BFC5935 PORTFOLIO MANAGEMENT AND THEORY

Final Exam Information

EXAM DURATION: 2 hours plus 10 minutes reading time

CALCULATORS: Approved Calculator: HP10BII+

The examination is closed book

Section Question Marks Topic

Section 1 10 MCQs 10 CFAI Ethics & Standards of Professional Conduct

Q1 15 Assets & Investments

Q2 15 Portfolio Theory & Asset Pricing Models
Q3 15 Market Efficiency & Behavioural Finance
Section 2
Q4 15 Fixed-Income Securities
Q5 15 Security Analysis I & II
Q6 15 Portfolio Management I & II
100

Section 1: 10 multiple-choice questions

Section 2: 6 short-answer questions – there are sub-questions (a), (b), (c), (d) etc.

Important Note: The topics stated in the table are only guidelines: all the topics are interrelated,
therefore, any main question maybe asking sub-questions from related individual topics (e.g. Assets &
Investments and Portfolio Theory, Market Efficiency and Security Analysis / Portfolio Management,
etc.). Everything covered is examinable.

Total Marks: 100 – This represents 60% of the total assessment for the unit.
Hurdle requirement [as stated in the Unit Guide]: You need to pass the Final Exam to pass the unit.

Notes:

- Everything covered is examinable.

- Formula sheets will be provided and is the same as the one posted on Moodle. Please note that
everything covered is examinable so you are reasonably expected to know those that are not in
the formula sheet.
- Answers in bullet points (still in complete sentences) are acceptable.

Finally, all the best for your exam!

BFC5935 Teaching Team
 List of Formulae

Price Relative = Ending value / Beginning value n

Portfolio Expected Return:
Return or HPY = Price Relative-1
 pi (ri )
E(Rp) = wE(RM) + (1 – w)RF
Expected Return: i = 1
Arithmetic Mean Return (AM): Capital Market Line (CML):
Variance:
AM=  ri / n n
E ( RM ) − RFR
( 2 ) =  [ R i − E(R i )] 2 / n E ( RP ) = RFR + P
Geometric Mean Return (GM) :
i =1
M
GM= [ (1+ri)] 1/n -1 Portfolio Risk (n Assets):
n n n Security market line (SML) / CAPM:
Equal-weighted portfolio return:  2port =  wi2 i2 +  w w cov ij R - RFR
E(R i ) = RFR + M 2
i j
N i =1 i =1 i  j j =1 (Covi,M )
1 M
R=
N
 ri Covariance (Cov): OR
i =1
COVij = riji j E(R i ) = RFR + i (R M - RFR)
Value [Dollar]-weighted portfolio return:
N
V   = Covi,M  M2
R =   i  ri Correlation coefficient: Asset Beta:
i =1  Vp  rij = COVij /ij
Optimal Weight:
Price-weighted portfolio return:
N
 P   22 −  1, 2
R =   i  ri x=
i =1  Pp 
 12 +  22 − 2 1, 2

2n
Ci / 2 Pp
Pm =  +
+ + GGM Model: V = D1 Sharpe Index: S = Ri − RFR
t
Bond Valuation: t =1 (1 i / 2) (1 i / 2) 2 n
k−g
j
i
i
n
Ct (t )
 (1 + i )t
FCF Model: V = OFCF1
Treynor Index: T = R i − RFR
D = t =n1 WACC j − gOFCF
j

Ct
i
i

t =1 (1 + i )
t
ROE: Profit Margin x Total Asset
Duration: Information Ratio:
Turnover x Financial Leverage
R j − Rb ER j
IR j = =
 ER  ER