be increased by the BSP, Harrys best fund management strategy should be:
a. Preserve capital by reducing the portfolio duration
b. Invest in equities
c. Aim for capital gains by increasing the portfolio duration
d. A and B
e. A, B, and C
6. Consider the following characteristics of stocks in the market:
GMA7 (a media firm, with high dividend yield)
Purefoors (with lowPE ratio vis--vis industry average)
2GO (low price/book)
CEBU PACIFIC (low price to sales ratio)
If you will consider these in your portfolio, the fund that you will likely create is:
a. Value fund
b. Factor fund
c. Growth fund
d. Index fund
7. If a bond fund manager seeks to combine passive and active management strategies in
his portfolio, a suggest approach would be:
a. Valuation analysis
b. Credit analysis
c. Core-Plus or Core-satellite bond portfolio management
d. None of the above
8. A bond fund manager aims to service a prescribed set of liabilities for retirement. A
highly-suggested portfolio management is:
a. Core-plus bond portfolio management
b. Dedication with reinvestment portfolio
c. Pure cash-matched dedicated portfolio
d. None of the above
9. Below is the 5-month portfolio performance of a mixed-asset fund with a constant-mix
strategy of 60% in stocks and 40% in bonds:

What should the fund manager do to rebalance his portfolio?

a. Buy Php 1.5 million worth of stocks, sell 1.5 worth of million bonds
b. Buy Php 1.5 million worth of bonds, sell 1.5 million worth of stocks
c. Buy Php 1.0 million worth of stocks, sell Php 1.0 million worth of bonds
d. Buy Php 1.0 million worth of bonds, sell Php 1.0 million worth of stocks

10. The stock market has been doing very well and it became expensive based on price-
earnings ratio valuation. On the other hand, the bond market got a boost from a recent
credit rating upgrade. Tadashi Portfolio Management Corp. offers a balanced fund with a
50%-bond and 50%-equity structure. To add value to its funds, Tadashi bought more
corporate bonds to its bond mix, and lessen its exposure in stocks. This strategy is
characterized by (use only information presented in the scenario):

a. Tactical asset allocation

b. Strategic asset allocation
c. Insured asset allocation
d. Integrated asset allocation