[{"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Fill in the blanks with the correct words: An American waterfall distributes performance fees on a(n) ___________ basis and is more advantageous to the ___________.\nOption A:deal-by-deal; LPs\nOption B:aggregate fund; LPs\nOption C:deal-by-deal; GP", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Compared with direct investment in infrastructure, publicly traded infrastructure securities are characterized by:\nOption A:higher concentration risk.\nOption B:more-transparent governance.\nOption C:greater control over the infrastructure assets.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "The investment method that typically requires the greatest amount of or most thorough due diligence from an investor is:\nOption A:fund investing.\nOption B:co-investing.\nOption C:direct investing.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "The majority of real estate property may be classified as either:\nOption A:debt or equity.\nOption B:commercial or residential.\nOption C:direct ownership or indirect ownership.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "In comparison to other alternative investment approaches, co-investing is most likely:\nOption A:more expensive.\nOption B:subject to adverse selection bias.\nOption C:the most flexible approach for the investor.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Two analysts are discussing the costs of external financing sources. The first states that the company’s bonds have a known interest rate but that the interest rate on accounts payable and the interest rate on equity financing are not specified. They are implicitly zero. Upon hearing this, the second analyst advocates financing the firm with greater amounts of accounts payable and common shareholders equity. Is the second analyst correct in his analysis?\nOption A:He is correct in his analysis of accounts payable only.\nOption B:He is correct in his analysis of common equity financing only.\nOption C:He is not correct in his analysis of either accounts payable or equity financing.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Which of the following mature companies is most likely to employ a high proportion of debt in its capital structure?\nOption A:A mining company with a large, fixed asset base\nOption B:A software company with very stable and predictable revenues and an asset-light business model\nOption C:An electric utility", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "The cost of debt can be determined using the yield-to-maturity and the bond rating approaches. If the bond rating approach is used, the:\nOption A:coupon is the yield.\nOption B:yield is based on the interest coverage ratio.\nOption C:company is rated and the rating can be used to assess the credit default spread of the company’s debt.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Which of the following represents a responsibility of a company’s board of directors?\nOption A:Implementation of strategy\nOption B:Enterprise risk management\nOption C:Considering the interests of shareholders only", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "SOA Company needs to raise 75 million, in local currency, for substantial new investments next year. Specific details, all in local currency, are as follows: Investments of 10 million in receivables and 15 million in inventory. Fixed capital investments of 50 million, including 10 million to replace depreciated equipment and 40 million of net new investments. Net income is expected to be 30 million, and dividend payments will be 12 million.Depreciation charges will be 10 million. Short-term financing from accounts payable of 6 million is expected. The firm will use receivables as collateral for an 8 million loan. The firm will also issue a 14 million short-term note to a commercial bank. Any additional external financing needed can be raised from an increase in long-term bonds. If additional financing is not needed, any excess funds will be used to repurchase common shares. What additional financing does SOA require?\nOption A:SOA will need to issue 19 million of bonds.\nOption B:SOA will need to issue 26 million of bonds.\nOption C:SOA can repurchase 2 million of common shares.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Stocks BWQ and ZER are each currently priced at $100 per share. Over the next year, stock BWQ is expected to generate significant benefits whereas stock ZER is not expected to generate any benefits. There are no carrying costs associated with holding either stock over the next year. Compared with ZER, the one-year forward price of BWQ is most likely:\nOption A:lower.\nOption B:the same.\nOption C:higher.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Which of the following statements best represents information discovery in the futures market?\nOption A:The futures price is predictive.\nOption B:Information flows more slowly into the futures market than into the spot market.\nOption C:The futures market reveals the price that the holder of the asset can take to avoid uncertainty.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Based on put-call parity, a trader who combines a long asset, a long put, and a short call will create a synthetic:\nOption A:long bond.\nOption B:fiduciary call.\nOption C:protective put.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Which of the following statements about the short position in a deliverable forward contract is most likely accurate?\nOption A:It is obligated to deliver the specified asset.\nOption B:It makes a cash payment to the long at settlement.\nOption C:It has no default risk.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "An arbitrageur will most likely execute a trade when:\nOption A:transaction costs are low.\nOption B:costs of short-selling are high.\nOption C:prices are consistent with the law of one price.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Which of the following most likely contributes to a current account deficit?\nOption A:High taxes.\nOption B:Low private savings.\nOption C:Low private investment.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "The characteristic of national consumer price indexes which is most typically shared across major economies worldwide is:\nOption A:the geographic areas covered in their surveys.\nOption B:the weights they place on covered goods and services.\nOption C:their use in the determination of macroeconomic policy.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "According to the Austrian school, the most appropriate government response to an economic recession is to:\nOption A:allow the market to adjust naturally.\nOption B:maintain steady growth in the money supply.\nOption C:decrease the market rate of interest below its natural value.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "A country has a comparative advantage in producing a good if:\nOption A:it is able to produce the good at a lower cost than its trading partner.\nOption B:its opportunity cost of producing the good is less than that of its trading partner.\nOption C:its opportunity cost of producing the good is more than that of its trading partner.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "According to the theory of money neutrality, money supply growth does not affect variables such as real output and employment in:\nOption A:the long run.\nOption B:the short run.\nOption C:the long and short run.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "The Standard & Poor’s Depositary Receipts (SPDRs) is an investment that tracks the S&P 500 stock market index. Purchases and sales of SPDRs during an average trading day are best described as:\nOption A:primary market transactions in a pooled investment.\nOption B:secondary market transactions in a pooled investment.\nOption C:secondary market transactions in an actively managed investment.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "An investor primarily invests in stocks of publicly traded companies. The investor wants to increase the diversification of his portfolio. A friend has recommended investing in real estate properties. The purchase of real estate would best be characterized as a transaction in the:\nOption A:derivative investment market.\nOption B:traditional investment market.\nOption C:alternative investment market.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "A hedge fund holds its excess cash in 90-day commercial paper and negotiable certificates of deposit. The cash management policy of the hedge fund is best described as using:\nOption A:capital market instruments.\nOption B:money market instruments.\nOption C:intermediate-term debt instruments.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Which of the following regulations will most likely contribute to market efficiency? Regulatory restrictions on:\nOption A:short selling.\nOption B:foreign traders.\nOption C:insiders trading with nonpublic information.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Fixed-income indexes are least likely constructed on the basis of:\nOption A:maturity.\nOption B:type of issuer.\nOption C:coupon frequency.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Brown works for an investment counseling firm. Green, a new client of the firm, is meeting with Brown for the first time. Green used another counseling firm for financial advice for years, but she has switched her account to Brown’s firm. After spending a few minutes getting acquainted, Brown explains to Green that she has discovered a highly undervalued stock that offers large potential gains. She recommends that Green purchase the stock. Brown has committed a violation of the Standards. What should she have done differently?\nOption A:Brown should have determined Green’s needs, objectives, and tolerance for risk before making a recommendation of any type of security.\nOption B:Brown should have thoroughly explained the characteristics of the company to Green, including the characteristics of the industry in which the company operates.\nOption C:Brown should have explained her qualifications, including her education, training, and experience and the meaning of the CFA designation.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Bronson provides investment advice to the board of trustees of a private university endowment fund. The trustees have provided Bronson with the fund’s financial information, including planned expenditures. Bronson receives a phone call on Friday afternoon from Murdock, a prominent alumnus, requesting that Bronson fax him comprehensive financial information about the fund. According to Murdock, he has a potential contributor but needs the information that day to close the deal and cannot contact any of the trustees. Based on the CFA Institute Standards, Bronson should:\nOption A:Send Murdock the information because disclosure would benefit the client.\nOption B:Not send Murdock the information to preserve confidentiality.\nOption C:Send Murdock the information, provided Bronson promptly notifies the trustees.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Which of the following statements is a stated purpose of disclosure in Standard VI(C)–Referral Fees?\nOption A:Disclosure will allow the client to request discounted service fees.\nOption B:Disclosure will help the client evaluate any possible partiality shown in the recommendation of services.\nOption C:Disclosure means advising a prospective client about the referral arrangement once a formal client relationship has been established.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Which of the following statements best describes an aspect of the Professional Conduct Program process?\nOption A:Inquiries are not initiated in response to information provided by the media.\nOption B:Investigations result in Disciplinary Review Committee panels for each case.\nOption C:Investigations may include requesting a written explanation from the member or candidate.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "According to the Code of Ethics, members of CFA Institute and candidates for the CFA designation must:\nOption A:maintain their professional competence to exercise independent professional judgment.\nOption B:place the integrity of the investment profession and the interests of clients above their own personal interests.\nOption C:practice in a professional and ethical manner with the public, clients, and others in the global capital markets.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "If at the beginning the entry recorded was prepaid expense, after the products are delivered or the service is rendered, the adjusting entry will most likely results in:\nOption A:the reduction of an asset and the recording of an expense.\nOption B:the addition of an asset and the recording of an expense.\nOption C:the reduction of an asset and the reduction of an debt.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Interest paid is classified as an operating cash flow under:\nOption A:US GAAP but may be classified as either operating or investing cash flows under IFRS.\nOption B:IFRS but may be classified as either operating or investing cash flows under US GAAP.\nOption C:US GAAP but may be classified as either operating or financing cash flows under IFRS.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "A benefit of using the direct method rather than the indirect method when reporting operating cash flows is that the direct method:\nOption A:mirrors a forecasting approach.\nOption B:is easier and less costly.\nOption C:provides specific information on the sources of operating cash flows.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "The income statement is best used to evaluate a company’s:\nOption A:financial position.\nOption B:sources of cash flow.\nOption C:financial results from business activities.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Cash flows from taxes on income must be separately disclosed under:\nOption A:IFRS only.\nOption B:US GAAP only.\nOption C:both IFRS and US GAAP.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Which of the following best describes a convertible bond’s conversion premium?\nOption A:Bond price minus conversion value\nOption B:Par value divided by conversion price\nOption C:Current share price multiplied by conversion ratio", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "The benefit to the issuer of a deferred coupon bond is most likely related to:\nOption A:tax management.\nOption B:cash flow management.\nOption C:original issue discount price.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "A bond that is characterized by a fixed periodic payment schedule that reduces the bond’s outstanding principal amount to zero by the maturity date is best described as a:\nOption A:bullet bond.\nOption B:plain vanilla bond.\nOption C:fully amortized bond.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "When underwriting new corporate bonds, matrix pricing is used to get an estimate of the:\nOption A:required yield spread over the benchmark rate.\nOption B:market discount rate of other comparable corporate bonds.\nOption C:yield-to-maturity on a government bond having a similar time-to-maturity.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Contrary to positive bond covenant, negative covenants are most likely:\nOption A:costlier.\nOption B:legally enforceable.\nOption C:enacted at time of issue.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Which of the following institutions will on average have the greatest need for liquidity?\nOption A:Banks.\nOption B:Investment companies.\nOption C:Non-life insurance companies.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "The sum of an asset’s systematic variance and its nonsystematic variance of returns is equal to the asset’s:\nOption A:beta.\nOption B:total risk.\nOption C:total variance.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "The correlation between assets in a two-asset portfolio increases during a market decline. If there is no change in the proportion of each asset held in the portfolio or the expected standard deviation of the individual assets, the volatility of the portfolio is most likely to:\nOption A:increase.\nOption B:decrease.\nOption C:remain the same.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "With respect to trading costs, liquidity is least likely to impact the:\nOption A:stock price.\nOption B:bid–ask spreads.\nOption C:brokerage commissions.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "With respect to the capital asset pricing model, which of the following values of beta for an asset is most likely to have an expected return for the asset that is less than the risk-free rate?\nOption A:-0.5\nOption B:0.0\nOption C:0.5", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "When we calculate the kurtosis, what is the power of the kurtosis?\nOption A:2.\nOption B:3.\nOption C:4.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "The covariance of returns is positive when the returns on two assets tend to:\nOption A:have the same expected values.\nOption B:be above their expected value at different times.\nOption C:be on the same side of their expected value at the same time.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "For a credit card, it charges 15% compounded monthly. Its effective annual rate is closet to?\nOption A:15.78%\nOption B:18.85%\nOption C:16.08%", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "US and Spanish bonds have return standard deviations of 0.64 and 0.56, respectively. If the correlation between the two bonds is 0.24, the covariance of returns is closest to:\nOption A:0.086.\nOption B:0.335.\nOption C:0.390.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Which of the following is a property of two dependent events?\nOption A:The two events must occur simultaneously.\nOption B:The probability of one event influences the probability of the other event.\nOption C:The probability of the two events occurring is the product of each event’s probability.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Hui Lin, CFA is an investment manager looking to diversify his portfolio by adding equity real estate investments. Lin and his investment analyst, Maria Nowak, are discussing whether they should invest in publicly traded real estate investment trusts (REITs) or public real estate operating companies (REOCs). Nowak expresses a strong preference for investing in public REITs in taxable accounts.Lin schedules a meeting to discuss this matter, and for the meeting, Lin asks Nowak to gather data on three specific REITs and come prepared to explain her preference for public REITs over public REOCs. At the meeting, Lin asks Nowak:“Why do you prefer to invest in public REITs over public REOCs for taxable accounts?” Nowak provides Lin with an explanation for her preference of public REITs and provides Lin with data on the three REITs shown in Exhibits 1 and 2.The meeting concludes with Lin directing Nowak to identify the key investment characteristics along with the principal risks of each REIT and to investigate the valuation of the three REITs. Specifically, Lin asks Nowak to value each REIT using four different methodologies:Method 1Net asset valueMethod 2Discounted cash flow valuation using a two-step dividend modelMethod 3Relative valuation using property subsector average P/FFO multipleMethod 4Relative valuation using property subsector average P/AFFO multiple\n| Exhibit l.Select RE IT Financial Information |\n| RE IT A | RE IT B | RE ITC |\n| Health |\n| Property subsector | Office | Storage | Care |\n| Estimated 12 months cash net operating income | $350，000 | $267，000 | $425，000 |\n| (NO I) |\n| Funds from operations(FFO) | $316，965 | $290，612 | $368，007 |\n| Cash and equivalents | $308，700 | $230，850 | $341，000 |\n| Accounts receivable | $205，800 | $282，150 | $279，000 |\n| Debt and other liabilities | $2，014，000 | $2，013，500 | $2，010，000 |\n| Non-cash rents | $25，991 | $24，702 | $29，808 |\n| Rec un ng maintenance-type capital expenditures | $63，769 | $60，852 | $80，961 |\n| Shares outstanding | 56，100 | 67，900 | 72，300 |\n\n| Exhibit 2.RE IT Dividend Forecasts and Average Price Multiples |\n| RE IT A | RE IT B | RE ITC |\n| Expected annual dividend next year | $3.80 | $2.25 | $4.00 |\n| Dividend growth rate in years 2 and 3 | 4.0% | 5.0% | 4.5% |\n| Dividend growth rate(after year 3 into perpetuity) | 3.5% | 4.5% | 4.0% |\n| Assumed cap rate | 7.0% | 6.25% | 6.5% |\n| Property subsector average P/FFO multiple | 14.4x | 13.5x | 15.1x |\n| Property subsector average P/AFFO multiple | 18.3x | 17.1x | 18.9x |\n\n\n \nNowak’s most likely response to Lin’s question is that the type of real estate security she prefers:\nOption A:offers a high degree of operating flexibility.\nOption B:provides dividend income that is exempt from double taxation.\nOption C:has below-average correlations with overall stock market returns.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Amanda Rodriguez is an alternative investments analyst for a US investment management firm, Delphinus Brothers. Delphinus’ Chief Investment Officer, Michael Tang, has informed Rodriguez that he wants to reduce the amount invested in traditional asset classes and gain exposure to the real estate sector by acquiring commercial property in the United States. Rodriguez is to analyze potential commercial real estate investments for Delphinus Brothers. Selected data on three commercial real estate properties is presented in Exhibit 1.\n| Exhibit l.Selected Property Data |\n| Property#l | Property # 2 | Property # 3 |\n| Downtown | Grocery-Anchored | Multi-Family |\n| Property Type | Office Building | Retail Center | Building |\n| Location | NewYork， NY | Miami， FL | Boston， MA |\n| Occupancy | 90.00% | 93.00% | 95.00% |\n| Square | Feet | or |\n| Number of Units | 100，000sf | 205，000sf | 300umits |\n| Gross Potential Rent | S4，250，000 | $1，800，000 | $3，100，000 |\n| Expense |\n| Reimbursement |\n| Revenue | S330，000 | $426，248 | so |\n| Other | Income |\n| (includes%Rent) | $550，000 | S15，000 | $45，000 |\n| Potential | Gross |\n| Income | $5，130，000 | S2，241，248 | $3，145，000 |\n| Vacancy Loss | (S513，000) | (S156，887) | (S157250) |\n| Effec ive | Gross |\n| Income | $5，079，000 | S2，084，361 | S2，987，750 |\n| Property Management |\n| Fees | (S203，160) | (S83，374) | (S119，510) |\n| Other | Opera tng |\n| Expenses | (S2，100，000) | (S342，874) | (S1，175，000) |\n| Net Opera tg Income |\n\n\nRodriguez reviews the three properties with Tang, who indicates that he would like her to focus on Property #1 because of his prediction of robust job growth in New York City over the next ten years. To complete her analysis, Rodriquez assembles additional data on Property #1, which is presented in Exhibits 2, 3 and 4.