We calculate the increase in return rate and translate that to increase in dollar amount as follows:

(300+100)(1.08)-100(1.01) =331

331/300 -1 = .10333

So the effective return rate is about 10.333%, vs the 8% return if money wasn't leveraged. This
means we gained an additional 2.333% on our original 300M, which is $7M.

The “Sharpe Ratio” is:

A risk metric divided by a revenue metric

A risk metric

A revenue metric divided by a risk metric

A revenue metric

1 point
2.Question 2
Actual CPC, divided by the conversion rate, is the revenue metric:

Ad Rank

Quality Score

Maximum Cost per Click-through

Acquisition Cost

1 point
3.Question 3
Which of the following as NOT a demographic for which one can purchase targeted advertising?

Income

Member of Vegetarian Interest Group Facebook page

Level of education

Location by zip code

Age

Future Customer

1 point
4.Question 4
The metric referred to as an “organic link” tells us that a visitor to our site came from:

An unpaid listing of our website that was returned in a search result

Clicking on a link to our site in a blog post or article

Directly typed in the url address of our site

A sponsored link

1 point
5.Question 5
Some step in “search engine optimization” or SEO, are: (check all that apply)

Make sure our content is current, substantive and directly relevant

Increase our “social signal” by increasing our Facebook page “likes” and retweets

Get third-party websites with authoritative reputations and substantive

opinions to mention us and provide a link to our website

Increase links to our website from all possible third-party websites

1 point
6.Question 6
The Internal Rate of Return must be used to calculate returns, when:

Cash is invested at several different times

It is necessary to annualize the rate of return

There are several methods that can be used, but a single method is preferred
It is necessary to compare two different rates of return

1 point
7.Question 7
In finance, it is useful to know both the return, and the volatility of return, of an investment, because:

Returns can always be increased through leverage (borrowing money to make a portion of the
investment) but this increases volatility, so returns cannot be evaluated in isolation, absent
knowledge of their accompanying volatility.

Higher volatility leads to higher returns.

Volatility of returns is a measure of risk and avoiding risk is a fundamental aim of investing.

Higher volatility leads to lower returns.

1 point
8.Question 8
Why is relying upon the Life Time Value (LTV) of a customer when determining web ad spending
potentially risky?

Life Time Value is a profitability metric, not a risk metric.

Life Time Value is a difficult metric to calculate accurately.

Life Time Value does not take into account the high negative cash flow associated with initial
customer acquisition; cash that it may take years to recoup.

Life Time Value is only useful if the CPC divided by the conversion rate is less than the LTV.

1 point
9.Question 9
In theory, an investor could generate any target return, simply by borrowing money to make a portion
of the investment, and investing in an instrument that returns more than the risk-free rate. However,
doing this would also:

Require a more skilled manager

Increase volatility of returns over the original instrument at the same rate that it increases excess
returns.

Inversely affect the discrete rate of return

None of the above

1 point
10.Question 10
The “Expense Ratio” is a profitability/efficiency metric - the money spent on operating a passive
fund, divided by the total market value of the fund assets.

What expense associated with the fund is NOT included in the money spent operating the fund in
calculating the expense ratio?

The manager’s performance bonus

Costs incurred in fighting shareholder lawsuits against the fund managers

Operating expenses associated with marketing the fund

Brokerage fees the fund pays to buy and sell assets

1 point
11.Question 11
If active fund managers picked their portfolios from an Index “universe” at random, weighted them by
relative market capitalization, and held them for a given time interval, what percentage of managers
would be expected to out-perform the Index return, before taking their fees into account?

10%

28%

50%

80%

1 point
12.Question 12
Why is it considered undesirable for a fund manager to have a large tracking error?

Tracking error is a kind of risk metric – it implies wide variation from the appropriate benchmark

Tracking errors are closely correlated with decreased profit

Tracking errors are the standard deviation of "excess" returns.

None of the above

1 point
13.Question 13
What is the most established metric for evaluating Venture Capital and Private Equity Funds?

Internal Rate of Return (IRR)

Tracking Error

Quality Score

Positive cash flow

1 point
14.Question 14
Why would investors in hedge funds typically want performance that has low correlation to the major
equity markets?

They invest in many different types of assets, including options and derivatives

They are typically permitted to structure a deal so that they make money when a stock goes down in
price

Investors like to see a strong linear trend in the log value of wealth in a fund.

Hedge fund investors typically also invest large amounts of capital in major equity markets, and
target the highest possible risk-adjusted return on their combined portfolio.

1 point
15.Question 15
On what measures are Mutual Fund Managers primarily judged relative to their benchmark?

Excess return and tracking error

Maximum drawdown and tracking error

Linearity of log return and maximum drawdown

All of the above

1 point
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