FinQuiz level3 mock2017 version4 JuneAMSolutions

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FinQuiz level3 mock2017 version4 JuneAMSolutions

FinQuiz level3 mock2017 version4 JuneAMSolutions ution of this material is strictly prohibited, info@fmquiz.com.CFA Level III Mode Exam 4 - Solutions (AM)FinQuiz.com -4,h Mock Exam 2017 (AM Session)T

he morning session of the 2017 Level III CFA Examination has 8 questions. For grading purposes, the maximum point value for each question is equal to FinQuiz level3 mock2017 version4 JuneAMSolutions

the number of minutes allocated to that question.QuestionsTopicMinutes1Portfolio Management - Behavioral Finance202 ArPortfolio Management - Instituti

FinQuiz level3 mock2017 version4 JuneAMSolutions

onal Investors203Portfolio Management - Fixed Income Investments194Portfolio Management - Individual-Asset Allocation395Portfolio Management - Asset .

20 MINUTESDano Parker works as a portfolio manager at Picasso Investments (PICIN), a large and reputable financial advisory firm offering a range of FinQuiz level3 mock2017 version4 JuneAMSolutions

capital management services and investment products to individual and institutional investors. Parker has been with the finn for over five years now.

FinQuiz level3 mock2017 version4 JuneAMSolutions

and has managed more than fifteen client portfolios. As such. PICTN has appointed Parker to appraise the performance of private wealth portfolios at r

FinQuiz level3 mock2017 version4 JuneAMSolutions with respect to the behaviors of individuals do not hold true. Parker was not sure what effects this might have on optimal portfolio construction by

financial market participants. To discuss this further, Parker invited David Hulsey, a behavioral financial analyst, to talk about investor behavior i FinQuiz level3 mock2017 version4 JuneAMSolutions

n detail. During their conversation. Hulsey made the following comment:“I believe that investors behave rationally when making investment decisions an

FinQuiz level3 mock2017 version4 JuneAMSolutions

d try to maximize the expected utility, given their budget constraint. When faced with new information, market participants revise expectations consis

FinQuiz level3 mock2017 version4 JuneAMSolutions he ‘Prospect Theory’, but was not sure how this theory provided an alternative explanation to investor behavior. He was. however, convinced that the t

heory explained apparent deviations in decision making from those explained under the utility theory.A. Justify how the prospect theory supports Parke FinQuiz level3 mock2017 version4 JuneAMSolutions

r's notion of an apparent departure of investor behavior from the behavior of the rational economic man. Give three ways the prospect theory differs f

FinQuiz level3 mock2017 version4 JuneAMSolutions

FinQuiz level3 mock2017 version4 JuneAMSolutions lamps. The lighting industry has seen tremendous growth over the past decade due to a rising trend of professional interior designing of homes and of

fices. Historical data of the past 15 years shows earnings growth for SFI at 1.0-1.5% above the GDP growth rate. Just recently, however, the firm repo FinQuiz level3 mock2017 version4 JuneAMSolutions

rted a drop of 5.0% in earnings growth due to a number concerns regarding the supply of raw materials. In addition, a few other firms also reported lo

FinQuiz level3 mock2017 version4 JuneAMSolutions

sses for the recent quarter, hl developing his forecasts. Parker decided to revise his earnings estimate downward for the stock in order to avoid any

FinQuiz level3 mock2017 version4 JuneAMSolutions ive one example where such a bias may result in excessive trading by financial market participants.(4 minutes)While reviewing the asset allocation dec

isions of his clients, and their stated preferences during regular meetings for updating their IPSs, Parker noticed that many portfolios lacked the ap FinQuiz level3 mock2017 version4 JuneAMSolutions

propriate amount of diversification, as would be present if investors behaved rationally and took a holistic view of their portfolios. Parker was assu

FinQuiz level3 mock2017 version4 JuneAMSolutions

red that this was due to the presence of behavioral biases.c. Give three behavioral explanations for inadequately diversified portfolios. State the bi