\n|  |\n| Exhibit 2.6-Year Net Operating Income(NO I)andDCFAssumptions forProperty # 1 |\n| Year lYear 2Year 3Year 4Year 5Year 6 |\n| NO I$2，775，840$2，859，119$2，944，889$3，033，235$3，124，232$3，217，959 |\n\n\n\n| Exhibit 3.Sales Comparison Data for Property#l |\n| Variable | Property l | Sales CompA | Sales Comp B | Sales Com pC |\n| Age(years) | 10 | 5 | 12 | 25 |\n| condtion | Good | Excellent | Good | Average |\n| Location | Prime | Secondary | Secondary | Prime |\n| Sale price psf | $415psf | $395psf | $400psf |\n\n| Adjustments |\n| Age(years) | -10% | 2% | 10% |\n| Condition | -10% | 0% | 10% |\n| Location | 15% | 15% | 0% |\n| Total Adjustments | -5% | 17% | 20% |\n\n| Exhibit 4.Other Selected Data for Property#l |\n| Land Value | $7，000，000 |\n| Replacement Cost | $59，000，000 |\n| Total Depreciation | $5，000，000 |\n\n\nAs part of the review, Tang asks Rodriguez to evaluate financing alternatives to determine if it would be better to use debt financing or to make an all cash purchase. Tang directs Rodriguez to inquire about terms with Richmond Life Insurance Company, a publicly traded company, which is an active lender on commercial real estate property. Rodriquez obtains the following information from Richmond Life for a loan on Property #1: loan term of 5 years, interest rate of 5.75% interest-only, maximum loan to value of 75%, and minimum debt service coverage ratio of 1.5x.After reviewing her research materials, Rodriguez formulates the following two conclusions:Conclusion 1Benefits of private equity real estate investments include owners’ ability to attain diversification benefits, to earn current income, and to achieve tax benefits.Conclusion 2Risk factors of private equity real estate investments include business conditions, demographics, the cost of debt and equity capital, and financial leverage.\nRichmond Life Insurance Company’s potential investment would be most likely described as:\nOption A:private real estate debt.\nOption B:private real estate equity.\nOption C:publicly traded real estate debt.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Amanda Rodriguez is an alternative investments analyst for a US investment management firm, Delphinus Brothers. Delphinus’ Chief Investment Officer, Michael Tang, has informed Rodriguez that he wants to reduce the amount invested in traditional asset classes and gain exposure to the real estate sector by acquiring commercial property in the United States. Rodriguez is to analyze potential commercial real estate investments for Delphinus Brothers. Selected data on three commercial real estate properties is presented in Exhibit 1.\n| Exhibit l.Selected Property Data |\n| Property#l | Property # 2 | Property # 3 |\n| Downtown | Grocery-Anchored | Multi-Family |\n| Property Type | Office Building | Retail Center | Building |\n| Location | NewYork， NY | Miami， FL | Boston， MA |\n| Occupancy | 90.00% | 93.00% | 95.00% |\n| Square | Feet | or |\n| Number of Units | 100，000sf | 205，000sf | 300umits |\n| Gross Potential Rent | S4，250，000 | $1，800，000 | $3，100，000 |\n| Expense |\n| Reimbursement |\n| Revenue | S330，000 | $426，248 | so |\n| Other | Income |\n| (includes%Rent) | $550，000 | S15，000 | $45，000 |\n| Potential | Gross |\n| Income | $5，130，000 | S2，241，248 | $3，145，000 |\n| Vacancy Loss | (S513，000) | (S156，887) | (S157250) |\n| Effec ive | Gross |\n| Income | $5，079，000 | S2，084，361 | S2，987，750 |\n| Property Management |\n| Fees | (S203，160) | (S83，374) | (S119，510) |\n| Other | Opera tng |\n| Expenses | (S2，100，000) | (S342，874) | (S1，175，000) |\n| Net Opera tg Income |\n\n\nRodriguez reviews the three properties with Tang, who indicates that he would like her to focus on Property #1 because of his prediction of robust job growth in New York City over the next ten years. To complete her analysis, Rodriquez assembles additional data on Property #1, which is presented in Exhibits 2, 3 and 4.\n|  |\n| Exhibit 2.6-Year Net Operating Income(NO I)andDCFAssumptions forProperty # 1 |\n| Year lYear 2Year 3Year 4Year 5Year 6 |\n| NO I$2，775，840$2，859，119$2，944，889$3，033，235$3，124，232$3，217，959 |\n\n\n\n| Exhibit 3.Sales Comparison Data for Property#l |\n| Variable | Property l | Sales CompA | Sales Comp B | Sales Com pC |\n| Age(years) | 10 | 5 | 12 | 25 |\n| condtion | Good | Excellent | Good | Average |\n| Location | Prime | Secondary | Secondary | Prime |\n| Sale price psf | $415psf | $395psf | $400psf |\n\n| Adjustments |\n| Age(years) | -10% | 2% | 10% |\n| Condition | -10% | 0% | 10% |\n| Location | 15% | 15% | 0% |\n| Total Adjustments | -5% | 17% | 20% |\n\n| Exhibit 4.Other Selected Data for Property#l |\n| Land Value | $7，000，000 |\n| Replacement Cost | $59，000，000 |\n| Total Depreciation | $5，000，000 |\n\n\nAs part of the review, Tang asks Rodriguez to evaluate financing alternatives to determine if it would be better to use debt financing or to make an all cash purchase. Tang directs Rodriguez to inquire about terms with Richmond Life Insurance Company, a publicly traded company, which is an active lender on commercial real estate property. Rodriquez obtains the following information from Richmond Life for a loan on Property #1: loan term of 5 years, interest rate of 5.75% interest-only, maximum loan to value of 75%, and minimum debt service coverage ratio of 1.5x.After reviewing her research materials, Rodriguez formulates the following two conclusions:Conclusion 1Benefits of private equity real estate investments include owners’ ability to attain diversification benefits, to earn current income, and to achieve tax benefits.Conclusion 2Risk factors of private equity real estate investments include business conditions, demographics, the cost of debt and equity capital, and financial leverage.\nWhich of the following is most likely accurate regarding Property 2 described in Exhibit 1?\nOption A:Operating expense risk is borne by the owner.\nOption B:The lease term for the largest tenant is greater than three years.\nOption C:There is a significant amount of percentage rent linked to sales levels.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Martha Brady is the CIO of the Upper Darby County (UDC) public employees’ pension system. Brady is considering an allocation of the pension system’s assets to private equity. She has asked two of her analysts, Jennifer Chau, CFA, and Matthew Hermansky, to provide more information about the workings of the private equity market.Brady recognizes that the private equity asset class covers a broad spectrum of equity investments that are not traded in public markets. She asks Chau to describe the major differences between assets within this asset class. Chau notes that private equity ranges from venture capital financing of early-stage companies to complete buyouts of large publicly traded or even privately held companies. Chau describes some of the characteristics of venture capital and buyout investments.Chau mentions that private equity firms take care to align the economic interests of the managers of the investments they control with their own. Various contractual clauses are inserted in the compensation contracts of the management team in order to reward or punish managers who meet or do not meet agreed-upon target objectives.One concern Chau highlights is the illiquidity of private equity investments over time. Some funds are returned to investors, however, over the life of the fund because a number of investment opportunities are exited early. Provisions in a fund’s prospectus describe the distribution of returns to investors, some of which favor the limited partners. One such provision is the distribution waterfall mechanism that provides distributions to limited partners (LPs) before the general partner (GP) receives the carried interest. This distribution mechanism is called the total return waterfall.Chau prepares the following data to illustrate the distribution waterfall mechanism and the funds provided to limited partners when a private equity fund with a zero hurdle rate exits from its first three projects during a three-year period.\n| Exhibit l.Investment Returns and Distribution Waterfalls |\n| Private equity committed capital | $ 400 million |\n| Carried interest | 20% |\n| First project investment capital | $20mllon |\n| Second project investment capital | $45mllon |\n| Third project investment capital | $50mllon |\n| Proceeds from first project | $25mllion |\n| Proceeds from second project | $ 35 million |\n| Proceeds from third project | $65mllon |\n\n\nChau cautions that investors must understand the terminology used to describe the performance of private equity funds. Interpretation of performance numbers should be made with the awareness that much of the fund assets are illiquid during a substantial part of the fund’s life. She provides the latest data in Exhibit 2 for the Alpha, Beta, and Gamma Funds, diversified high-technology venture capital funds formed five years ago, each with five years remaining to termination.\n| Exhibit 2.Financial Performance of Alpha， Beta， and Gamma Funds |\n| Fund | PIC | DPI | RVP I |\n| Alpha | 0.30 | 0.10 | 0.65 |\n| Beta | 0.85 | 0.10 | 1.25 |\n| Gamma | 0.85 | 1.25 | 0.75 |\n\n\nChau studies the data and comments, Of the three funds, the Alpha Fund has the best chance to outperform over the remaining life. First, it’s because the management has earned such a relatively high residual value on capital and will be able to earn a high return on the remaining funds called down. At termination, the RVPI will be double the 0.65 value when the rest of the funds are called down. Second, its cash-on-cash return as measured by DPI is already as high as that of the Beta Fund. The PIC (or paid-in capital) ratio indicates the proportion of capital already called by the GP. The PIC of Alpha is relatively low relative to Beta and Gamma.Hermansky notes that a private equity fund’s ability to properly plan and execute its exit from an investment is vital for the fund’s success. Venture funds, such as Alpha, Beta, and Gamma, take special care to plan their exits.Brady then asks the analysts what procedures private equity firms would use to value investments in their portfolios as well as investments that are added later. She is concerned about buying into a fund with existing assets that do not have public market prices that can be used to ascertain value. In such cases, she worries, what if a GP overvalues the assets and new investors in the fund pay more for the fund assets than they are worth?Hermansky makes three statements regarding the valuation methods used in private equity transactions during the early stages of selling a fund to investors.Statement 1: For venture capital investment in the early stages of analysis, emphasis is placed on the discounted cash flow approach to valuation.Statement 2: For buyout investments, income-based approaches are used frequently as a primary method of valuation.Statement 3: If a comparable group of companies exist, multiples of revenues or earnings are used frequently to derive a value for venture capital investments.\nAre Chau's two reasons for interpreting Alpha Fund as the best performing fund over the remaining life correct?\nOption A:No.\nOption B:Yes.\nOption C:The first reason is correct, but the second reason is incorrect.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Raffi Musicale is the portfolio manager for a defined benefit pension plan. He meets with Jenny Brown, market strategist with Menlo Bank, to discuss possible investment opportunities. The investment committee for the pension plan has recently approved expanding the plan's permitted asset mix to include alternative asset classes.Brown proposes the Apex Commodity Fund (Apex Fund) offered by Menlo Bank as a potentially suitable investment for the pension plan. The Apex Fund attempts to produce trading profits by capitalizing on the mispricing between the spot and futures prices of commodities. The fund has access to storage facilities, allowing it to take delivery of commodities when necessary. The Apex Fund's current asset allocation is presented in Exhibit 1.\n| Exhibit l Apex Fund's Asset Allocation |\n| Commodity Sector | Allocation(%) |\n| Energy | 31.9 |\n| Livestock | 12.6 |\n| Softs | 21.7 |\n| Precious metals | 33.8 |\n\n\nBrown explains that the Apex Fund has had historically low correlations with stocks and bonds, resulting in diversification benefits. Musicale asks Brown, “Can you identify a factor that affects the valuation of financial assets like stocks and bonds but does not affect the valuation of commodities?”Brown shares selected futures contract data for three markets in which the Apex Fund invests. The futures data are presented in Exhibit 2.\n| Exhibit 2 Selected Commodity Futures Data* |\n| Month | Gold Price | Coffee Price | Gasoline Price |\n| July | 1，301.2 | 09600 | 2.2701 |\n| September | 1，301.2 | 0.9795 | 2.2076 |\n| December | 1，301.2 | 1.0055 | 2.0307 |\n\n\nMenlo Bank recently released a report on the coffee market. Brown shares the key conclusion from the report with Musicale: “The coffee market had a global harvest that was greater than expected. Despite the large harvest, coffee futures trading activity is balanced between producers and consumers. This balanced condition is not expected to change over the next year”Brown shows Musicale the total return of a recent trade executed by the Apex Fund. Brown explains that the Apex Fund took a fully collateralized long futures position in nearby soybean futures contracts at the quoted futures price of 865.0 (US cents/bushel). Three months later, the entire futures position was rolled when the near-term futures price was 877.0 and the farther-term futures price was 883.0. During the three-month period between the time that the initial long position was taken and the rolling of the contract, the collateral earned an annualized rate of 0.60%.Brown tells Musicale that the pension fund could alternatively gain long exposure to commodities using the swap market. Brown and Musicale analyze the performance of a long position in an S&P GSCI total return swap having monthly resets and a notional amount of $25 million. Selected data on the S&P GSCI are presented in Exhibit 3.\n| Exhibit 3 Selected S&PG SCI Data |\n| Reference Date | Index Level |\n| April(swap initiation) | 2，542.35 |\n| May | 2，582.23 |\n| June | 2，525.21 |\n\n\n \nWhich futures market in Exhibit 2 is in backwardation?\nOption A:Gold\nOption B:Coffee\nOption C:Gasoline", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "John Ladan is an analyst in the research department of an international securities firm. Ladan is currently analyzing Yeta Products, a publicly traded global consumer goods company located in the United States. Selected data for Yeta are presented in Exhibit 1.\n| Exhibit l.Selected Financial Data for Yet a Products |\n| Most Recent Fiscal Year | Current |\n| Pretax income | S280mllon | Shares outstanding | 100mlion |\n| Net income after tax | $182mlion | Book value per share | $25.60 |\n| Cashflow from operations | S235milion | Share price | S20.00 |\n| Capital expenditures | $175mlion |  |  |\n| Eam ings per share | S1.82 |  |  |\n\n\nYeta currently does not pay a dividend, and the company operates with a target capital structure of 40% debt and 60% equity. However, on a recent conference call, Yeta's management indicated that they are considering four payout proposals:Proposal #1: Issue a 10% stock dividend.Proposal #2: Repurchase $40 million in shares using idle cash.Proposal #3: Repurchase $40 million in shares by borrowing $40 million at an after-tax cost of borrowing of 8.50%.Proposal #4: Initiate a regular cash dividend based on a residual dividend policy.\nBased on Exhibit 1 and Yeta's target capital structure, the total dividend that Yeta would have paid last year under a residual dividend policy is closest to:\nOption A:$77 million.\nOption B:$112 million.\nOption C:$175 million.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Maximilian Bohm is reviewing several capital budgeting proposals from subsidiaries of his company. Although his reviews deal with several details that may seem like minutiae, the company places a premium on the care it exercises in making its investment decisions.The first proposal is a project for Richie Express, which is investing $500,000, all in fixed capital, in a project that will have operating income after taxes of $20,000 and depreciation of $40,000 each year for the next three years. Richie Express will sell the asset in three years, paying 30 percent taxes on any excess of the selling price over book value. The proposal indicates that a $647,500 terminal selling price will enable the company to earn a 15 percent internal rate of return on the investment. Bohm doubts that this terminal value estimate is correct.Another proposal concerns Gasup Company, which does natural gas exploration. A new investment has been identified by the Gasup finance department with the following projected cash flows:● Investment outlays are $6 million immediately and $1 million at the end of the first year.● After-tax operating cash flows are $0.5 million at the end of the first year and $4 million at the end of each of the second, third, fourth, and fifth years. In addition, an after-tax outflow occurs at the end of the five-year project that has not been included in the operating cash flows: $5 million required for environmental cleanup.● The required rate of return on natural gas exploration is 18 percent.The Gasup analyst is unsure about the calculation of the NPV and the IRR because the outlay is staged over two years.Finally, Dominion Company is evaluating two mutually exclusive projects: The Pinto grinder involves an outlay of $100,000, annual after-tax operating cash flows of $45,000, an after-tax salvage value of $25,000, and a three-year life. The Bolten grinder has an outlay of $125,000, annual after-tax operating cash flows of $47,000, an after-tax salvage value of $20,000, and a four-year life. The required rate of return is 10 percent. The net present value (NPV) and equivalent annual annuity (EAA) of the Pinto grinder are $30,691 and $12,341, respectively. Whichever grinder is chosen, it will have to be replaced at the end of its service life. The analyst is unsure about which grinder should be chosen.Bohm and his colleague Beth Goldberg have an extended conversation about capital budgeting issues, including several comments listed below. Goldberg makes two comments about real options:Comment 1“The abandonment option is valuable, but it should be exercised only when the abandonment value is above the amount of the original investment.”Comment 2“If the cost of a real option is less than its value, this will increase the NPV of the investment project in which the real option is embedded.”Bohm also makes several comments about specific projects under consideration:Comment AThe land and building were purchased five years ago for $10 million. This is the amount that should now be included in the fixed capital investment.”Comment B“We can improve the project's NPV by using the after-tax cost of debt as the discount rate. If we finance the project with 100 percent debt, this discount rate would be appropriate.”Comment C“It is generally safer to use the NPV than the IRR in making capital budgeting decisions. However, when evaluating mutually exclusive projects, if the projects have conventional cash flow patterns and have the same investment outlays, it is acceptable to use either the NPV or IRR.”Comment D“You should not base a capital budgeting decision on its immediate impact on earnings per share (EPS).”\nIs Bohm most likely correct regarding Comment C that it is acceptable to use either NPV or IRR and Comment D about the immediate impact on EPS?\nOption A:No for both comments.\nOption B:Yes for both comments.\nOption C:No for Comment C and Yes for Comment D.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Karen Maghami is a portfolio manager for a mutual fund. Maghami, working with analyst Marcel Lynbrock, is researching two companies: Syvie Electric and EnileGEN. Located in the same country, both companies produce electricity from conventional and renewable sources. Maghami wants to integrate environmental, social, and governance (ESG) factors into the analysis of each company’s financial statements.Syvie Electric is a stock exchange- listed, state- owned enterprise (SOE). The sovereign government holds 58% of shares; remaining shares are publicly traded. EnileGEN is a public company owned primarily by institutional investors.Lynbrock starts with an analysis of corporate governance factors. Relevant information about the two companies is summarized in Exhibit 1.\n|  | Sy vieElectric | En i leGEN |\n| Ownership Information and Voting Policies |  |\n| Percentage of shares owned by the largest shareholder | 58% | 9% |\n| Straight voting | Yes | Yes |\n| Board Information |  |\n| Board structure | One-tier | Two-tier |\n| CEO duality | No | Yes |\n| Number of directors | 8 | 11 |\n| Percentage of directors with experience in industry | 27% | 88% |\n| Remuneration Policies |  |\n| Clawback policy | No | Yes |\n| Say-on-pay provision | Yes | No |\n\n\nAfter reviewing the corporate governance information, Maghami and Lynbrock focus on factors related to environmental and social considerations. Lynbrock asks Maghami, “What resource would you recommend using to find a list of ESG factors material to the electricity generation sector?”Next, Maghami and Lynbrock discuss the effect of expected regulatory changes on stock and bond values for both companies. The government recently announced that it intends to authorize a new environmental regulation requiring that a minimum of 35% of electricity be produced from renewable sources. ?The exact timing of the new regulation is unknown, but EnileGEN already exceeds the minimum level by a significant margin. Maghami notes that the new regulation should give EnileGEN a competitive edge in the industry, and for scenario analysis purposes, she asks Lynbrock to assume that the regulation will take effect in two years. Lynbrock uses a discounted cash flow model to value EnileGEN stock under the assumption requested by Maghami.Lynbrock believes that the new regulation will make three of Syvie Electric’s coal-fired power stations no longer financially viable within 10 years following implementation. Maghami asks Lynbrock to estimate the potential effect on Syvie Electric’s balance sheet and the potential impact on the value of Syvie Electric bonds.Maghami reads in Syvie Electric’s most recent financial statements that the company plans to issue green bonds. Maghami asks Lynbrock to evaluate any possible valuation risks or opportunities associated with green bonds. Lynbrock tells Maghami the following:Statement 1: Green bonds offer higher protection for an investor because they typically are backed by the income derived from the environmental project they are used to fund.Statement 2: Issuing green bonds ensures a lower cost of capital because the green feature typically results in a tighter credit spread compared with conventional bonds.Statement 3: A unique risk related to green bonds is greenwashing, which is the risk that the bond’s proceeds are not actually used for a beneficial environmental or climate-related project.\nBased on the ownership structures of Syvie Electric and EnileGEN, a principal–principal problem is most likely to occur in the case of:\nOption A:only EnileGEN.\nOption B:only Syvie Electric.\nOption C:both Syvie Electric and EnileGEN.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "María Hernández is a sell-side analyst covering the electronics industry in Spain. One of the companies she follows, SG Electronics, S.A., has recently announced plans to begin producing and selling a new series of video cameras. Hernández estimates that this project will increase the value of the company and, consequently, she plans on changing her research opinion on the company from a “hold” to a “buy.” Her initial financial predictions for the project are:● Fixed capital equipment outlay is €2,750,000.● At the beginning of the project, a required increase in current assets of €200,000 and a required increase in current liabilities of €125,000.● Straight-line depreciation to zero over a five-year life.● Project life of five years.● Incremental annual unit sales of 3,000 at a unit price of €600.● Annual fixed cash expenses of €125,000; variable cash expenses of €125 per unit.● The capital equipment is expected to be sold for €450,000 at the end of Year 5. At the end of the project, the net working capital investment will be recovered.● Tax rate of 40 percent.● Based on the capital asset pricing model, the required rate of return is 12 percent.Hernández estimates the expected net present value (NPV) of the project to be €975,538 and the internal rate of return (IRR) to be 24.6 percent. She also performs a sensitivity analysis by changing the input variable assumptions used in her initial analysis.When reviewing Hernández's work, her supervisor, Arturo Costa, notes that she did not include changes in the depreciation method, initial fixed capital outlay, or inflation assumptions in her sensitivity analysis. As a result, Costa asks the following questions:Question 1“What would be the effect on the project's NPV if the initial fixed capital equipment outlay increased from €2,750,000 to €3,000,000, everything else held constant?”Question 2“How would a higher than expected inflation rate affect the value of the real tax savings from depreciation and the value of the real after-tax interest expense, everything else held constant?”Question 3“You are using a required rate of return of 12 percent when the company's weighted average cost of capital (WACC) is 10 percent. Why are you using a required rate of return for the project greater than the company's WACC?”Before ending the meeting, Costa tells Hernández: “Last year the company produced a prototype at a cost of €500,000. Now management is having doubts about the market appeal of the product in its current design, and so they are considering delaying the start of the project for a year, until the prototype can be shown to industry experts.”\nHernández's best response to Costa's first question is that the project's NPV would decrease by an amountclosest to:\nOption A:€142,000.\nOption B:€178,000.\nOption C:€250,000.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Karen Maghami is a portfolio manager for a mutual fund. Maghami, working with analyst Marcel Lynbrock, is researching two companies: Syvie Electric and EnileGEN. Located in the same country, both companies produce electricity from conventional and renewable sources. Maghami wants to integrate environmental, social, and governance (ESG) factors into the analysis of each company’s financial statements.Syvie Electric is a stock exchange- listed, state- owned enterprise (SOE). The sovereign government holds 58% of shares; remaining shares are publicly traded. EnileGEN is a public company owned primarily by institutional investors.Lynbrock starts with an analysis of corporate governance factors. Relevant information about the two companies is summarized in Exhibit 1.\n|  | Sy vieElectric | En i leGEN |\n| Ownership Information and Voting Policies |  |\n| Percentage of shares owned by the largest shareholder | 58% | 9% |\n| Straight voting | Yes | Yes |\n| Board Information |  |\n| Board structure | One-tier | Two-tier |\n| CEO duality | No | Yes |\n| Number of directors | 8 | 11 |\n| Percentage of directors with experience in industry | 27% | 88% |\n| Remuneration Policies |  |\n| Clawback policy | No | Yes |\n| Say-on-pay provision | Yes | No |\n\n\nAfter reviewing the corporate governance information, Maghami and Lynbrock focus on factors related to environmental and social considerations. Lynbrock asks Maghami, “What resource would you recommend using to find a list of ESG factors material to the electricity generation sector?”Next, Maghami and Lynbrock discuss the effect of expected regulatory changes on stock and bond values for both companies. The government recently announced that it intends to authorize a new environmental regulation requiring that a minimum of 35% of electricity be produced from renewable sources. ?The exact timing of the new regulation is unknown, but EnileGEN already exceeds the minimum level by a significant margin. Maghami notes that the new regulation should give EnileGEN a competitive edge in the industry, and for scenario analysis purposes, she asks Lynbrock to assume that the regulation will take effect in two years. Lynbrock uses a discounted cash flow model to value EnileGEN stock under the assumption requested by Maghami.Lynbrock believes that the new regulation will make three of Syvie Electric’s coal-fired power stations no longer financially viable within 10 years following implementation. Maghami asks Lynbrock to estimate the potential effect on Syvie Electric’s balance sheet and the potential impact on the value of Syvie Electric bonds.Maghami reads in Syvie Electric’s most recent financial statements that the company plans to issue green bonds. Maghami asks Lynbrock to evaluate any possible valuation risks or opportunities associated with green bonds. Lynbrock tells Maghami the following:Statement 1: Green bonds offer higher protection for an investor because they typically are backed by the income derived from the environmental project they are used to fund.Statement 2: Issuing green bonds ensures a lower cost of capital because the green feature typically results in a tighter credit spread compared with conventional bonds.Statement 3: A unique risk related to green bonds is greenwashing, which is the risk that the bond’s proceeds are not actually used for a beneficial environmental or climate-related project.\nTo reflect the effect of the new regulation on Syvie Electric’s balance sheet, Lynbrock should:\nOption A:increase terminal value.\nOption B:increase impaired assets.\nOption C:decrease capital expenditures.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Sonal Johnson is a risk manager for a bank. She manages the bank's risks using a combination of swaps and forward rate agreements (FRAs).Johnson prices a three-year Libor-based interest rate swap with annual resets using the present value factors presented in Exhibit 1.\n| Exhibit l.Present Value Factors |\n| Maturity(years) | Present Value Factors |\n| 1 | 0.990099 |\n| 2 | 0.977876 |\n| 3 | 0.965136 |\n\n\nJohnson also uses the present value factors in Exhibit 1 to value an interest rate swap that the bank entered into one year ago as the pay-fixed (receive-floating) party. Selected data for the swap are presented in Exhibit 2. Johnson notes that the current equilibrium two-year fixed swap rate is 1.12%.\n| Exhibit 2.Selected Data on Fixed for Floating Interest Rate Swap |\n| Swap notional amount | $50，000，000 |\n| Original swap term | Three years， wih annual resets |\n| Fixed swap rate(since initiation) | 3.00% |\n\n\nOne of the bank's investments is exposed to movements in the Japanese yen, and Johnson desires to hedge the currency exposure. She prices a one-year fixed-for-fixed currency swap involving yen and US dollars, with a quarterly reset. Johnson uses the interest rate data presented in Exhibit 3 to price the currency swap.\n| Exhibit 3.Selected Japanese and US Interest Rate Data |\n| Days to Maturity | Yen Spot Interest Rates | US Dollar Spot Interest Rates |\n| 90 | 0.05% | 0.20% |\n| 180 | 0.10% | 0.40% |\n| 270 | 0.15% | 0.55% |\n| 360 | 0.25% | 0.70% |\n\n\nJohnson next reviews an equity swap with an annual reset that the bank entered into six months ago as the receive-fixed, pay-equity party. Selected data regarding the equity swap, which is linked to an equity index, are presented in Exhibit 4. At the time of initiation, the underlying equity index was trading at 100.00.\n| Exhibit 4.Selected Data on Equity Swap |\n| Swap notional amount | $20，000，000 |\n| Original swap te mm | Five years， with annual resets |\n| Fixed swap rate | 2.00% |\n\n\nThe equity index is currently trading at 103.00, and relevant US spot rates, along with their associated present value factors, are presented in Exhibit 5.\n| Exhibit 5.Selected US Spot Rates and Present Value Factors |\n| Maturity(years) | Spot Rate | Present Value Factors |\n| 0.5 | 0.40% | 0.998004 |\n| 1.5 | 1.00% | 0.985222 |\n| 2.5 | 1.20% | 0.970874 |\n| 3.5 | 2.00% | 0.934579 |\n| 4.5 | 2.60% | 0.895255 |\n\n\nJohnson reviews a 6×9 FRA that the bank entered into 90 days ago as the pay-fixed/receive-floating party. Selected data for the FRA are presented in Exhibit 6, and current Libor data are presented in Exhibit 7. Based on her interest rate forecast, Johnson also considers whether the bank should enter into new positions in 1 × 4 and 2 × 5 FRAs.\n| Exhibit 6.6×9FRA Data |\n| FRA term | 6×9 |\n| FRA rate | 0.70% |\n| FRA notional amount | USS 20， 000， 000 |\n| FRA settlement terms | Advanced set， advanced settle |\n\n\n\n| Exhibit 7.Current Libor |\n| 30-day Libor | 0.75% |\n| 60-day Libor | 0.82% |\n| 90-day Libor | 0.90% |\n| 120-day Libor | 0.92% |\n| 150-day Libor | 0.94% |\n| 180-day Libor | 0.95% |\n| 210-day Libor | 0.97% |\n| 270-day Libor | 1.00% |\n\n\nThree months later, the 6 × 9 FRA in Exhibit 6 reaches expiration, at which time the three-month US dollar Libor is 1.10% and the six-month US dollar Libor is 1.20%. Johnson determines that the appropriate discount rate for the FRA settlement cash flows is 1.10%.\nFrom the bank's perspective, based on Exhibits 6 and 7, the value of the 6 × 9 FRA 90 days after inception is closest to:\nOption A:$14,817.\nOption B:$19,647.\nOption C:$29,635.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Trident Advisory Group manages assets for high-net-worth individuals and family trusts.Alice Lee, chief investment officer, is meeting with a client, Noah Solomon, to discuss risk management strategies for his portfolio. Solomon is concerned about recent volatility and has asked Lee to explain options valuation and the use of options in risk management.Options on StockLee begins: “We use the Black-Scholes-Merton (BSM) model for option valuation. To fully understand the BSM model valuation, one needs to understand the assumptions of the model. These assumptions include normally distributed stock returns, constant volatility of return on the underlying, constant interest rates, and continuous prices” Lee uses the BSM model to price TCB, which is one of Solomon's holdings. Exhibit 1 provides the current stock price (S), exercise price (X), risk-free interest rate (r), volatility (σ), and time to expiration (T) in years as well as selected outputs from the BSM model. TCB does not pay a dividend.\n| Exhibit lBS M Model for European Options on TCB |\n| BSM Inputs |\n| SXrT |\n| $57.03550.22%32%0.25 |\n|  |\n| BSMOutputs |\n| BSMBSMdN(d)dN(da)Call PricePut Price |\n| 0.31000.62170.15000.5596$4.695$2.634 |\n\n\nOptions on FuturesThe Black model valuation and selected outputs for options on another of Solomon's holdings, the GPX 500 Index (GPX), are shown in Exhibit 2. The spot index level for the GPX is 187.95, and the index is assumed to pay a continuous dividend at a rate of 2.2% (5) over the life of the options being valued, which expire in 0.36 years. A futures contract on the GPX also expiring in 0.36 years is currently priced at 186.73.\n| Exhibit 2.Black Model for European Options on the GPX Index |\n| Black Model Inputs |\n| GPX Index | X | r | 8 Yield |\n| 187.95 | 180 | 0.39% | 24% | 0.36 | 2.2% |\n| Black | Black | Market | Market |\n| Model | Model | Call Price | Put Price |\n| Call Value | Put Value |\n| $14.2089 | $7.4890 | $14.26 | $7.20 |\n| Option Greeks |\n| Vega |\n| Delta(cal) Delta(put) | Gamma(call or | Theta(cal) | Rho(cal) | per% |\n| put) | daily | per% | (call or |\n| put) |\n\n\nAfter reviewing Exhibit 2, Solomon asks Lee which option Greek letter best describes the changes in an option's value as time to expiration declines.Solomon observes that the market price of the put option in Exhibit 2 is $7.20. Lee responds that she used the historical volatility of the GPX of 24% as an input to the BSM model, and she explains the implications for the implied volatility for the GPX.Options on Interest RatesSolomon forecasts the three-month Libor will exceed 0.85% in six months and is considering using options to reduce the risk of rising rates. He asks Lee to value an interest rate call with a strike price of 0.85%. The current three-month Libor is 0.60%, and an FRA for a three-month Libor loan beginning in six months is currently 0.75%.Hedging Strategy for the Equity IndexSolomon's portfolio currently holds 10,000 shares of an exchange-traded fund (ETF) that tracks the GPX. He is worried the index will decline. He remarks to Lee, “You have told me how the BSM model can provide useful information for reducing the risk of my GPX position” Lee suggests a delta hedge as a strategy to protect against small moves in the GPX Index.Lee also indicates that a long position in puts could be used to hedge larger moves in the GPX. She notes that although hedging with either puts or calls can result in a delta-neutral position, they would need to consider the resulting gamma.\nBased on Solomon's observation about the model price and market price for the put option in Exhibit 2, the implied volatility for the GPX is most likely:\nOption A:Less than the historical volatility.\nOption B:Equal to the historical volatility.\nOption C:Greater than the historical volatility.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Tim Doyle is a portfolio manager at BestFutures Group, a hedge fund that frequently enters into derivative contracts either to hedge the risk of investments it holds or to speculate outside of those investments. Doyle works alongside Diane Kemper, a junior analyst at the hedge fund. They meet to evaluate new investment ideas and to review several of the firm’s existing investments.Carry Arbitrage ModelDoyle and Kemper discuss the carry arbitrage model and how they can take advantage of mispricing in bond markets. Specifically, they would like to execute an arbitrage transaction on a Eurodollar futures contract in which the underlying Eurodollar bond is expected to make an interest payment in two months. Doyle makes the following statements:Statement 1: If the Eurodollar futures price is less than the price suggested by the carry arbitrage model, the futures contract should be purchased.Statement 2: Based on the cost of carry model, the futures price would be higher if the underlying Eurodollar bond’s upcoming interest payment was expected in five months instead of two.Three-Year Treasury Note Futures ContractKemper then presents two investment ideas to Doyle. Kemper’s first investment idea is to purchase a three-year Treasury note futures contract. The underlying 1.5%, semi-annual three-year Treasury note is quoted at a clean price of 101. It has been 60 days since the three-year Treasury note’s last coupon payment, and the next coupon payment is payable in 120 days. Doyle asks Kemper to calculate the full spot price of the underlying three-year Treasury note.10-Year Treasury Note Futures ContractKemper’s second investment idea is to purchase a 10-year Treasury note futures contract. The underlying 2%, semi-annual 10-year Treasury note has a dirty price of 104.17. It has been 30 days since the 10-year Treasury note’s last coupon payment. The futures contract expires in 90 days. The quoted futures contract price is 129. The current annualized three-month risk-free rate is 1.65%. The conversion factor is 0.7025. Doyle asks Kemper to calculate the equilibrium quoted futures contract price based on the carry arbitrage model.Japanese Government BondsAfter discussing Kemper’s new investment ideas, Doyle and Kemper evaluate one of their existing forward contract positions. Three months ago, BestFutures took a long position in eight 10-year Japanese government bond (JGB) forward contracts, with each contract having a contract notional value of 100 million yen. The contracts had a price of JPY153 (quoted as a percentage of par) when the contracts were purchased.Now, the contracts have six months left to expiration and have a price of JPY155. The annualized six-month interest rate is 0.12%. Doyle asks Kemper to value the JGB forward position.Interest Rate SwapsAdditionally, Doyle asks Kemper to price a one-year plain vanilla swap. The spot rates and days to maturity at each payment date are presented in Exhibit 1.\n| Exhibit 1 | Selected US Spot Rate Data |\n| Days to Maturity | Spot Interest Rates |\n| (%) |\n| 90 | 1.90 |\n| 180 | 2.00 |\n| 270 | 2.10 |\n| 360 | 2.20 |\n\n\nFinally, Doyle and Kemper review one of BestFutures’s pay-fixed interest rate swap positions. Two years ago, the firm entered into a JPY5 billion five-year interest rate swap, paying the fixed rate. The fixed rate when BestFutures entered into the swap two years ago was 0.10%. The current term structure of interest rates for JPY cash flows, which are relevant to the interest rate swap position, is presented in Exhibit 2.\n| Exhibit 2 | Selected Japanese Interest Rate Data |\n| Yen Spot Interest | Present Value |\n| Maturity(Years) | Rates(%) | Factors |\n| 1 | 0.03 | 0.9997 |\n| 2 | 0.06 | 0.9988 |\n| 3 | 0.08 | 0.9976 |\n| Sum | 2.9961 |\n\n\nDoyle asks Kemper to calculate the value of the pay-fixed interest rate swap.\nWhich of Doyle’s statements regarding the Eurodollar futures contract price is correct?\nOption A:Only Statement 1.\nOption B:Only Statement 2\nOption C:Both Statement 1 and Statement 2.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Sonal Johnson is a risk manager for a bank. She manages the bank's risks using a combination of swaps and forward rate agreements (FRAs).Johnson prices a three-year Libor-based interest rate swap with annual resets using the present value factors presented in Exhibit 1.\n| Exhibit l.Present Value Factors |\n| Maturity(years) | Present Value Factors |\n| 1 | 0.990099 |\n| 2 | 0.977876 |\n| 3 | 0.965136 |\n\n\nJohnson also uses the present value factors in Exhibit 1 to value an interest rate swap that the bank entered into one year ago as the pay-fixed (receive-floating) party. Selected data for the swap are presented in Exhibit 2. Johnson notes that the current equilibrium two-year fixed swap rate is 1.12%.\n| Exhibit 2.Selected Data on Fixed for Floating Interest Rate Swap |\n| Swap notional amount | $50，000，000 |\n| Original swap term | Three years， wih annual resets |\n| Fixed swap rate(since initiation) | 3.00% |\n\n\nOne of the bank's investments is exposed to movements in the Japanese yen, and Johnson desires to hedge the currency exposure. She prices a one-year fixed-for-fixed currency swap involving yen and US dollars, with a quarterly reset. Johnson uses the interest rate data presented in Exhibit 3 to price the currency swap.\n| Exhibit 3.Selected Japanese and US Interest Rate Data |\n| Days to Maturity | Yen Spot Interest Rates | US Dollar Spot Interest Rates |\n| 90 | 0.05% | 0.20% |\n| 180 | 0.10% | 0.40% |\n| 270 | 0.15% | 0.55% |\n| 360 | 0.25% | 0.70% |\n\n\nJohnson next reviews an equity swap with an annual reset that the bank entered into six months ago as the receive-fixed, pay-equity party. Selected data regarding the equity swap, which is linked to an equity index, are presented in Exhibit 4. At the time of initiation, the underlying equity index was trading at 100.00.\n| Exhibit 4.Selected Data on Equity Swap |\n| Swap notional amount | $20，000，000 |\n| Original swap te mm | Five years， with annual resets |\n| Fixed swap rate | 2.00% |\n\n\nThe equity index is currently trading at 103.00, and relevant US spot rates, along with their associated present value factors, are presented in Exhibit 5.\n| Exhibit 5.Selected US Spot Rates and Present Value Factors |\n| Maturity(years) | Spot Rate | Present Value Factors |\n| 0.5 | 0.40% | 0.998004 |\n| 1.5 | 1.00% | 0.985222 |\n| 2.5 | 1.20% | 0.970874 |\n| 3.5 | 2.00% | 0.934579 |\n| 4.5 | 2.60% | 0.895255 |\n\n\nJohnson reviews a 6×9 FRA that the bank entered into 90 days ago as the pay-fixed/receive-floating party. Selected data for the FRA are presented in Exhibit 6, and current Libor data are presented in Exhibit 7. Based on her interest rate forecast, Johnson also considers whether the bank should enter into new positions in 1 × 4 and 2 × 5 FRAs.\n| Exhibit 6.6×9FRA Data |\n| FRA term | 6×9 |\n| FRA rate | 0.70% |\n| FRA notional amount | USS 20， 000， 000 |\n| FRA settlement terms | Advanced set， advanced settle |\n\n\n\n| Exhibit 7.Current Libor |\n| 30-day Libor | 0.75% |\n| 60-day Libor | 0.82% |\n| 90-day Libor | 0.90% |\n| 120-day Libor | 0.92% |\n| 150-day Libor | 0.94% |\n| 180-day Libor | 0.95% |\n| 210-day Libor | 0.97% |\n| 270-day Libor | 1.00% |\n\n\nThree months later, the 6 × 9 FRA in Exhibit 6 reaches expiration, at which time the three-month US dollar Libor is 1.10% and the six-month US dollar Libor is 1.20%. Johnson determines that the appropriate discount rate for the FRA settlement cash flows is 1.10%.\nFrom the bank's perspective, using data from Exhibits 4 and 5, the fair value of the equity swap is closest to:\nOption A:–$1,139,425.\nOption B:–$781,323.\nOption C:–$181,323.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Trident Advisory Group manages assets for high-net-worth individuals and family trusts.Alice Lee, chief investment officer, is meeting with a client, Noah Solomon, to discuss risk management strategies for his portfolio. Solomon is concerned about recent volatility and has asked Lee to explain options valuation and the use of options in risk management.Options on StockLee begins: “We use the Black-Scholes-Merton (BSM) model for option valuation. To fully understand the BSM model valuation, one needs to understand the assumptions of the model. These assumptions include normally distributed stock returns, constant volatility of return on the underlying, constant interest rates, and continuous prices” Lee uses the BSM model to price TCB, which is one of Solomon's holdings. Exhibit 1 provides the current stock price (S), exercise price (X), risk-free interest rate (r), volatility (σ), and time to expiration (T) in years as well as selected outputs from the BSM model. TCB does not pay a dividend.\n| Exhibit lBS M Model for European Options on TCB |\n| BSM Inputs |\n| SXrT |\n| $57.03550.22%32%0.25 |\n|  |\n| BSMOutputs |\n| BSMBSMdN(d)dN(da)Call PricePut Price |\n| 0.31000.62170.15000.5596$4.695$2.634 |\n\n\nOptions on FuturesThe Black model valuation and selected outputs for options on another of Solomon's holdings, the GPX 500 Index (GPX), are shown in Exhibit 2. The spot index level for the GPX is 187.95, and the index is assumed to pay a continuous dividend at a rate of 2.2% (5) over the life of the options being valued, which expire in 0.36 years. A futures contract on the GPX also expiring in 0.36 years is currently priced at 186.73.\n| Exhibit 2.Black Model for European Options on the GPX Index |\n| Black Model Inputs |\n| GPX Index | X | r | 8 Yield |\n| 187.95 | 180 | 0.39% | 24% | 0.36 | 2.2% |\n| Black | Black | Market | Market |\n| Model | Model | Call Price | Put Price |\n| Call Value | Put Value |\n| $14.2089 | $7.4890 | $14.26 | $7.20 |\n| Option Greeks |\n| Vega |\n| Delta(cal) Delta(put) | Gamma(call or | Theta(cal) | Rho(cal) | per% |\n| put) | daily | per% | (call or |\n| put) |\n\n\nAfter reviewing Exhibit 2, Solomon asks Lee which option Greek letter best describes the changes in an option's value as time to expiration declines.Solomon observes that the market price of the put option in Exhibit 2 is $7.20. Lee responds that she used the historical volatility of the GPX of 24% as an input to the BSM model, and she explains the implications for the implied volatility for the GPX.Options on Interest RatesSolomon forecasts the three-month Libor will exceed 0.85% in six months and is considering using options to reduce the risk of rising rates. He asks Lee to value an interest rate call with a strike price of 0.85%. The current three-month Libor is 0.60%, and an FRA for a three-month Libor loan beginning in six months is currently 0.75%.Hedging Strategy for the Equity IndexSolomon's portfolio currently holds 10,000 shares of an exchange-traded fund (ETF) that tracks the GPX. He is worried the index will decline. He remarks to Lee, “You have told me how the BSM model can provide useful information for reducing the risk of my GPX position” Lee suggests a delta hedge as a strategy to protect against small moves in the GPX Index.Lee also indicates that a long position in puts could be used to hedge larger moves in the GPX. She notes that although hedging with either puts or calls can result in a delta-neutral position, they would need to consider the resulting gamma.\nThe strategy suggested by Lee for hedging small moves in Solomon's ETF position would most likely involve:\nOption A:Selling put options.\nOption B:Selling call options.\nOption C:Buying call options.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Tiu Asset Management (TAM), a hypothetical financial services firm, recently hired Jonna Yun. Yun is a member of TAM’s Global Equity portfolio team and is assigned the task of analyzing the effects of regulation on the financial services sector of a par-ticular country. In her first report to the team, Yun makes the following statements:Statement 1 The country’s regulator, a government agency, concerned about systemic risk, is calling for an accelerated adoption of central-ized derivatives settlement (as opposed to bilateral settlement between two counterparties)—a more stringent rule—ahead of other major countries that are considering a similar move.Statement 2 Regulators use various tools to intervene in the financial services sector.Statement 3 Regulations may bring benefits to the economy, but they may also have unanticipated costs.Statement 4 The country’s regulatory authorities are considering a regula-tion that is similar to Regulation Q in the United States, which imposed a ceiling on interest rates paid by banks for certain bank deposits.\nWhat is the most likely basis for the concerns noted in Statement 1?\nOption A:Externalities\nOption B:Regulatory arbitrage\nOption C:Informational friction", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Cate Stephenson is an analyst in the economics research division of an international securities firm. She is conducting research on the regulatory environment in certain European countries. Stephenson begins with an analysis of Genovia.Genovia has recently introduced a new accounting statute. In Genovia, there is an independent regulator - “Le regulateur.” Le regulateur is not a self-regulating organization (SRO). There is also an SRO – “L'organisation.” L'organisation is not an independent regulator.In her research report, Stephenson makes the following statements:Statement 1:Le regulateur has been given legal authority by the government to enforce the new statute.Statement 2:L'organisation issues administrative regulations related to the new statute using government funding.Statement 3:L'organisation has member companies that accept the authorization of L'organisation to set and enforce rules and standards. Stephenson and her supervisor discuss the intended and unintended effects of implementing the new statute, and Stephenson makes two comments.Comment 1:It is likely that some unintended consequences will be identified in regulatory filings prior to implementation of the new legislation.Comment 2:Indirect costs arise because of unintended consequences and may result in high unanticipated costs.Stephenson reads a report titled \"International Trade;' which has three sections about Genovia's policies and regulations.The first section of the report discusses policies that legislators may implement to accomplish Genovia's objective of promoting free trade on industrial goods.The second section of the report covers corporate domicile. Stephenson learns that regulators in Genovia recently amended regulations to encourage foreign businesses to move their corporate domicile to Genovia.The third section of the report reviews the regulation of commerce. Genovia's goal is to establish an environment that encourages foreign businesses to increase trade with domestic businesses. Stephenson considers two features of Genovia's regulation of commerce.Feature 1:Recent court decisions have upheld financial liability and bankruptcy laws.Feature 2:A legal structure is in place governing contracts and each party's rights.Stephenson then reviews two initiatives by Genovia to improve domestic policies and regulations.The first initiative by Genovia is its passage of conflict of interest regulations. Regulators implement regulatory restrictions and regulatory mandates that apply to employees of securities firms. One of Stephenson's research colleagues writes reports on a company in which he owns shares.The second initiative by Genovia is to reduce pollution and promote renewable electricity generation. Two years ago, the government implemented taxes on fossil fuels and subsidies on hydropower and other renewables. Stephenson reviews the changes in sources of electricity production since the policies were introduced, shown in Exhibit 1.\n| Exhibit l.Geno via's Domestic Electricity Generation Production |\n| Sector | Year O | Year l | Year 2 |\n| Fossil fuels | 462 | 446 | 426 |\n| Hydropower | 186 | 231 | 273 |\n| Other renewables | 97 | 120 | 154 |\n| Total | 745 | 797 | 853 |\n| Note：Amounts are inter a watt hours(TWh). |\n\n\n \nBy amending regulations to encourage foreign businesses to change their corporate domicile, regulators are encouraging regulatory:\nOption A:capture.\nOption B:arbitrage.\nOption C:competition.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Victor Klymchuk, the chief economist at ECONO Consulting (EC), is reviewing the long-term GDP growth of three countries over the recent decade. Klymchuk is interested in forecasting the long-term change in stock market value for each country. Exhibit 1 presents current country characteristics and historical information on selected economic variables for the three countries.\n| Exhibit l.Select Country Factors and Historical Economic Data |\n| 2000-2010GrowthGrowth inin HoursLaborGrowthGrowthCountry FactorsWorkedProductivityin TFPin GDP |\n| (%) | (%) | (%) | (%) |\n| High level of savi gs |\n| and investment |\n| Highly educated |\n| Countryworkforce0.92.4ALow tariffs on foreign | 0.6 | 3.3 |\n| imports |\n| Limited natural |\n| resources |\n| >Developed fi an cial |\n| markets |\n| Moderate levels of |\n| disposable income |\n| CountrySignificant foreign-0.31.6Bdirect and indirectinvestmentsSignificant naturalresources | 0.8 | 1.3 |\n| Polt cal y unstable |\n| Limited property rights |\n| CountryPoor public education1.80.8 | -0.3 | 2.6 |\n| Cand health |\n| Significant natural |\n\n\nKlymchuk instructs an associate economist at EC to assist him in forecasting the change in stock market value for each country. Klymchuk reminds the associate:Statement 1:“Over short time horizons, percentage changes in GDP, the ratio of earnings to GDP, and the price-to-earnings ratio are important factors for describing the relationship between economic growth and stock prices. However, I am interested in a long-term stock market forecast.”A client is considering investing in the sovereign debt of Country A and Country B and asks Klymchuk his opinion of each country's credit risk. Klymchuk tells the client:Statement 2:“Over the next 10 years, I forecast higher potential GDP growth for Country A and lower potential GDP growth for Country B. The capital per worker is similar and very high for both countries, but per capita output is greater for Country A.”The client tells Klymchuk that Country A will offer 50-year bonds and that he believes the bonds could be a good long-term investment given the higher potential GDP growth. Klymchuk responds to the client by saying:Statement 3:After the next 10 years, I think the sustainable rate of economic growth for Country A will be affected by a growing share of its population over the age of 65, a declining percentage under age 16, and minimal immigration.”The client is surprised to learn that Country C, a wealthy, oil-rich country with significant reserves, is experiencing sluggish economic growth and asks Klymchuk for an explanation. Klymchuk responds by stating:Statement 4:“While countries with access to natural resources are often wealthier, the relationship between resource abundance and economic growth is not clear. My analysis shows that the presence of a dominant natural resource (oil) in Country C is constraining growth. Interestingly, Country A has few natural resources, but is experiencing a strong rate of increase in per capita GDP growth.”Klymchuk knows that growth in per capita income cannot be sustained by pure capital deepening. He asks the associate economist to determine how important capital deepening is as a source of economic growth for each country. Klymchuk instructs the associate to use the data provided in Exhibit 1.Klymchuk and his associate debate the concept of convergence. The associate economist believes that developing countries, irrespective of their particular characteristics, will eventually equal developed countries in per capita output. Klymchuk responds as follows:Statement 5:“Poor countries will only converge to the income levels of the richest countries if they make appropriate institutional changes.”\nBased upon Exhibit 1, capital deepening as a source of growth was most important for:\nOption A:Country A.\nOption B:Country B.\nOption C:Country C.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Hans Schmidt, CFA, is a portfolio manager with a boutique investment firm that specializes in sovereign credit analysis. Schmidt's supervisor asks him to develop estimates for GDP growth for three countries. Information on the three countries is provided in Exhibit 1.\n| Exhibit l.Select Economic Data for Countries A， B， and C |\n| Country | Economy | Capital per Worker |\n| A | Developed | High |\n| B | Developed | High |\n| C | Developing | Low |\n\n\nAfter gathering additional data on the three countries, Schmidt shares his findings with colleague, Sean O'Leary. After reviewing the data, O'Leary notes the following observations:Observation 1:The stock market of Country A has appreciated considerably over the past several years. Also, the ratio of corporate profits to GDP for Country A has been trending upward over the past several years and is now well above its historical average.Observation 2:The government of Country C is working hard to bridge the gap between its standard of living and that of developed countries. Currently, the rate of potential GDP growth in Country C is high.Schmidt knows that a large part of the analysis of sovereign credit is to develop a thorough understanding of what the potential GDP growth rate is for a particular country and the region in which the country is located. Schmidt is also doing research on Country D for a client of the firm. Selected economic facts on Country D are provided in Exhibit 2.\n| Exhibit 2.Select Economic Facts for Country D |\n| > | Slow GDP Growth |\n| > | Abundant Natural Resources |\n| > | Developed Economic Institutions |\n\n\nPrior to wrapping up his research, Schmidt schedules a final meeting with O'Leary to see if he can provide any other pertinent information. O'Leary makes the following statements to Schmidt:Statement 1:Many countries that have the same population growth rate, savings rate, and production function will have growth rates that converge over time.Statement 2:Convergence between countries can occur more quickly if economies are open and there is free trade and international borrowing and lending; however, there is no permanent increase in the rate of growth in an economy from a more open trade policy.\nBased upon Observation 1, in the long run the ratio of profits to GDP in Country A is most likely to:\nOption A:remain near its current level.\nOption B:increase from its current level.\nOption C:decrease from its current level.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Cate Stephenson is an analyst in the economics research division of an international securities firm. She is conducting research on the regulatory environment in certain European countries. Stephenson begins with an analysis of Genovia.Genovia has recently introduced a new accounting statute. In Genovia, there is an independent regulator - “Le regulateur.” Le regulateur is not a self-regulating organization (SRO). There is also an SRO – “L'organisation.” L'organisation is not an independent regulator.In her research report, Stephenson makes the following statements:Statement 1:Le regulateur has been given legal authority by the government to enforce the new statute.Statement 2:L'organisation issues administrative regulations related to the new statute using government funding.Statement 3:L'organisation has member companies that accept the authorization of L'organisation to set and enforce rules and standards. Stephenson and her supervisor discuss the intended and unintended effects of implementing the new statute, and Stephenson makes two comments.Comment 1:It is likely that some unintended consequences will be identified in regulatory filings prior to implementation of the new legislation.Comment 2:Indirect costs arise because of unintended consequences and may result in high unanticipated costs.Stephenson reads a report titled \"International Trade;' which has three sections about Genovia's policies and regulations.The first section of the report discusses policies that legislators may implement to accomplish Genovia's objective of promoting free trade on industrial goods.The second section of the report covers corporate domicile. Stephenson learns that regulators in Genovia recently amended regulations to encourage foreign businesses to move their corporate domicile to Genovia.The third section of the report reviews the regulation of commerce. Genovia's goal is to establish an environment that encourages foreign businesses to increase trade with domestic businesses. Stephenson considers two features of Genovia's regulation of commerce.Feature 1:Recent court decisions have upheld financial liability and bankruptcy laws.Feature 2:A legal structure is in place governing contracts and each party's rights.Stephenson then reviews two initiatives by Genovia to improve domestic policies and regulations.The first initiative by Genovia is its passage of conflict of interest regulations. Regulators implement regulatory restrictions and regulatory mandates that apply to employees of securities firms. One of Stephenson's research colleagues writes reports on a company in which he owns shares.The second initiative by Genovia is to reduce pollution and promote renewable electricity generation. Two years ago, the government implemented taxes on fossil fuels and subsidies on hydropower and other renewables. Stephenson reviews the changes in sources of electricity production since the policies were introduced, shown in Exhibit 1.\n| Exhibit l.Geno via's Domestic Electricity Generation Production |\n| Sector | Year O | Year l | Year 2 |\n| Fossil fuels | 462 | 446 | 426 |\n| Hydropower | 186 | 231 | 273 |\n| Other renewables | 97 | 120 | 154 |\n| Total | 745 | 797 | 853 |\n| Note：Amounts are inter a watt hours(TWh). |\n\n\n \nWhich of Stephenson's comment to her supervisor is most likely correct?\nOption A:Only Comment 1 is correct.\nOption B:Only Comment 2 is correct.\nOption C:Both Comment 1 and Comment 2 are correct.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Adam Craw, CFA, is chief executive officer (CEO) of Crawfood, a European private equity firm specializing in food retailers. The retail food industry has been consolidating during the past two years as private equity funds have closed numerous deals and taken many companies private.Crawfood recently hired Lillian Voser, a CFA Level II candidate, as a controller. On Voser's first day of work, the head of personnel informs her that by signing the employment contract, Voser agrees to comply with the company's code of ethics and compliance manual. She hands Voser copies of the code and compliance manual without further comment. Voser spends the next hour reading both documents. An excerpt from the compliance manual appears in Exhibit 1.\n| Exhibit 1.Craw food Company Compliance Manual Excerpts |\n| 1. | Employees must | notaccept gifts， benefits， compensation， or consideration that |\n| competes with， or might reasonably be expected to create a conflict of interest with |\n| their employer's interest unless they obtain written consent from all parties involved. |\n| 2.Officers have responsibility for ensuring that their direct reports—that is， employees |\n| whom they directly supervise—adhere to applicable laws， rules， and regulations. |\n| 3.Employees in possession of material nonpublic information should make reasonable |\n| efforts to achieve public dissemination of the information if such actions would not |\n| breach a duty. |\n| 4.Employees shall not trade or cause others to trade insecurities of food retailers that |\n| maybe potential takeover targets of their employer. |\n\n\nWhen she enters her new office that afternoon, Voser finds a large gift basket sent by her sister. The card reads “Congratulations on your new position.” The basket is filled with expensive high-quality food items from Greenhornfood—a local small, publicly-traded food retailer, which produces many delicatessen products under its own brand name.During the next two weeks, Voser meets with all of Crawfood's upper management, including the CEO. In his office, Craw praises Voser's efforts to complete the CFA program. “The program is demanding, but it is worthwhile.” Craw then explains his investment strategy for choosing Crawfood's acquisition targets. He points to a large map on the wall with multi-colored pins marking Crawfood's previous takeovers. The map shows acquisitions in all the major cities of Germany with one exception—the home of Crawfood headquarters. Craw remarks, “We are currently in talks for another purchase. Confidentiality prohibits me from discussing it any further, but you will hear more about it soon.”Introduced to Greenhornfood by her sister, Voser quickly becomes a loyal customer. She considers it the best food retailer in the vicinity and she frequently purchases its products.The following week, the local newspaper features an article about Greenhornfood and its young founders. The article describes the company's loyal and growing customer base as well as its poor quarterly financial results. Voser notes that the stock has steadily declined during the past twelve months. She concludes that the company has an inexperienced management team, but its popular product line and loyal customer base make the company a potential acquisition target. Voser calls her sister and recommends that she purchase Greenhornfood shares because “it would be an attractive acquisition for a larger company.” Based on Voser's recommendation, her sister buys €3,000 worth of shares.During the following two weeks the stock price of Greenhornfood continues to decline. Voser's sister is uncertain of what she should do with her position. She seeks Voser's advice. Voser recommends that her sister wait another few days before making her decision and promises to analyze the situation in the meantime.While walking by Craw's office the following day, Voser sees a document with Greenhornfood's distinctive logo and overhears the company's name through an open office door. That evening, Voser tells her sister, “with the price decline, the stock is even more attractive.” She recommends that her sister increase her position. Based on her recommendation her sister buys an additional €3,000 worth of Greenhornfood shares.One month later, Crawfood publicly announces the acquisition of Greenhornfood Company at a 20% premium to the previous day's closing price. Following the announcement, Voser's sister boasts about Voser's excellent recommendation and timing to her broker.Regulatory authorities initiate an investigation into suspicious trading in Greenhornfood shares and options preceding the formal announcement of the acquisition. Craw receives a letter from regulatory authorities stating that he is the subject of a formal investigation into his professional conduct surrounding the acquisition. He learns from the compliance officer that Voser is also under investigation. The compliance officer provides no details and out of respect for Voser's privacy, Craw makes no inquiries.The situation remains unchanged and the matter is still pending with regulatory authorities several months later when Craw receives his annual Professional Conduct Statement (PCS) from CFA Institute. He reviews the text asking “In the last two years, have you been . . . the subject of…any investigation…in which your professional conduct, in either a direct or supervisory capacity, was at issue?”\nWhen recommending the purchase of additional Greenhornfood company shares, Voser least likely violates the Standard relating to:\nOption A:loyalty to employer.\nOption B:integrity of capital markets.\nOption C:diligence and reasonable basis.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Samuel Telline, CFA, is a portfolio manager at Aiklin Investments with discretionary authority over all of his accounts. One of his clients, Alan Caper, Chief Executive Officer (CEO) of Ellipse Manufacturing, invites Telline to lunch.At the restaurant, the CEO reveals the reason for the lunch. “As you know Reinhold Partners has made an unsolicited cash offer for all outstanding shares of Ellipse Manufacturing. Reinhold has made it clear that I will not be CEO if they are successful. I can assure you that our shareholders will be better off in the long term if I'm in charge.” Caper then shows Telline his projections for a new plan designed to boost both sales and operating margins.“I know that your firm is the trustee for our firm's Employee Stock Ownership Plan (ESOP). I hope that the trustee will vote in the best interest of our shareholders—and that would be a vote against the takeover offer.”After looking through Caper's business plans, Telline says, “This plan looks good. I will recommend that the trustee vote against the offer.”Caper responds, “I remember my friend Karen Leighton telling me that the Leighton Family's Trust is managed by your firm. Perhaps the trustee could vote those shares against the acquisition as well. Karen Leighton is a close friend. I am sure that she would agree.”Telline responds, “The Family Trust is no longer managed by Aiklin.” He adds, “I understand that the Trust is very conservatively managed. I doubt it that it would have holdings in Ellipse Manufacturing.” Telline does not mention that although the Family Trust has changed investment managers, Karen Leighton remains an important client at Aiklin with significant personal holdings in Ellipse.After lunch, Telline meets with Sydney Brown, CFA, trustee of the Ellipse ESOP. He shows her Caper's plan for improvements. “I think the plan is a good one and Caper is one of the firm's most profitable accounts. We don't want to lose him.” Brown agrees to analyze the plan. After thoroughly analyzing both the plan and the takeover offer, Brown concludes that the takeover offer is best for the shareholders in the ESOP and votes the plan's shares in favor of the takeover offer.A few months later the acquisition of Ellipse by Reinhold Partners is completed. Caper again meets Telline for lunch. “I received a generous severance package and I'm counting on you to manage my money well for me. While we are on the subject, I would like to be more aggressive with my portfolio. With my severance package, I can take additional risk.” Telline and Caper discuss his current financial situation, risk tolerance, and financial objectives throughout lunch. Telline agrees to adjust Caper's investment policy statement (IPS) to reflect his greater appetite for risk and his increased wealth.Back at the office, Telline realizes that with the severance package, Caper is now his wealthiest client. He also realizes that Caper's increased appetite for risk gives him a risk profile similar to that of another client. He pulls a copy of the other client's investment policy statement (IPS) and reviews it quickly before realizing that the two clients have very different tax situations. Telline quickly revises Caper's IPS to reflect the changes in his financial situation. He uses the other client's IPS as a reference when revising the section relating to Caper's risk tolerance. He then files the revised IPS in Caper's file.The following week, an Aiklin analyst issues a buy recommendation on a small technology company with a promising software product. Telline reads the report carefully and concludes it would be suitable under Caper's new IPS. Telline places an order for 10,000 shares in Caper's account and then calls Caper to discuss the stock in more detail. Telline does not purchase the stock for any other clients. Although the one client has the same risk profile as Caper, that client does not have cash available in his account and Telline determines that selling existing holdings does not make sense.In a subsequent telephone conversation, Caper expresses his lingering anger over the takeover. “You didn't do enough to persuade Aiklin's clients to vote against the takeover. Maybe I should look for an investment manager who is more loyal.” Telline tries to calm Caper but is unsuccessful. In an attempt to change the topic of conversation, Telline states, “The firm was just notified of our allocation of a long-awaited IPO. Your account should receive a significant allocation. I would hate to see you lose out by moving your account.” Caper seems mollified and concludes the phone call, “I look forward to a long-term relationship with you and your firm.”Aiklin distributes a copy of its firm policies regarding IPO allocations to all clients annually. According to the policy, Aiklin allocates IPO shares to each investment manager and each manager has responsibility for allocating shares to accounts for which the IPO is suitable. The statement also discloses that Aiklin offers different levels of service for different fees.After carefully reviewing the proposed IPO and his client accounts, Telline determines that the IPO is suitable for 11 clients including Caper. Because the deal is oversubscribed, he receives only half of the shares he expected. Telline directs 50% of his allocation to Caper's account and divides the remaining 50% between the other ten accounts, each with a value equal to half of Caper's account.\nWhen deciding how to vote the ESOP shares, does Brown violate any CFA Institute Standards?\nOption A:No.\nOption B:Yes, relating to loyalty, prudence, and care.\nOption C:Yes, relating to diligence and reasonable basis.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Adam Craw, CFA, is chief executive officer (CEO) of Crawfood, a European private equity firm specializing in food retailers. The retail food industry has been consolidating during the past two years as private equity funds have closed numerous deals and taken many companies private.Crawfood recently hired Lillian Voser, a CFA Level II candidate, as a controller. On Voser's first day of work, the head of personnel informs her that by signing the employment contract, Voser agrees to comply with the company's code of ethics and compliance manual. She hands Voser copies of the code and compliance manual without further comment. Voser spends the next hour reading both documents. An excerpt from the compliance manual appears in Exhibit 1.\n| Exhibit 1.Craw food Company Compliance Manual Excerpts |\n| 1. | Employees must | notaccept gifts， benefits， compensation， or consideration that |\n| competes with， or might reasonably be expected to create a conflict of interest with |\n| their employer's interest unless they obtain written consent from all parties involved. |\n| 2.Officers have responsibility for ensuring that their direct reports—that is， employees |\n| whom they directly supervise—adhere to applicable laws， rules， and regulations. |\n| 3.Employees in possession of material nonpublic information should make reasonable |\n| efforts to achieve public dissemination of the information if such actions would not |\n| breach a duty. |\n| 4.Employees shall not trade or cause others to trade insecurities of food retailers that |\n| maybe potential takeover targets of their employer. |\n\n\nWhen she enters her new office that afternoon, Voser finds a large gift basket sent by her sister. The card reads “Congratulations on your new position.” The basket is filled with expensive high-quality food items from Greenhornfood—a local small, publicly-traded food retailer, which produces many delicatessen products under its own brand name.During the next two weeks, Voser meets with all of Crawfood's upper management, including the CEO. In his office, Craw praises Voser's efforts to complete the CFA program. “The program is demanding, but it is worthwhile.” Craw then explains his investment strategy for choosing Crawfood's acquisition targets. He points to a large map on the wall with multi-colored pins marking Crawfood's previous takeovers. The map shows acquisitions in all the major cities of Germany with one exception—the home of Crawfood headquarters. Craw remarks, “We are currently in talks for another purchase. Confidentiality prohibits me from discussing it any further, but you will hear more about it soon.”Introduced to Greenhornfood by her sister, Voser quickly becomes a loyal customer. She considers it the best food retailer in the vicinity and she frequently purchases its products.The following week, the local newspaper features an article about Greenhornfood and its young founders. The article describes the company's loyal and growing customer base as well as its poor quarterly financial results. Voser notes that the stock has steadily declined during the past twelve months. She concludes that the company has an inexperienced management team, but its popular product line and loyal customer base make the company a potential acquisition target. Voser calls her sister and recommends that she purchase Greenhornfood shares because “it would be an attractive acquisition for a larger company.” Based on Voser's recommendation, her sister buys €3,000 worth of shares.During the following two weeks the stock price of Greenhornfood continues to decline. Voser's sister is uncertain of what she should do with her position. She seeks Voser's advice. Voser recommends that her sister wait another few days before making her decision and promises to analyze the situation in the meantime.While walking by Craw's office the following day, Voser sees a document with Greenhornfood's distinctive logo and overhears the company's name through an open office door. That evening, Voser tells her sister, “with the price decline, the stock is even more attractive.” She recommends that her sister increase her position. Based on her recommendation her sister buys an additional €3,000 worth of Greenhornfood shares.One month later, Crawfood publicly announces the acquisition of Greenhornfood Company at a 20% premium to the previous day's closing price. Following the announcement, Voser's sister boasts about Voser's excellent recommendation and timing to her broker.Regulatory authorities initiate an investigation into suspicious trading in Greenhornfood shares and options preceding the formal announcement of the acquisition. Craw receives a letter from regulatory authorities stating that he is the subject of a formal investigation into his professional conduct surrounding the acquisition. He learns from the compliance officer that Voser is also under investigation. The compliance officer provides no details and out of respect for Voser's privacy, Craw makes no inquiries.The situation remains unchanged and the matter is still pending with regulatory authorities several months later when Craw receives his annual Professional Conduct Statement (PCS) from CFA Institute. He reviews the text asking “In the last two years, have you been . . . the subject of…any investigation…in which your professional conduct, in either a direct or supervisory capacity, was at issue?”\nDoes Craw violate any CFA Institute Standards?\nOption A:No.\nOption B:Yes, because he passes material nonpublic information to Voser.\nOption C:Yes, because he does not make reasonable efforts to prevent violations of applicable law.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Erik Brecksen, CFA, a portfolio manager at Apfelbaum Kapital, recently recruited Hans Grohl, a CFA candidate and recent MBA graduate from a top university with excellent quantitative analysis skills. Apfelbaum Kapital stresses “top-down” fundamental analysis and uses a team approach to investment management. The firm's investment professionals, all of whom are CFA charterholders or candidates, attend weekly investment committee meetings. At the meetings, analysts responsible for different industrial sectors present their research and recommendations. Following each presentation, the investment committee, consisting of senior portfolio managers, questions the analyst about the recommendation. If the majority of the committee agrees with the recommendation, the recommendation is approved and the stock is placed on a restricted list while the firm executes the necessary trades.Apfelbaum considers its research proprietary. It is intended for the sole use of its investment professionals and is not distributed outside the firm. The names of all the investment personnel associated with the sector or investment class are listed on each research report regardless of their actual level of contribution to the report.On Grohl's first day of work, Brecksen assigns him responsibility for a company that Brecksen covered previously. He provides Grohl with his past research including all of his files and reports. Brecksen instructs Grohl to report back when he has finished his research and is ready to submit his own research report on the company.Grohl reads Brecksen's old reports before studying the financial statements of the company and its competitors. Taking advantage of his quantitative analysis skills, Grohl then conducts a detailed multi-factor analysis. Afterward, he produces a written buy recommendation using Brecksen's old research reports as a guide for format and submits a draft to Brecksen for review.Brecksen reviews the work and indicates that he is not familiar with multi-factor analysis. He tells Grohl that he agrees with the buy recommendation, but instructs Grohl to omit the multi-factor analysis from the report. Grohl attempts to defend his research methodology, but is interrupted when Brecksen accepts a phone call. Grohl follows Brecksen's instructions and removes all mention of the multi-factor analysis from the final report. Brecksen presents the completed report at the weekly meeting with both his and Grohl's names listed on the document. After Brecksen's initial presentation, the committee turns to Grohl and asks about his research. Grohl takes the opportunity to mention the multi-factor analysis. Satisfied, the committee votes in favor of the recommendation and congratulates Grohl on his work.Ottie Zardt, CFA, has worked as a real estate analyst for Apfelbaum for the past 18 months. A new independent rating service has determined that Zardt's recommendations have resulted in an excess return of 12% versus the industry's return of 2.7% for the past twelve months. After learning about the rating service, Zardt immediately updates the promotional material he is preparing for distribution at an upcoming industry conference. He includes a reference to the rating service and quotes its returns results and other information. Before distributing the material at the conference, he adds a footnote stating “Past performance is no guarantee of future success.”\nWhen preparing the initial draft for Brecksen’s review, does Grohl violate any CFA Standards?\nOption A:No.\nOption B:Yes, because he used Brecksen’s research reports without permission.\nOption C:Yes, because he did not use reasonable judgment in identifying which factors were important to the analysis.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Erik Brecksen, CFA, a portfolio manager at Apfelbaum Kapital, recently recruited Hans Grohl, a CFA candidate and recent MBA graduate from a top university with excellent quantitative analysis skills. Apfelbaum Kapital stresses “top-down” fundamental analysis and uses a team approach to investment management. The firm's investment professionals, all of whom are CFA charterholders or candidates, attend weekly investment committee meetings. At the meetings, analysts responsible for different industrial sectors present their research and recommendations. Following each presentation, the investment committee, consisting of senior portfolio managers, questions the analyst about the recommendation. If the majority of the committee agrees with the recommendation, the recommendation is approved and the stock is placed on a restricted list while the firm executes the necessary trades.Apfelbaum considers its research proprietary. It is intended for the sole use of its investment professionals and is not distributed outside the firm. The names of all the investment personnel associated with the sector or investment class are listed on each research report regardless of their actual level of contribution to the report.On Grohl's first day of work, Brecksen assigns him responsibility for a company that Brecksen covered previously. He provides Grohl with his past research including all of his files and reports. Brecksen instructs Grohl to report back when he has finished his research and is ready to submit his own research report on the company.Grohl reads Brecksen's old reports before studying the financial statements of the company and its competitors. Taking advantage of his quantitative analysis skills, Grohl then conducts a detailed multi-factor analysis. Afterward, he produces a written buy recommendation using Brecksen's old research reports as a guide for format and submits a draft to Brecksen for review.Brecksen reviews the work and indicates that he is not familiar with multi-factor analysis. He tells Grohl that he agrees with the buy recommendation, but instructs Grohl to omit the multi-factor analysis from the report. Grohl attempts to defend his research methodology, but is interrupted when Brecksen accepts a phone call. Grohl follows Brecksen's instructions and removes all mention of the multi-factor analysis from the final report. Brecksen presents the completed report at the weekly meeting with both his and Grohl's names listed on the document. After Brecksen's initial presentation, the committee turns to Grohl and asks about his research. Grohl takes the opportunity to mention the multi-factor analysis. Satisfied, the committee votes in favor of the recommendation and congratulates Grohl on his work.Ottie Zardt, CFA, has worked as a real estate analyst for Apfelbaum for the past 18 months. A new independent rating service has determined that Zardt's recommendations have resulted in an excess return of 12% versus the industry's return of 2.7% for the past twelve months. After learning about the rating service, Zardt immediately updates the promotional material he is preparing for distribution at an upcoming industry conference. He includes a reference to the rating service and quotes its returns results and other information. Before distributing the material at the conference, he adds a footnote stating “Past performance is no guarantee of future success.”\nWhen listing their names on the research report, do Brecksen and Grohl violate any CFA Standards?\nOption A:No.\nOption B:Yes, because Brecksen misrepresents his authorship.\nOption C:Yes, because Grohl should dissociate from the report.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Assorted Fund, a UK-based globally diversified equity mutual fund, is considering adding Talisman Energy Inc. (Toronto Stock Exchange: TLM) to its portfolio. Talisman is an independent upstream oil and gas company headquartered in Calgary, Canada. It is one of the largest oil and gas companies in Canada and has operations in several countries. Brian Dobson, an analyst at the mutual fund, has been assigned the task of estimating a fair value of Talisman. Dobson is aware of several approaches that could be used for this purpose. After carefully considering the characteristics of the company and its competitors, he believes the company will have extraordinary growth for the next few years and normal growth thereafter. So, he has concluded that a two-stage DDM is the most appropriate for valuing the stock.Talisman pays semi-annual dividends. The total dividends during 2006, 2007, and 2008 have been C$0.114, C$0.15, and C$0.175, respectively. These imply a growth rate of 32 percent in 2007 and 17 percent in 2008. Dobson believes that the growth rate will be 14 percent in the next year. He has estimated that the first stage will include the next eight years.Dobson is using the CAPM to estimate the required return on equity for Talisman. He has estimated that the beta of Talisman, as measured against the S&P/TSX Composite Index (formerly TSE 300 Composite Index), is 0.84. The Canadian risk-free rate, as measured by the annual yield on the 10-year government bond, is 4.1 percent. The equity risk premium for the Canadian market is estimated at 5.5 percent. Based on these data, Dobson has estimated that the required return on Talisman stock is 0.041 + 0.84(0.055) = 0.0872 or 8.72 percent. Dobson is doing the analysis in January 2009 and the stock price at that time is C$17.Dobson realizes that even within the two-stage DDM, there could be some variations in the approach. He would like to explore how these variations affect the valuation of the stock. Specifically, he wants to estimate the value of the stock for each of the following approaches separately.I. The dividend growth rate will be 14 percent throughout the first stage of eight years. The dividend growth rate thereafter will be 7 percent.II. Instead of using the estimated stable growth rate of 7 percent in the second stage, Dobson wants to use his estimate that eight years later Talisman’s stock will be worth 17 times its earnings per share (trailing P/E of 17). He expects that the earnings retention ratio at that time will be 0.70.III. In contrast to the first approach above in which the growth rate declines abruptly from 14 percent in the eighth year to 7 percent in the ninth, the growth rate would decline linearly from 14 percent in the first year to 7 percent in the ninth.\nIn the first approach, what proportion of the total value of the stock is represented by the value of second stage?\nOption A:0.10.\nOption B:0.52.\nOption C:0.90.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Ryan Leigh is preparing a presentation that analyzes the valuation of the common stock of two companies under consideration as additions to his firm’s recommended list, Emerald Corporation and Holt Corporation. Leigh has prepared preliminary valuations of both companies using an FCFE model and is also preparing a value estimate for Emerald using a dividend discount model. Holt’s 2019 and 2020 financial statements, contained in Exhibits 1 and 2, are prepared in accordance with US GAAP.\n| Ex hl bit 1Holt Corporation Consolidated Balance Sheets(USS MIll lons) |\n| As of 31 December |\n| 2020 | 2019 |\n| Assets |\n| Current assets |\n| Cash and cash equivalents | $372 | $315 |\n| Accounts receivable | 770 | 711 |\n| Inventories | 846 | 780 |\n| Total current assets | 1，988 | 1，806 |\n| Gross fixed assets | 4，275 | 3，752 |\n| Less：Accumulated depreciation | 1，176 | 3，099 | 906 | 2，846 |\n| Total assets | $5，087 | $4，652 |\n| Liabilities and shareholders'equity |\n| Current liabilities |\n| Accounts payable | $476 | $443 |\n| Accrued taxes and expenses | 149 | 114 |\n| Notes payable | 465 | 450 |\n| Total current liabilities | 1，090 | 1，007 |\n| Long-term debt | 1，575 | 1，515 |\n| Common stock | 525 | 525 |\n| Retained earnings | 1，897 | 1，605 |\n| Total liabilities and shareholders'equity |  |\n\n\n\n| Exhibit 2Holt Corporation Consolidated Income Statement for the Year |\n| Ended 31 December 2020(US SMI Ill ons) |\n| Total revenues | $3，323 |\n| Cost of goods sold | 1，287 |\n| Selling， general， and administrative expenses | 858 |\n| Earnings before interest， taxes， depreciation， and amortization(EBITDA) | 1，178 |\n| Depreciation expense | 270 |\n| Operating income | 908 |\n| Interest expense | 195 |\n| Pretax income | 713 |\n| Income tax(at 32%) | 228 |\n| Net income | $485 |\n\n\nLeigh presents his valuations of the common stock of Emerald and Holt to his supervisor, Alice Smith. Smith has the following questions and comments:1 “I estimate that Emerald’s long-term expected dividend payout rate is 20% and its return on equity is 10% over the long term.”2 “Why did you use an FCFE model to value Holt’s common stock? Can you use a DDM instead?”3 “How did Holt’s FCFE for 2020 compare with its FCFF for the same year? I recommend you use an FCFF model to value Holt’s common stock instead of using an FCFE model because Holt has had a history of leverage changes in the past.”4 “In the last three years, about 5% of Holt’s growth in FCFE has come from decreases in inventory.”Leigh responds to each of Smith’s points as follows:1 “I will use your estimates and calculate Emerald’s long-term, sustainable dividend growth rate.”2 “There are two reasons why I used the FCFE model to value Holt’s common stock instead of using a DDM. The first reason is that Holt’s dividends have differed significantly from its capacity to pay dividends. The second reason is that Holt is a takeover target and once the company is taken over, the new owners will have discretion over the uses of free cash flow.”3 “I will calculate Holt’s FCFF for 2020 and estimate the value of Holt’s common stock using an FCFF model.”4 “Holt is a growing company. In forecasting either Holt’s FCFE or FCFF growth rates, I will not consider decreases in inventory to be a long-term source of growth.”\nWhich of the following long-term FCFE growth rates is most consistent with the facts and stated policies of Emerald?\nOption A:5% or lower.\nOption B:2% or higher.\nOption C:8% or higher.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Guardian Capital is a rapidly growing US investment firm. The Guardian Capital research team is responsible for identifying undervalued and overvalued publicly traded equities that have a market capitalization greater than $500 million.Due to the rapid growth of assets under management, Guardian Capital recently hired a new analyst, Jack Richardson, to support the research process. At the new analyst orientation meeting, the director of research made the following statements about equity valuation at Guardian:Statement 1“Analysts at Guardian Capital seek to identify mispricing, relying on price eventually converging to intrinsic value. However, convergence of the market price to an analyst’s estimate of intrinsic value may not happen within the portfolio manager’s investment time horizon. So, besides evidence of mispricing, analysts should look for the presence of a particular market or corporate event,—that is, a catalyst— that will cause the marketplace to re-evaluate the subject firm’s prospects.”Statement 2“An active investment manager attempts to capture positive alpha. But mispricing of assets is not directly observable. It is therefore important that you understand the possible sources of perceived mispricing.”Statement 3“For its distressed securities fund, Guardian Capital screens its investable universe of securities for companies in financial distress.”Statement 4“For its core equity fund, Guardian Capital selects financially sound companies that are expected to generate significant positive free cash flow from core business operations within a multiyear forecast horizon.”Statement 5“Guardian Capital’s research process requires analysts to evaluate the reasonableness of the expectations implied by the market price by comparing the market’s implied expectations to his or her own expectations.”After the orientation meeting, the director of research asks Richardson to evaluate three companies that are retailers of men’s clothing: Diamond Co., Renaissance Clothing, and Deluxe Men’s Wear.Richardson starts his analysis by evaluating the characteristics of the men’s retail clothing industry. He finds few barriers to new retail entrants, high intra-industry rivalry among retailers, low product substitution costs for customers and a large number of wholesale clothing suppliers.While conducting his analysis, Richardson discovers that Renaissance Clothing included three non-recurring items in their most recent earnings release: a positive litigation settlement, a one-time tax credit, and the gain on the sale of a non-operating asset.To estimate each firm’s intrinsic value, Richardson applies appropriate discount rates to each firm’s estimated free cash flows over a ten-year time horizon and to the estimated value of the firm at the end of the ten-year horizon.Michelle Lee, a junior technology analyst at Guardian, asks the director of research for advice as to which valuation model to use for VEGA, a fast growing semiconductor company that is rapidly gaining market share.The director of research states that “the valuation model selected must be consistent with the characteristics of the company being valued.”Lee tells the director of research that VEGA is not expected to be profitable for several more years. According to management guidance, when the company turns profitable, it will invest in new product development; as a result, it does not expect to initiate a dividend for an extended period of time. Lee also notes that she expects that certain larger competitors will become interested in acquiring VEGA because of its excellent growth prospects. The director of research advises Lee to consider that in her valuation.\nWhich of the following statements about the reported earnings of Renaissance Clothing is most accurate? Relative to sustainable earnings, reported earnings are likely:\nOption A:unbiased.\nOption B:upward biased.\nOption C:downward biased.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Alan Chin, the chief executive officer of Thunder Corporation, has asked his chief financial officer, Constance Ebinosa, to prepare a valuation of Thunder for the purpose of selling the company to a private investment partnership. Thunder is a profitable $200 million annual sales US domiciled manufacturer of generic household products. Customers consist of several grocery store chains in the United States. Competitors include large companies such as Procter & Gamble, Clorox, and Unilever. Thunder has been in business for 15 years and is privately owned by the original shareholders, none of whom are employed by the company. The company’s senior management has been in charge of the company’s operations for most of the past 15 years and expects to remain in that capacity after any sale.The partnership has expectations about Thunder similar to the current shareholders and management of Thunder. These investors expect to hold Thunder for an intermediate period of time and then bring the company public when market conditions are more favorable than currently.Chin is concerned about what definition of value should be used when analyzing Thunder. He notes that the stock market has been very volatile recently. He also wonders whether fair market value can be realistically estimated when the most similar recent private market transactions may not have been at arm’s length.Chin asks Ebinosa whether there will be differences in the process of valuing a private company like Thunder compared with a public company. Ebinosa replies that differences do exist and mentions several factors an analyst must consider.Ebinosa also explains that several approaches are available for valuing private companies. She mentions that one possibility is to use an asset-based approach because Thunder has a relatively large and efficient factory and warehouse for its products. A real estate appraiser can readily determine the value of these facilities. A second method would be the market approach and using an average of the price-to-earnings multiples for Procter & Gamble and Clorox. A third possibility is a discounted free cash flow approach. The latter would focus on a continuation of Thunder’s trend of slow profitable growth during the past ten years.The private investment partnership has mentioned that they are likely to use an income approach as one of their methods. Ebinosa decides to validate the estimates they make. She assumes for the next 12 months that Thunder’s revenues increase by the long-term annual growth rate of 3 percent. She also makes the following assumptions to calculate the free cash flow to the firm for the next 12 months:● Gross profit margin is 45 percent. ? Depreciation is 2 percent of revenues.● Selling, general, and administrative expenses are 24 percent of revenues.● Capital expenditures equal 125 percent of depreciation to support the current level of revenues.● Additional capital expenditures of 15 percent of incremental revenues are needed to fund future growth.● Working capital investment equals 8 percent of incremental revenues.● Marginal tax rate on EBIT is 35 percent.Chin knows that if an income approach is used then the choice of discount rate may have a large influence on the estimated value. He makes two statements regarding discount rate estimates:1. If the CAPM method is used to estimate the discount rate with a beta estimate based on public companies with operations and revenues similar to Thunder, then a small stock premium should be added to the estimate.2. The weighted average cost of capital of the private investment partnership should be used to value Thunder.Ebinosa decides to calculate a value of Thunder’s equity using the capitalized cash flow method (CCM) and decides to use the build-up method to estimate Thunder’s required return on equity. She makes the following assumptions:● Growth of FCFE is at a constant annual rate of 3 percent.● Free cash flow to equity for the year ahead is $2.5 million.● Risk free rate is 4.5 percent.● Equity risk premium is 5.0 percent.● Size premium is 2.0 percent.\nRegarding the two statements about discount rate estimates, Chin is:\nOption A:correct with respect to adding the small stock premium and correct with respect to the weighted average cost of capital.\nOption B:correct with respect to adding the small stock premium and incorrect with respect to the weighted average cost of capital.\nOption C:incorrect with respect to adding the small stock premium and incorrect with respect to the weighted average cost of capital.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Guardian Capital is a rapidly growing US investment firm. The Guardian Capital research team is responsible for identifying undervalued and overvalued publicly traded equities that have a market capitalization greater than $500 million.Due to the rapid growth of assets under management, Guardian Capital recently hired a new analyst, Jack Richardson, to support the research process. At the new analyst orientation meeting, the director of research made the following statements about equity valuation at Guardian:Statement 1“Analysts at Guardian Capital seek to identify mispricing, relying on price eventually converging to intrinsic value. However, convergence of the market price to an analyst’s estimate of intrinsic value may not happen within the portfolio manager’s investment time horizon. So, besides evidence of mispricing, analysts should look for the presence of a particular market or corporate event,—that is, a catalyst— that will cause the marketplace to re-evaluate the subject firm’s prospects.”Statement 2“An active investment manager attempts to capture positive alpha. But mispricing of assets is not directly observable. It is therefore important that you understand the possible sources of perceived mispricing.”Statement 3“For its distressed securities fund, Guardian Capital screens its investable universe of securities for companies in financial distress.”Statement 4“For its core equity fund, Guardian Capital selects financially sound companies that are expected to generate significant positive free cash flow from core business operations within a multiyear forecast horizon.”Statement 5“Guardian Capital’s research process requires analysts to evaluate the reasonableness of the expectations implied by the market price by comparing the market’s implied expectations to his or her own expectations.”After the orientation meeting, the director of research asks Richardson to evaluate three companies that are retailers of men’s clothing: Diamond Co., Renaissance Clothing, and Deluxe Men’s Wear.Richardson starts his analysis by evaluating the characteristics of the men’s retail clothing industry. He finds few barriers to new retail entrants, high intra-industry rivalry among retailers, low product substitution costs for customers and a large number of wholesale clothing suppliers.While conducting his analysis, Richardson discovers that Renaissance Clothing included three non-recurring items in their most recent earnings release: a positive litigation settlement, a one-time tax credit, and the gain on the sale of a non-operating asset.To estimate each firm’s intrinsic value, Richardson applies appropriate discount rates to each firm’s estimated free cash flows over a ten-year time horizon and to the estimated value of the firm at the end of the ten-year horizon.Michelle Lee, a junior technology analyst at Guardian, asks the director of research for advice as to which valuation model to use for VEGA, a fast growing semiconductor company that is rapidly gaining market share.The director of research states that “the valuation model selected must be consistent with the characteristics of the company being valued.”Lee tells the director of research that VEGA is not expected to be profitable for several more years. According to management guidance, when the company turns profitable, it will invest in new product development; as a result, it does not expect to initiate a dividend for an extended period of time. Lee also notes that she expects that certain larger competitors will become interested in acquiring VEGA because of its excellent growth prospects. The director of research advises Lee to consider that in her valuation.\nWhich valuation model is Richardson applying in his analysis of the retailers?\nOption A:Relative value\nOption B:Absolute value\nOption C:Sum-of-the-parts", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Consolidated Motors is a US-based corporation that sells mechanical engines and components used by electric utilities. Its Canadian subsidiary, Consol-Can, operates solely in Canada. It was created on 31 December 20X1, and Consolidated Motors determined at that time that it should use the US dollar as its functional currency. Chief Financial Officer Monica Templeton was asked to explain to the board of directors how exchange rates affect the financial statements of both Consol-Can and the consolidated financial statements of Consolidated Motors. For the presentation, Templeton collects Consol-Can's balance sheets for the years ended 20X1 and 20X2 (Exhibit 1), as well as relevant exchange rate information (Exhibit 2).\n| Exhibit 1.Consol-Can Condensed Balance Sheet for Fiscal Years Ending 31 December |\n| (CS millions) |\n| Account | 20X2 | 20X1 |\n| Cash | 135 | 167 |\n| Accounts receivable | 98 |  |\n| Inventory | 77 | 30 |\n| Fixed assets | 100 | 100 |\n| Accumulated depreciation | (10) |  |\n| Total assets | 400 | 297 |\n| Accounts payable | 77 | 22 |\n| Long-term debt | 175 | 175 |\n| Common stock | 100 | 100 |\n| Retained earnings | 48 |  |\n| Total liabilities and shareholders'equity | 400 | 297 |\n\n\n\n| Exhibit 2.Exchange Rate Information |\n| USS/C$ |\n| Rate on31December20X 10.86Average rate in20X 20.92Weighted-average rate for inventory purchases0.92Rate on31December20X 20.95 |\n\n\nTempleton explains that Consol-Can uses the FIFO inventory accounting method and that purchases of C$300 million and the sell-through of that inventory occurred evenly throughout 20X2. Her presentation includes reporting the translated amounts in US dollars for each item, as well as associated translation-related gains and losses. The board responds with several questions. ● Would there be a reason to change the functional currency to the Canadian dollar? ● Would there be any translation effects for Consolidated Motors if the functional currency for Consol-Can were changed to the Canadian dollar? ● Would a change in the functional currency have any impact on financial statement ratios for the parent company? ● What would be the balance sheet exposure to translation effects if the functional currency were changed?\nAfter translating Consol-Can's inventory and long-term debt into the parent company's currency (US$), the amounts reported on Consolidated Motor's financial statements on 31 December 20X2 would be closest to (in millions):\nOption A:$71 for inventory and $161 for long-term debt.\nOption B:$71 for inventory and $166 for long-term debt.\nOption C:$73 for inventory and $166 for long-term debt.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Kensington plc, a hypothetical company based in the United Kingdom, offers its employees a defined benefit pension plan. Kensington complies with IFRS. The assumed discount rate that the company used in estimating the present value of its pension obligations was 5.48 percent. Information on Kensington's retirement plans is presented in Exhibit 1.\n| Exhibit 1.Kensington plc Defined Benefit Pension Plan |\n| (in millions) | 2010 |\n| Components of periodic benefit cost |\n| Service cost | E228 |\n| Net interest(income) expense | 273 |\n| Re measurements | -18 |\n| Periodic pension cost | f483 |\n| Change in benefit obligation |\n| Bene ft obligations at beginning of year | f28，416 |\n| Service cost | 228 |\n| Interest cost | 1，557 |\n| Benefits paid | -1，322 |\n| Actuarial gain or loss | 0 |\n| Benefit obligations at end of year | f28，879 |\n\n\n\n| Change in plan assets |\n| Fair value of plan assets at beginning of year | f23，432 |\n| Actual return on plan assets | 1，302 |\n| Employer contributions | 693 |\n| Benefits paid | -1，322 |\n| Fair value of plan assets at end of year | f24，105 |\n| Funded status at beginning of year | -E4，984 |\n| Funded status at end of year | -E4，774 |\n\n\n \nFor the year 2010, the net interest expense of ￡273 represents the interest cost on the:\nOption A:ending benefit obligation.\nOption B:beginning benefit obligation.\nOption C:beginning net pension obligation", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Quentin Abay, CFA, is an analyst for a private equity firm interested in purchasing Bickchip Enterprises, a conglomerate. His first task is to determine the trends in ROE and the main drivers of the trends using DuPont analysis. To do so he gathers the data in Exhibit 1.\n| Exhibit 1.Selected Financial Data for Bick chip Enterprises(e Thousands) |\n| 2009 | 2008 | 2007 |\n| Revenue | 72，448 | 66，487 | 55，781 |\n| Earnings before interest and tax | 6，270 | 4，710 | 3，609 |\n| Earnings before tax | 5，101 | 4，114 | 3，168 |\n| Net income | 4，038 | 3，345 | 2，576 |\n| Asset turnover | 0.79 | 0.76 | 0.68 |\n| Assets/Equity | 3.09 | 3.38 | 3.43 |\n\n\nAfter conducting the DuPont analysis, Abay believes that his firm could increase the ROE without operational changes. Further, Abay thinks that ROE could improve if the company divested segments that were generating the lowest returns on capital employed (total assets less non-interest-bearing liabilities). Segment EBIT margins in 2009 were 11 percent for Automation Equipment, 5 percent for Power and Industrial, and 8 percent for Medical Equipment. Other relevant segment information is presented in Exhibit 2.\n| Exhibit 2.Segment Data for Bick chip Enterprises(E Thousands) |\n| Operating Segments | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 |\n| Automation Equipment | 10，705 | 6，384 | 5，647 | 700 | 743 | 616 |\n| Power and Industrial | 15，805 | 13，195 | 12，100 | 900 | 849 | 634 |\n| Medical Equipment | 22，870 | 22，985 | 22，587 | 908 | 824 | 749 |\n| 49，380 | 42，564 | 40，334 | 2，508 | 2，416 | 1，999 |\n\n\nAbay is also concerned with earnings quality, so he intends to calculate Bickchip's cash-flow-based accruals ratio and the ratio of operating cash flow before interest and taxes to operating income. To do so, he prepares the information in Exhibit 3.\n| Exhibit 3.Earnings Quality Data for Bick chip Enterprises(E Thousands) |\n| 2009 | 2008 | 2007 |\n| Net income | 4，038 | 3，345 | 2，576 |\n| Net cashflow provided by(used in) operating activitya | 9，822 | 5，003 | 3，198 |\n| Net cashflow provided by(used in) investing activity | (10，068) | (4，315) | (5，052) |\n| bNet cashflow provided by(used in) financing activity | (5，792) | 1，540 | (2，241) |\n| Average net operating assets | 43，192 | 45，373 | 40，421 |\n| aincludes cash paid for taxes of： | (1，930) | (1，191) | (1，093) |\n| bincludes cash paid for interest of： | (1，169) | (596) | (441) |\n\n\n \nThe cash-flow-based accruals ratios from 2007 to 2009 indicate:\nOption A:improving earnings quality.\nOption B:deteriorating earnings quality.\nOption C:no change in earnings quality.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Cinnamon, Inc. is a diversified manufacturing company headquartered in the United Kingdom. It complies with IFRS. In 2009, Cinnamon held a 19 percent passive equity ownership interest in Cambridge Processing that was classified as available-for-sale. During the year, the value of this investment rose by ￡2 million. In December 2009, Cinnamon announced that it would be increasing its ownership interest to 50 percent effective 1 January 2010 through a cash purchase. Cinnamon and Cambridge have no intercompany transactions. Peter Lubbock, an analyst following both Cinnamon and Cambridge, is curious how the increased stake will affect Cinnamon's consolidated financial statements. He asks Cinnamon's CFO how the company will account for the investment, and is told that the decision has not yet been made. Lubbock decides to use his existing forecasts for both companies' financial statements to compare the outcomes of alternative accounting treatments. Lubbock assembles abbreviated financial statement data for Cinnamon (Exhibit 1) and Cambridge (Exhibit 2) for this purpose.\n| Exhibit 1.Selected Financial Statement Information for Cinnamon， Inc.(E Millions) |\n| Year ending 31 December | 2009 | 2010* |\n| Revenue | 1，400 | 1，575 |\n| Operating income | 126 | 142 |\n| Net income | 62 | 69 |\n| 31 December | 2009 | 2010* |\n| Total assets | 1，170 | 1，317 |\n| Shareholders'equity | 616 | 685 |\n\n\n\n| Exhibit 2.Selected Financial Statement Information for Cambridge Processing |\n| (E Millions) |\n| Year ending 31 December | 2009 | 2010* |\n| Revenue | 1，000 | 1，100 |\n| Operating income | 80 | 88 |\n| Net income | 40 | 44 |\n| Dividends paid | 20 | 22 |\n| 31 December | 2009 | 2010* |\n| Total assets | 800 | 836 |\n| Shareholders'equity | 440 | 462 |\n| *Estimates made prior to announcement of increased stake by Cinnamon. |\n\n\n \nAt 31 December 2010, assuming control and recognition of goodwill, Cinnamon's reported debt to equity ratio willmost likely be highest if it accounts for its investment in Cambridge using the:\nOption A:equity method.\nOption B:full goodwill method.\nOption C:partial goodwill method.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Percy Byron, CFA, is an equity analyst with a UK-based investment firm. One firm Byron follows is NinMount PLC, a UK-based company. On 31 December 2008, NinMount paid ￡320 million to purchase a 50 percent stake in Boswell Company. The excess of the purchase price over the fair value of Boswell's net assets was attributable to previously unrecorded licenses. These licenses were estimated to have an economic life of six years. The fair value of Boswell's assets and liabilities other than licenses was equal to their recorded book values. NinMount and Boswell both use the pound sterling as their reporting currency and prepare their financial statements in accordance with IFRS. Byron is concerned whether the investment should affect his “buy” rating on NinMount common stock. He knows NinMount could choose one of several accounting methods to report the results of its investment, but NinMount has not announced which method it will use. Byron forecasts that both companies' 2009 financial results (excluding any merger accounting adjustments) will be identical to those of 2008. NinMount's and Boswell's condensed income statements for the year ended 31 December 2008, and condensed balance sheets at 31 December 2008, are presented in Exhibits 1 and 2, respectively.\n| Exhibit 1.N in Mount PLC and Boswell Company Income Statements for the Year |\n| Ended 31 December 2008(E Millions) |\n| N in Mount | Boswell |\n| Net sales | 950 | 510 |\n| Cost of goods sold | (495) | (305) |\n| Selling expenses | (50) | (15) |\n| Administrative expenses | (136) | (49) |\n| Depreciation&amortization expense | (102) | (92) |\n| Interest expense | (42) | (32) |\n| Income before taxes | 125 | 17 |\n| Income tax expense | (50) | (7) |\n| Net income | 75 | 10 |\n\n\n\n| Exhibit 2.N in Mount PLC and Boswell Company Balance Sheets at 31 December 2008 |\n| N in Mount | Boswell |\n| Cash | 50 | 20 |\n| Receivables—net | 70 | 45 |\n| Inventory | 130 | 75 |\n| Total current assets | 250 | 140 |\n| Property， plant， &equipment net | 1，570 | 930 |\n| Investment in Boswell | 320 |  |\n| Total assets | 2，140 | 1，070 |\n| Current liabilities | 110 | 90 |\n| Long-term debt | 600 | 400 |\n| Total liabilities | 710 | 490 |\n| Common stock | 850 | 535 |\n| Retained earnings | 580 | 45 |\n\n\n\n| Inventory | 130 | 75 |\n| Total current assets | 250 | 140 |\n| Property， plant， &equipment—net | 1，570 | 930 |\n| Investment in Boswell | 320 |  |\n| Total assets | 2，140 | 1，070 |\n| Current liabilities | 110 | 90 |\n| Long-term debt | 600 | 400 |\n| Total liabilities | 710 | 490 |\n| Common stock | 850 | 535 |\n| Retained earnings | 580 | 45 |\n| Total equity | 1，430 | 580 |\n| Total liabilities and equity | 2，140 | 1，070 |\n| Note：Balance sheets reflect the purchase price paid by N in Mount， but do not yet consider the |\n\n\n \nBased on Byron's forecast, NinMount's net profit margin for 2009 most likely will be highest if the results of the acquisition are reported using:\nOption A:the equity method.\nOption B:consolidation with full goodwill.\nOption C:consolidation with full goodwill.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Liz Tyo is a fund manager for an actively managed global fixed-income fund that buys bonds issued in Countries A，B，and C. She and her assistant are preparing the quarterly markets update. Tyo begins the meeting by distributing the daily rates sheet, which includes the current government spot rates for Countries A, B, and C as shown in Exhibit 1.\n| Exhibit l Today's Government Spot Rates |\n| Maturity | Country A | Country B | Country C |\n| One year | 0.40% | -0.22% | 14.00% |\n| Two years | 0.70 | -0.20 | 12.40 |\n| Three years | 1.00 | -0.12 | 11.80 |\n| Four years | 1.30 | -0.02 | 11.00 |\n| Five years | 1.50 | 0.13 | 10.70 |\n\n\nTyo asks her assistant how these spot rates were obtained. The assistant replies, “Spot rates are determined through the process of bootstrapping. It entails backward substitution using par yields to solve for zero-coupon rates one by one, in order from latest to earliest maturities.”Tyo then provides a review of the fund's performance during the last year and comments, “The choice of an appropriate benchmark depends on the country's characteristics. For example, although Countries A and B have both an active government bond market and a swap market, Country C's private sector is much bigger than its public sector, and its government bond market lacks liquidity.”Tyo further points out, “The fund's results were mixed; returns did not benefit from taking on additional risk. We are especially monitoring the riskiness of the corporate bond holdings. For example, our largest holdings consist of three four-year corporate bonds (Bonds 1, 2, and 3) with identical maturities, coupon rates, and other contract terms. These bonds have Z-spreads of 0.55%, 1.52%, and 1.76%, respectively:”Tyo continues, “We also look at risk in terms of the swap spread. We considered historical three-year swap spreads for Country B, which reflect that market's credit and liquidity risks, at three different points in time.” Tyo provides the information in Exhibit 2.\n| Exhibit 2 Selected Historical Three-Year Rates for Country B |\n| Period | Govemment Bond Yield(%) | Fixed-for-Floating Libor Swap |\n| (%) |\n| 1 Month ago | -0.10 | 0.16 |\n| 6 Month ago | -0.08 | 0.01 |\n| 12 Month ago | -0.07 | 0.71 |\n\n\nTyo then suggests that the firm was able to add return by riding the yield curve. The fund plans to continue to use this strategy but only in markets with an attractive yield curve for this strategy.She moves on to present her market views on the respective yield curves for a five-year investment horizon.Country A: “The government yield curve has changed little in terms of its level and shape during the last few years, and 1 expect this trend to continue. We assume that future spot rates reflect the current forward curve for all maturities.”Countrγ B: “Because of recent economic trends, I expect a reversal in the slope of the current yield curve. We assume that future spot rates will be higher than current forward rates for all maturities.”Country C: \"To improve liquidity, Country C's central bank is expected to intervene, leading to a reversal in the slope of the existing yield curve. We assume that future spot rates will be lower than today's forward rates for all maturities.”Tyo's assistant asks, “Assuming investors require liquidity premiums, how can a yield curve slope downward? What does this imply about forward rates?\"Tyo answers, “Even if investors require compensation for holding longer-term bonds, the yield curve can slope downward ----- for example, if there is an expectation of severe deflation. Regarding forward rates, it can be helpful to understand yield curve dynamics by calculating implied forward rates. To see what I mean, we can use Exhibit 1 to calculate the forward rate for a two-year Country C loan beginning in three years.”\nBased on the given Z-spreads for Bonds 1, 2, and 3, which bond has the greatest credit and liquidity risk?\nOption A:Bond 1\nOption B:Bond 2\nOption C:Bond 3", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Jules Bianchi is a bond analyst for Maneval Investments, lnc. Bianchi gathers data on three corporate bonds, as shown in Exhibit 1.\n| Exibit 1.Selected Bond Data |\n| Issuer | Coupon Rate | Price | Bond Description |\n| Ayrault， lnc.(A I) | 5.25% | 100.200 | C aIlable at par in one year and two |\n| years from today |\n| Blum， lne.(BI) | 5.25% | 101.300 | Option-free |\n| Cresson Enterprises(CE) | 5.25% | par in one year from | 102.100 | Put able at |\n| today |\n| Note：Each bond has a remaining maturity of three years， annual coupon payments， and a |\n| credit rating of BBB. |\n\n\nTo assess the interest rate risk of the three bonds, Bianchi constructs two binomial interest rate trees based on a 10% interest rate volatility assumption and a current one-year rate of 1%. Panel A of Exhibit 2 provides an interest rate tree assuming the benchmark yield curve shifts down by 30 bps, and Panel B provides an interest rate tree assuming the benchmark yield curve shifts up by 30 bps. Bianchi determines that the AI bond is currently trading at an option-adjusted spread (OAS) of 13.95 bps relative to the benchmark yield curve.\n| 7.0037% |\n| 4.6947% |\n\n| Panel B Interest Rates Shift Upby30bps |\n| 7.7432% |\n\n| Exhibit 2.Binomial Interest Rate Trees |\n| Panel A Interest Rates Shift Down by30bps |\n| Year 0 | Year 1 | Year 2 |\n\n| 3.7000% |\n| 4.3000% |\n\n\nArmand Gillette, a convertible bond analyst, stops by Bianchi's office to discuss two convertible bonds. One is issued by DeLille Enterprises (DE) and the other is issued by Raffarin Incorporated (RI). Selected data for the two bonds are presented in Exhibits 3 and 4.\n| Exhibit 3 Selected Data for DE Convertible Bond |\n| Issue price | E 1， 000atpar |\n| Conversion period | 13September 20X 5to |\n| 12 |\n| September 20X 8 |\n| Initial conversion price | C 10.00per share |\n| Threshold dividend | e 0.50per share |\n| Change of control conversion price | 68.00per share |\n| Common stock share price on issue date | 8.70 |\n| Share price on17September20X 5 | e9.10 |\n| Convertible bond price on17September20X 5 | C1，123 |\n\n\n\n| Exhibit 4 Selected Data for RI Convertible Bond |\n| Straight bond value | 6978 |\n| Value of embedded issuer call option | 643 |\n| Value of embedded investor put option | 626 |\n| Value of embedded call option on issuer's stock | e147 |\n| Conversion price | 612.50 |\n| Current common stock share price | 611.75 |\n\n\nGillette makes the following comments to Bianchi:■ “The DE bond does not contain any call or put options but the RI bond contains both an embedded call option and put option. I expect that DeLille Enterprises will soon announce a common stock dividend of €0.70 per share.”■ “My belief is that, over the next year, Raffarin's share price will appreciate toward the conversion price but not exceed it.”\nBased on Exhibits 1 and 2, the effective duration for the AI bond is closest to:\nOption A:1.98\nOption B:2.15\nOption C:2.73", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Liz Tyo is a fund manager for an actively managed global fixed-income fund that buys bonds issued in Countries A，B，and C. She and her assistant are preparing the quarterly markets update. Tyo begins the meeting by distributing the daily rates sheet, which includes the current government spot rates for Countries A, B, and C as shown in Exhibit 1.\n| Exhibit l Today's Government Spot Rates |\n| Maturity | Country A | Country B | Country C |\n| One year | 0.40% | -0.22% | 14.00% |\n| Two years | 0.70 | -0.20 | 12.40 |\n| Three years | 1.00 | -0.12 | 11.80 |\n| Four years | 1.30 | -0.02 | 11.00 |\n| Five years | 1.50 | 0.13 | 10.70 |\n\n\nTyo asks her assistant how these spot rates were obtained. The assistant replies, “Spot rates are determined through the process of bootstrapping. It entails backward substitution using par yields to solve for zero-coupon rates one by one, in order from latest to earliest maturities.”Tyo then provides a review of the fund's performance during the last year and comments, “The choice of an appropriate benchmark depends on the country's characteristics. For example, although Countries A and B have both an active government bond market and a swap market, Country C's private sector is much bigger than its public sector, and its government bond market lacks liquidity.”Tyo further points out, “The fund's results were mixed; returns did not benefit from taking on additional risk. We are especially monitoring the riskiness of the corporate bond holdings. For example, our largest holdings consist of three four-year corporate bonds (Bonds 1, 2, and 3) with identical maturities, coupon rates, and other contract terms. These bonds have Z-spreads of 0.55%, 1.52%, and 1.76%, respectively:”Tyo continues, “We also look at risk in terms of the swap spread. We considered historical three-year swap spreads for Country B, which reflect that market's credit and liquidity risks, at three different points in time.” Tyo provides the information in Exhibit 2.\n| Exhibit 2 Selected Historical Three-Year Rates for Country B |\n| Period | Govemment Bond Yield(%) | Fixed-for-Floating Libor Swap |\n| (%) |\n| 1 Month ago | -0.10 | 0.16 |\n| 6 Month ago | -0.08 | 0.01 |\n| 12 Month ago | -0.07 | 0.71 |\n\n\nTyo then suggests that the firm was able to add return by riding the yield curve. The fund plans to continue to use this strategy but only in markets with an attractive yield curve for this strategy.She moves on to present her market views on the respective yield curves for a five-year investment horizon.Country A: “The government yield curve has changed little in terms of its level and shape during the last few years, and 1 expect this trend to continue. We assume that future spot rates reflect the current forward curve for all maturities.”Countrγ B: “Because of recent economic trends, I expect a reversal in the slope of the current yield curve. We assume that future spot rates will be higher than current forward rates for all maturities.”Country C: \"To improve liquidity, Country C's central bank is expected to intervene, leading to a reversal in the slope of the existing yield curve. We assume that future spot rates will be lower than today's forward rates for all maturities.”Tyo's assistant asks, “Assuming investors require liquidity premiums, how can a yield curve slope downward? What does this imply about forward rates?\"Tyo answers, “Even if investors require compensation for holding longer-term bonds, the yield curve can slope downward ----- for example, if there is an expectation of severe deflation. Regarding forward rates, it can be helpful to understand yield curve dynamics by calculating implied forward rates. To see what I mean, we can use Exhibit 1 to calculate the forward rate for a two-year Country C loan beginning in three years.”\nBased on Exhibit 1 and Tyo's expectations for the yield curves, Tyo most likely perceives the bonds of which country to be fairly valued?\nOption A:Country A\nOption B:Country B\nOption C:Country C", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Jules Bianchi is a bond analyst for Maneval Investments, lnc. Bianchi gathers data on three corporate bonds, as shown in Exhibit 1.\n| Exibit 1.Selected Bond Data |\n| Issuer | Coupon Rate | Price | Bond Description |\n| Ayrault， lnc.(A I) | 5.25% | 100.200 | C aIlable at par in one year and two |\n| years from today |\n| Blum， lne.(BI) | 5.25% | 101.300 | Option-free |\n| Cresson Enterprises(CE) | 5.25% | par in one year from | 102.100 | Put able at |\n| today |\n| Note：Each bond has a remaining maturity of three years， annual coupon payments， and a |\n| credit rating of BBB. |\n\n\nTo assess the interest rate risk of the three bonds, Bianchi constructs two binomial interest rate trees based on a 10% interest rate volatility assumption and a current one-year rate of 1%. Panel A of Exhibit 2 provides an interest rate tree assuming the benchmark yield curve shifts down by 30 bps, and Panel B provides an interest rate tree assuming the benchmark yield curve shifts up by 30 bps. Bianchi determines that the AI bond is currently trading at an option-adjusted spread (OAS) of 13.95 bps relative to the benchmark yield curve.\n| 7.0037% |\n| 4.6947% |\n\n| Panel B Interest Rates Shift Upby30bps |\n| 7.7432% |\n\n| Exhibit 2.Binomial Interest Rate Trees |\n| Panel A Interest Rates Shift Down by30bps |\n| Year 0 | Year 1 | Year 2 |\n\n| 3.7000% |\n| 4.3000% |\n\n\nArmand Gillette, a convertible bond analyst, stops by Bianchi's office to discuss two convertible bonds. One is issued by DeLille Enterprises (DE) and the other is issued by Raffarin Incorporated (RI). Selected data for the two bonds are presented in Exhibits 3 and 4.\n| Exhibit 3 Selected Data for DE Convertible Bond |\n| Issue price | E 1， 000atpar |\n| Conversion period | 13September 20X 5to |\n| 12 |\n| September 20X 8 |\n| Initial conversion price | C 10.00per share |\n| Threshold dividend | e 0.50per share |\n| Change of control conversion price | 68.00per share |\n| Common stock share price on issue date | 8.70 |\n| Share price on17September20X 5 | e9.10 |\n| Convertible bond price on17September20X 5 | C1，123 |\n\n\n\n| Exhibit 4 Selected Data for RI Convertible Bond |\n| Straight bond value | 6978 |\n| Value of embedded issuer call option | 643 |\n| Value of embedded investor put option | 626 |\n| Value of embedded call option on issuer's stock | e147 |\n| Conversion price | 612.50 |\n| Current common stock share price | 611.75 |\n\n\nGillette makes the following comments to Bianchi:■ “The DE bond does not contain any call or put options but the RI bond contains both an embedded call option and put option. I expect that DeLille Enterprises will soon announce a common stock dividend of €0.70 per share.”■ “My belief is that, over the next year, Raffarin's share price will appreciate toward the conversion price but not exceed it.”\nBased on Exhibit 3, the market conversion premium per share for the DE bond on 17 September 20X5 is closest to:\nOption A:€0.90.\nOption B:€2.13.\nOption C:€2.53.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "A one-year zero-coupon bond yields 4.0%. The two- and three-year zero-coupon bonds yield 5.0% and 6.0% respectively.\nA two-year fixed-for-floating MRR swap is 1.00%, and the two-year US Treasury bond is yielding 0.63%. The swap spread is closest to:\nOption A:37 bps.\nOption B:100 bps.\nOption C:163 bps.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Michael Bloomfield is a trader at 2Fast Trading, a proprietary trading company that uses machine learning and algorithms to execute trades. He works with Amy Riley, a junior trader at the company. Bloomfield and Riley meet to review the company’s trading systems and several trades in Bloomfield’s trading account.They discuss the increasing impact of market fragmentation on available liquidity for the company’s trading strategies. Riley makes the following comments regarding market fragmentation:Comment 1: Liquidity aggregation and smart order routing help traders manage the challenges and opportunities presented by fragmentation.Comment 2: With increasing market fragmentation, traders who fill large orders now search for liquidity across multiple venues and across time to control market impact.Bloomfield tells Riley that he noticed trades of 500 shares of BYYP stock were executed every 20 minutes for an hour. Bloomfield saw the same pattern of trading in the stock during the previous trading day. He instructs Riley to submit an order to purchase BYYP shares on the assumption that a trader seeks liquidity and is executing a large buy order by breaking it into pieces. The prices of these trades and the best bids and offers in the market when the BYYP trades occurred are presented in Exhibit 1.\n| Exhibit 1 | BY YP Trade Details |\n| Trade | Trade Price | Prevailing Bid | Prevailing Offer |\n| 1 | 41.50 | 41.45 | 41.50 |\n| 2 | 41.75 | 41.73 | 41.75 |\n\n\nBloomfield shifts the conversation to AXZ Corp. Bloomfield notes that AXZ’s bid–ask spread is narrow, even though AXZ’s share price has been experiencing a period of high volatility. After extensive research, Bloomfield will purchase AXZ shares using a trading strategy that does not include standing orders.Bloomfield then assesses the risks that 2Fast’s electronic trading strategies introduce into the market. He is concerned that these risks may bring on more regulation. Bloomfield claims that the risks can be reduced by changing the structure of the market, and those structural changes can maintain 2Fast’s primary competitive advantage, which is trading faster than competitors.Bloomfield mentions that a regulatory body is investigating a competitor’s trading practices. The investigation involves a tip that the competitor is manipulating markets by submitting orders and arranging trades to influence other traders’ perceptions of value. Specifically, regulators were informed that the competitor has been buying stock to raise its price, thereby encouraging momentum traders to buy, and then selling the stock to them at higher prices. The regulator confirmed that the competitor did not use standing limit orders or commonly controlled accounts for the trades under investigation.\nBased on Exhibit 1, the average effective spread of the BYYP trades is closest to:\nOption A:$0.018.\nOption B:$0.035.\nOption C:$0.070.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Brian Johnson is a senior manager at Star Asset Management (SAMN), a large asset management firm in the United States. Tim Martin has just earned his advanced degree in statistics and was hired to support the trading team at SAMN. Martin meets with Johnson to undergo a training relating to SAMN's trading activities.Johnson begins the training with a review of the limit order book for Light Systems, Inc., which is presented in Exhibit 1. Three dealers make market for the shares of Light Systems. Based on these prices, SAMN's trading desk executes a market sell order for 1,100 shares of Light Systems.\n| Exhibit 1Limit Order Book for Light Systems, Inc. |\n| Bid | Ask |\n| Dealer | TimeEntered | Price | Size | Dealer | TimeEntered | Price | Size |\n| B | 10.10a.m. | $17.15 | 900 | C | 10.11a.m. | $17.19 | 1，200 |\n| C | 10.11a.m. | $17.14 | 1，500 | B | 10.10a.m. | $17.20 | 800 |\n| A | 10.11a.m. | $17.12 | 1，100 | A | 10.12a.m. | $17.22 | 1，100 |\n\n\nJohnson then discusses a market buy order for 5,000 shares of an illiquid stock. The order was filled in three trades, and details about the three trades are presented in Exhibit 2.\n| Exhibit 2 | Buy Trade Order Details |\n| Trade# | Time | Trade Price | Trade Size | Bid Price | Ask Price |\n| 1 | 9.45a.m. | $25.20 | 1，200 | $25.17 | $25.20 |\n| 2 | 9.55a.m. | $25.22 | 1，300 | $25.19 | $25.22 |\n| 3 | 11.30a.m. | $25.27 | 2，500 | $25.22 | $25.26 |\n\n\nJohnson explains to Martin that the number of venues trading the same instruments has proliferated in recent years, and trading in any given instrument has now been distributed across these multiple venues. As a result, the available liquidity on any one of those exchanges represents just a small portion of the aggregate liquidity for that security. As a result, SAMN has had to adapt its trading strategies, particularly for large trades.Johnson asks Martin about his views on how the introduction of electronic trading might have impacted SAMN. Martin tells Johnson:Statement 1 Once built, electronic trading systems are more efficient and cheaper to operate than floor-based trading systems.Statement 2 Electronic trading systems have attracted a lot of new buy-side traders, and the increased competition has resulted in narrower bid–ask spreads.Statement 3 The introduction of electronic markets has had a much greater impact on the trading of corporate and municipal bonds than on the trading of equities.Johnson tells Martin that communication speed is SAMN's current highest prior-ity. All of SAMN's competitors have increased their communication speeds in recent months, and Johnson says management wants SAMN to be faster than its competi-tors. SAMN's trading desk is located in a residential area far from downtown where the exchanges it works with are located. SAMN's trading team is relatively large with experienced investment professionals, and the firm recently invested in fast computers with the latest algorithms.At the end of the training, Johnson gives Martin his first assignment. The assign-ment is for Martin to use the vast amount of data that SAMN has collected to design a machine learning (ML) model using advanced statistical methods to characterize data structures and relations. Then he has to build a trading algorithm based on the same model. Since electronic trading has added systemic risk to the market, Johnson asks Martin to suggest ways to minimize the systemic risk introduced by his algorithm. Martin offers two suggestions:Suggestion 1 Perform extensive testing of the algorithm before its launch.Suggestion 2 Impose mandatory trading halts if prices change outside a threshold range.A month into the job, Johnson sends Martin to an investment conference focused on abusive trading practices. Based on what he learned at the conference, Martin recommends to Johnson that SAMN incorporate a new rule that news be validated before a trade triggered by news is executed.\nWhich market manipulation strategy is most likely the target of the new rule suggested by Martin?\nOption A:Rumormongering\nOption B:Gunning the market\nOption C:Trading for market impact", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Kata Rom is an equity analyst working for Gimingham Wealth Partners (GWP), a large investment advisory company. Rom meets with Goran Galic, a Canadian private wealth client, to explain investment strategies used by GWP to generate portfolio alpha for its clients.Rom states that GWP is recognized in the Canadian investment industry as a leading factor-based value portfolio manager and describes how GWP creates relevant investment strategies and explains GWP’s backtesting process. Rom notes the following:Statement 1: Using historical data, backtesting approximates a real-life investment process to illustrate the risk–return tradeoff of a particular proposed investment strategy.Statement 2: Backtesting is used almost exclusively by quantitative investment managers and rarely by fundamental investment managers, who are more concerned with information such as forward estimates of company earnings, macroeconomic factors, and intrinsic values.Galic, who is 62 years old, decides to allocate C$2 million (representing 10% of his net worth) to an account with GWP and stipulates that portfolio assets be restricted exclusively to domestic securities. Although GWP has not backtested its strategies with such a restriction, it has backtested its strategies using a global index that includes domestic securities. Rom shows the following risk measures to Galic for three factor portfolios.\n| Exhibit 1Downside Risk Measures for Model Factors |\n| Risk Measure | Factor 1 | Factor 2 | Factor 3 |\n| Value at risk(VaR)(95%) | (6.49%) | (0.77%) | (2.40%) |\n| Conditional VaR(CVaR) (95%) | (15.73%) | (4.21%) | (3.24%) |\n| Maximum drawdown | 35.10% | 38.83% | 45.98% |\n\n\nGalic asks Rom, “What happens if the future is different from the past?” Rom gives the following replies:Statement 3: Although backtesting can offer some comfort, you are correct that it does have a weakness: Backtesting generally does not capture the dynamic nature of financial markets and in particular may not capture extreme downside risk.Statement 4: As a result, we have captured extreme downside risk and the dynamic nature of financial markets by using the Value-at-Risk and Conditional Value-at- Risk measures.In an effort to make Galic fully aware of the risks inherent in GWP’s strategies, Rom describes a recent study that investigated the return distributions of value and momentum factors that GWP uses to construct portfolios. The study found that these distributions were non-normal based on their negative skewness, excess kurtosis, and tail dependence. Rom indicated that investment strategies based on this type of data are prone to significantly higher downside risk. Rom informs Galic that GWP also uses a technique commonly referred to as scenario analysis to examine how strategies perform in different structural regimes. Exhibit 2 compares the performance of two of GWP’s factor allocation strategies in different regimes:\n| Exhibit 2Scenario Analysis Using the Sharpe Ratio |\n| Strategy/Regime | HighVolatility | LowVolatility | Recession | Non-recession |\n| Strategy I | 0.88 | 0.64 | 0.20 | 1.00 |\n| Strategy II | 1.56 | 1.60 | 1.76 | 1.52 |\n\n\nGalic is surprised to see that some of the backtest results are unfavorable. He asks,“Why has GWP not considered strategies that perform better in backtesting?” Galic recently met with Fastlane Wealth Managers, who showed much better performance results. The portfolio manager at Fastlane told Galic that the company selects the top-performing strategies after performing thousands of backtests.\nWhich key parameter needs to be changed for a new backtest that includes Galic’s restrictions?\nOption A:Start and end dates.\nOption B:Consideration of transaction costs.\nOption C:Investment universe.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Randy Gorver, chief risk officer at Eastern Regional Bank, and John Abell, assistant risk officer, are currently conducting a risk assessment of several of the bank's independent investment functions. These reviews include the bank's fixed-income investment portfolio and an equity fund managed by the bank's trust department. Gorver and Abell are also assessing Eastern Regional's overall risk exposure.Eastern Regional Bank Fixed-Income Investment PortfolioThe bank's proprietary fixed-income portfolio is structured as a barbell portfolio: About half of the portfolio is invested in zero-coupon Treasuries with maturities in the 3- to 5-year range (Portfolio P1), and the remainder is invested in zero-coupon Treasuries with maturities in the 10- to 15-year range (Portfolio P2. Georges Montes, the portfolio manager, has discretion to allocate between 40% and 60% of the assets to each maturity “bucket” He must remain fully invested at all times. Exhibit 1 shows details of this portfolio.\n| Exhibit l.US Treasury Barbell Portfolio |\n| Maturity |\n| Pi | P2 |\n| 3-5 Years | 10-15 Years |\n| Average duration | 3.30 | 11.07 |\n| Average yield to maturity | 1.45% | 2.23% |\n| Market value | $50.3 million | $58.7 million |\n\n\nTrust Department's Equity Funda) Use of Options: The trust department of Eastern Regional Bank manages an equity fund called the Index Plus Fund, with $325 million in assets. This fund's objective is to track the S&P 500 Index price return while producing an income return 1.5 times that of the S&P 500. The bank's chief investment officer (CIO) uses put and call options on S&P 500 stock index futures to adjust the risk exposure of certain client accounts that have an investment in this fund. The portfolio of a 60-year-old widow with a below-average risk tolerance has an investment in this fund, and the CIO has asked his assistant, Janet Ferrell, to propose an options strategy to bring the portfolio's delta to 0.90.b) Value at Risk: The Index Plus Fund has a one-day 95% value at risk (VaR) of $6.5 million. Gorver asks Abell to write a brief summary of the portfolio VaR for the report he is preparing on the fund's risk position.Combined Bank Risk ExposuresThe bank has adopted a new risk policy, which requires forward-looking risk assessments in addition to the measures that look at historical risk characteristics. Management has also become very focused on tail risk since the subprime crisis and is evaluating the bank's capital allocation to certain higher-risk lines of business. Gorver must determine what additional risk metrics to include in his risk reporting to address the new policy. He asks Abell to draft a section of the risk report that will address the risk measures' adequacy for capital allocation decisions.\nTo comply with the new bank policy on risk assessment, which of the following is the best set of risk measures to add to the chief risk officer's risk reporting?\nOption A:Conditional VaR, stress test, and scenario analysis\nOption B:Monte Carlo VaR, incremental VaR, and stress test\nOption C:Parametric VaR, marginal VaR, and scenario analysis", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Carlos Altuve is a manager-of-managers at an investment company that uses quantitative models extensively. Altuve seeks to construct a multi-manager portfolio using some of the funds managed by portfolio managers within the firm. Maya Zapata is assisting him.Altuve uses arbitrage pricing theory (APT) as a basis for evaluating strategies and managing risks. From his earlier analysis, Zapata knows that Funds A and B in Exhibit 1 are well diversified. He has not previously worked with Fund C and is puzzled by the data because it is inconsistent with APT. He asks Zapata gather additional information on Fund C's holdings and to determine if an arbitrage opportunity exists among these three investment alternatives. Her analysis, using the data in Exhibit 1, confirms that an arbitrage opportunity does exist.\n| Exhibit l.Expected Returns and Factor Sensitivities(One-Factor Mode) |\n| Fund | Expected Return | Factor Sensitivity |\n| A | 0.02 | 0.5 |\n| B | 0.04 | 1.5 |\n| C | 0.03 | 0.9 |\n\n\nThe manager of Fund C makes some modifications to his portfolio and eliminates the arbitrage opportunity. Using a two-factor model, Zapata now estimates the three funds'sensitivity to inflation and GDP growth. That information is presented in Exhibit 2. Zapata assumes a zero value for the error terms when working with the selected two-factor model.\n| Exhibit 2.Expected Returns and Factor Sensitivities(Two-Factor Mode) |\n| Fund | Factor Sensitivity | Expected Return |\n| Inflation | GDP Growth |\n| A | 0.02 | 0.5 | 1.0 |\n| B | 0.04 | 1.6 | 0.0 |\n| C | 0.03 | 1.0 | 1.1 |\n\n\nAltuve asks Zapata to calculate the return for Portfolio AC, composed of a 60% allocation to Fund A and 40% allocation to Fund C, using the surprises in inflation and GDP growth in Exhibit 3.\n| Exhibit 3.Selected Data on Factors |\n| Factor | Research Staff Forecast | Actual Value |\n| Inflation | 2.0% | 2.2% |\n| GDP Growth | 1.5% | 1.0% |\n\n\nFinally, Altuve asks Zapata about the return sensitivities of Portfolios A, B, and C given the information provided in Exhibit 3.\nThe two-factor model Zapata uses is a:\nOption A:statistical factor model.\nOption B:fundamental factor model.\nOption C:macroeconomic factor model.", "output": "C"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Doris Honore is a securities analyst with a large wealth management firm. She and her colleague Bill Smith are addressing three research topics: how investment fund characteristics affect fund total returns, whether a fund rating system helps predict fund returns, and whether stock and bond market returns explain the returns of a portfolio of utility shares run by the firm.To explore the first topic, Honore decides to study US mutual funds using a sample of 555 large-cap US equity funds. The sample includes funds in style classes of value, growth, and blend (i.e., combining value and growth characteristics). The dependent variable is the average annualized rate of return (in percent) over the past five years. The independent variables are fund expense ratio, portfolio turnover, the natural logarithm of fund size, fund age, and three dummy variables. The multiple manager dummy variable has a value of 1 if the fund has multiple managers (and a value of 0 if it has a single manager). The fund style is indicated by a growth dummy (value of 1 for growth funds and 0 otherwise) and a blend dummy (value of 1 for blend funds and 0 otherwise). If the growth and blend dummies are both zero, the fund is a value fund. The regression output is given in Exhibit 1.\n| Exhibit l.Multiple Regression Output for Large-Cap Mutual Fund Sample |\n| Coefficient | Standard Error | t-Statistic |\n| Intercept | 10.9375 | 1.3578 | 8.0551 |\n| Expense ratio(%) | -1.4839 | 0.2282 | -6.5039 |\n| Portfolio tu mox ex(%) | 0.0017 | 0.0016 | 1.0777 |\n| ln(fund size in$) | 0.1467 | 0.0612 | 2.3976 |\n| Manager tenure(years) | -0.0098 | 0.0102 | -0.9580 |\n| Multiple manager dummy | 0.0628 | 0.1533 | 0.4100 |\n| Fund age(years) | -0.0123 | 0.0047 | -2.6279 |\n| Growth dummy | 2.4368 | 0.1886 | 12.9185 |\n| Blend dummy | 0.5757 | 0.1881 | 3.0611 |\n| ANOVA | df | SS | MSS |\n| Regression | 8 | 714.169 | 89.2712 |\n| Residual | 546 | 1583.113 | 2.8995 |\n| Total | 554 | 2297.282 |\n| Multiple R | 0.5576 |\n| R | 0.3109 |\n| Adjusted R | 0.3008 |\n| Standard euro x(%) | 1.7028 |\n| Observations | 555 |\n\n\nBased on the results shown in Exhibit 1, Honore wants to test the hypothesis that all of the regression coefficients are equal to zero. For the 555 fund sample, she also wants to compare the performance of growth funds with the value funds.Honore is concerned about the possible presence of multicollinearity in the regression. She states that adding a new independent variable that is highly correlated with one or more independent variables already in the regression model, has three potential consequences:1. The R2 is expected to decline.2. The regression coefficient estimates can become imprecise and unreliable.3. The standard errors for some or all of the regression coefficients will become inflated.Another concern for the regression model (in Exhibit 1) is conditional heteroskedasticity. Honore is concerned that the presence of heteroskedasticity can cause both the F-test for the overall significance of the regression and the t-tests for significance of individual regression coefficients to be unreliable. She runs a regression of the squared residuals from the model in Exhibit 1 on the eight independent variables, and finds the R2 is 0.0669.As a second research project, Honore wants to test whether including Morningstar's rating system, which assigns a one- through five-star rating to a fund, as an independent variable will improve the predictive power of the regression model. To do this, she needs to examine whether values of the independent variables in a given period predict fund return in the next period. Smith suggests three different methods of adding the Morningstar ratings to the model:■ Method 1: Add an independent variable that has a value equal to the number of stars in the rating of each fund.■Method 2: Add five dummy variables, one for each rating.■Method 3: Add dummy variables for four of the five ratings.As a third research project, Honore wants to establish whether bond market returns (proxied by returns of long-term US Treasuries) and stock market returns (proxied by returns of the S&P 500 Index) explain the returns of a portfolio of utility stocks being recommended to clients. Exhibit 2 presents the results of a regression of 10 years of monthly percentage total returns for the utility portfolio on monthly total returns for US Treasuries and the S&P 500.\n| Exhibit 2.Regression Analysis of Utility Portfolio Returns |\n| Coefficient | Standard | t-Statistic | p-Value |\n| Error |\n| Intercept | -0.0851 | 0.2829 | -0.3008 | 0.7641 |\n| US Treasury | 0.4194 | 0.0848 | 49474 | <0.0001 |\n| S&P500 | 0.6198 | 0.0666 | 9.3126 | <0.0001 |\n| ANOVA | df | SS | MSS | Significance |\n| F |\n| Regression | 2 | 827.48 | 413.74 | 46.28 | <0.0001 |\n| Residual | 117 | 1045.93 | 8.94 |\n| Total | 119 | 1873.41 |\n| Multiple R | 0.6646 |\n| R | 0.4417 |\n| Adjusted R | 0.4322 |\n| Standard error(%) | 2.99 |\n| Observations | 120 |\n\n\nFor the time-series model in Exhibit 2, Honore says that positive serial correlation would not require that the estimated coefficients be adjusted, but that the standard errors of the regression coefficients would be underestimated. This issue would cause the t-statistics of the regression coefficients to be inflated. Honore tests the null hypothesis that the there is no serial correlation in the regression residuals and finds that the Durbin-Watson statistic is equal to 1.81. The critical values at the 0.05 significance level for the Durbin-Watson statistic are dl = 1.63 and du = 1.72.Smith asks whether Honore should have estimated the models in Exhibit 1 and Exhibit 2 using a probit or logit model instead of using a traditional regression analysis.\nIs Honore's description of the effects of positive serial correlation (in Exhibit 2) correct regarding the estimated coefficients and the standard errors?\nOption A:Yes\nOption B:No, she is incorrect about only the estimated coefficients\nOption C:No, she is incorrect about only the standard errors of the regression coefficients", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Howard Golub, CFA, is preparing to write a research report on Stellar Energy Corp. common stock. One of the world's largest companies, Stellar is in the business of refining and marketing oil. As part of his analysis, Golub wants to evaluate the sensitivity of the stock's returns to various economic factors. For example, a client recently asked Golub whether the price of Stellar Energy Corporation stock has tended to rise following increases in retail energy prices. Golub believes the association between the two variables to be negative, but he does not know the strength of the association.Golub directs his assistant, Jill Batten, to study the relationships between Stellar monthly common stock returns versus the previous month's percent change in the US Consumer Price Index for Energy (CPIENG), and Stellar monthly common stock returns versus the previous month's percent change in the US Producer Price Index for Crude Energy Materials (PPICEM). Golub wants Batten to run both a correlation and a linear regression analysis. In response, Batten compiles the summary statistics shown in Exhibit 1 for the 248 months between January 1980 and August 2000. All of the data are in decimal form, where 0.01 indicates a 1 percent return. Batten also runs a regression analysis using Stellar monthly returns as the dependent variable and the monthly change in CPIENG as the independent variable. Exhibit 2 displays the results of this regression model.\n| Exhibit l.Descriptive Statistics | Monthly Return Stellar | Lagged Monthly Change |\n| Common Stock | CPI ENG | PP ICEM |\n| Mean | 0.0123 | 0.0023 | 0.0042 |\n| Standard Deviation | 0.0717 | 0.0160 | 0.0534 |\n| Covariance， Stellar vs.CPI ENG | -0.00017 |\n| Covariance， Stellar vs.PP ICEM | -0.00048 |\n| Covariance， | CPI ENG | VS. | 0.00044 |\n| PP ICEM |\n| Correlation， Stellar vs.CPI ENG | -0.1452 |\n\n\n\n| Exhibit 2.Regression Analysis with CPI ENG |\n| Regression Statistics |\n| Multiple R | 0.1452 |\n| R-squared | 0.0211 |\n| Standard error of the estimate | 0.0710 |\n| Observations | 248 |\n| Coefficients | Standard Error | t-Statistic |\n| Intercept | 0.0138 | 0.0046 | 3.0275 |\n| Slope coefficient | -0.6486 | 0.2818 | -2.3014 |\n\n\n \nDid Batten's regression analyze cross-sectional or time-series data, and what was the expected value of the error term from that regression?\nOption A:Data Type：Time-series Expected Value of Error Term：0\nOption B:Data Type：Time-series Expected Value of Error Term：εi\nOption C:Data Type：Cross-sectional Expected Value of Error Term：0", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Doris Honore is a securities analyst with a large wealth management firm. She and her colleague Bill Smith are addressing three research topics: how investment fund characteristics affect fund total returns, whether a fund rating system helps predict fund returns, and whether stock and bond market returns explain the returns of a portfolio of utility shares run by the firm.To explore the first topic, Honore decides to study US mutual funds using a sample of 555 large-cap US equity funds. The sample includes funds in style classes of value, growth, and blend (i.e., combining value and growth characteristics). The dependent variable is the average annualized rate of return (in percent) over the past five years. The independent variables are fund expense ratio, portfolio turnover, the natural logarithm of fund size, fund age, and three dummy variables. The multiple manager dummy variable has a value of 1 if the fund has multiple managers (and a value of 0 if it has a single manager). The fund style is indicated by a growth dummy (value of 1 for growth funds and 0 otherwise) and a blend dummy (value of 1 for blend funds and 0 otherwise). If the growth and blend dummies are both zero, the fund is a value fund. The regression output is given in Exhibit 1.\n| Exhibit l.Multiple Regression Output for Large-Cap Mutual Fund Sample |\n| Coefficient | Standard Error | t-Statistic |\n| Intercept | 10.9375 | 1.3578 | 8.0551 |\n| Expense ratio(%) | -1.4839 | 0.2282 | -6.5039 |\n| Portfolio tu mox ex(%) | 0.0017 | 0.0016 | 1.0777 |\n| ln(fund size in$) | 0.1467 | 0.0612 | 2.3976 |\n| Manager tenure(years) | -0.0098 | 0.0102 | -0.9580 |\n| Multiple manager dummy | 0.0628 | 0.1533 | 0.4100 |\n| Fund age(years) | -0.0123 | 0.0047 | -2.6279 |\n| Growth dummy | 2.4368 | 0.1886 | 12.9185 |\n| Blend dummy | 0.5757 | 0.1881 | 3.0611 |\n| ANOVA | df | SS | MSS |\n| Regression | 8 | 714.169 | 89.2712 |\n| Residual | 546 | 1583.113 | 2.8995 |\n| Total | 554 | 2297.282 |\n| Multiple R | 0.5576 |\n| R | 0.3109 |\n| Adjusted R | 0.3008 |\n| Standard euro x(%) | 1.7028 |\n| Observations | 555 |\n\n\nBased on the results shown in Exhibit 1, Honore wants to test the hypothesis that all of the regression coefficients are equal to zero. For the 555 fund sample, she also wants to compare the performance of growth funds with the value funds.Honore is concerned about the possible presence of multicollinearity in the regression. She states that adding a new independent variable that is highly correlated with one or more independent variables already in the regression model, has three potential consequences:1. The R2 is expected to decline.2. The regression coefficient estimates can become imprecise and unreliable.3. The standard errors for some or all of the regression coefficients will become inflated.Another concern for the regression model (in Exhibit 1) is conditional heteroskedasticity. Honore is concerned that the presence of heteroskedasticity can cause both the F-test for the overall significance of the regression and the t-tests for significance of individual regression coefficients to be unreliable. She runs a regression of the squared residuals from the model in Exhibit 1 on the eight independent variables, and finds the R2 is 0.0669.As a second research project, Honore wants to test whether including Morningstar's rating system, which assigns a one- through five-star rating to a fund, as an independent variable will improve the predictive power of the regression model. To do this, she needs to examine whether values of the independent variables in a given period predict fund return in the next period. Smith suggests three different methods of adding the Morningstar ratings to the model:■ Method 1: Add an independent variable that has a value equal to the number of stars in the rating of each fund.■Method 2: Add five dummy variables, one for each rating.■Method 3: Add dummy variables for four of the five ratings.As a third research project, Honore wants to establish whether bond market returns (proxied by returns of long-term US Treasuries) and stock market returns (proxied by returns of the S&P 500 Index) explain the returns of a portfolio of utility stocks being recommended to clients. Exhibit 2 presents the results of a regression of 10 years of monthly percentage total returns for the utility portfolio on monthly total returns for US Treasuries and the S&P 500.\n| Exhibit 2.Regression Analysis of Utility Portfolio Returns |\n| Coefficient | Standard | t-Statistic | p-Value |\n| Error |\n| Intercept | -0.0851 | 0.2829 | -0.3008 | 0.7641 |\n| US Treasury | 0.4194 | 0.0848 | 49474 | <0.0001 |\n| S&P500 | 0.6198 | 0.0666 | 9.3126 | <0.0001 |\n| ANOVA | df | SS | MSS | Significance |\n| F |\n| Regression | 2 | 827.48 | 413.74 | 46.28 | <0.0001 |\n| Residual | 117 | 1045.93 | 8.94 |\n| Total | 119 | 1873.41 |\n| Multiple R | 0.6646 |\n| R | 0.4417 |\n| Adjusted R | 0.4322 |\n| Standard error(%) | 2.99 |\n| Observations | 120 |\n\n\nFor the time-series model in Exhibit 2, Honore says that positive serial correlation would not require that the estimated coefficients be adjusted, but that the standard errors of the regression coefficients would be underestimated. This issue would cause the t-statistics of the regression coefficients to be inflated. Honore tests the null hypothesis that the there is no serial correlation in the regression residuals and finds that the Durbin-Watson statistic is equal to 1.81. The critical values at the 0.05 significance level for the Durbin-Watson statistic are dl = 1.63 and du = 1.72.Smith asks whether Honore should have estimated the models in Exhibit 1 and Exhibit 2 using a probit or logit model instead of using a traditional regression analysis.\nShould Honore have estimated the models in Exhibit 1 and Exhibit 2 using probit or logit models instead of traditional regression analysis?\nOption A:Both should be estimated with probit or logit models.\nOption B:Neither should be estimated with probit or logit models.\nOption C:Only the analysis in Exhibit 1 should be done with probit or logit models.", "output": "B"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Iesha Azarov is a senior analyst at Ganymede Moon Partners (Ganymede), where he works with junior analyst Pàola Bector. Azarov would like to incorporate machine learning (ML) models into the company’s analytical process. Azarov asks Bector to develop ML models for two unstructured stock sentiment datasets, Dataset ABC and Dataset XYZ. Both datasets have been cleaned and preprocessed in preparation for text exploration and model training.Following an exploratory data analysis that revealed Dataset ABC’s most frequent tokens, Bector conducts a collection frequency analysis. Bector then computes TF–IDF (term frequency–inverse document frequency) for several words in the collection and tells Azarov the following:Statement 1: IDF is equal to the inverse of the document frequency measure.Statement 2: TF at the collection level is multiplied by IDF to calculate TF–IDF.Statement 3: TF–IDF values vary by the number of documents in the dataset, and therefore, model performance can vary when applied to a dataset with just a few documents.Bector notes that Dataset ABC is characterized by the absence of ground truth.Bector turns his attention to Dataset XYZ, containing 84,000 tokens and 10,000 sentences. Bector chooses an appropriate feature selection method to identify and remove unnecessary tokens from the dataset and then focuses on model training. For performance evaluation purposes, Dataset XYZ is split into a training set, cross-validation (CV) set, and test set. Each of the sentences has already been labeled as either a positive sentiment (Class “1”) or a negative sentiment (Class “0”) sentence. There is an unequal class distribution between the positive sentiment and negative sentiment sentences in Dataset XYZ. Simple random sampling is applied within levels of the sentiment class labels to balance the class distributions within the splits. Bector’s view is that the false positive and false negative evaluation metrics should be given equal weight. Select performance data from the cross-validation set confusion matrices is presented in Exhibit 1:\n| Exhibit 1Performance Metrics for Dataset XYZ |\n| ConfusionMatrix | CV Data(thresholdp-value) | Performance Metrics |\n| Precision | