1. You identify an arbitrage opportunity between the options market and the common stock market for TWTR that is expected to produce an annual risk-free return of 7% before transactions costs. The opportunity requires shorting TWTR stock. Your broker tells you that it costs 9% annually to borrow TWTR stock. Based on this information, which of the following limits to arbitrage would most likely cause you to abandon this opportunity?
a. Fundamental Risk
b. Implementation Costs
c. Model Risk
d. Noise Trader Risk
e. Systematic Risk
2. A sell side analyst sends you his report on Tesla stock and also says that you should pay particular attention to his quarterly revenue and EPS estimates in his model for the years 2041 through 2047. Which of the following best explains why these estimates are likely to be inaccurate?
a. Availability Bias
b. Conflict of Interest
c. Forecasting Error
d. Herding
e. Overconfidence
3. Which of the following is NOT a duty to clients in the CFA Institute s Standards of Practice Handbook?
a. Consistent Investment Recommendations and Actions for All Clients
b. Guaranteeing Future Equity Portfolio Performance to Clients
c. Placing Client Interests Above Employer Interests
d. Preserving Client Confidentiality
e. Providing Fair and Accurate Performance Presentation
4. The practice in which investment managers (i.e. mutual funds_) obtain services and/or products from a brokerage by directing trading flow to that brokerage is known as:
a. Directed Trading
b. Preferencing
c. Program Trading
d. Soft Dollars
e. Standards of Practice
5. A large quantity order sent to multiple trading venues simultaneously is called a:
a. Flash Order
b. Iceberg Order
c. Inter-Market Sweep
d. Jumbo Order
e. Mega Order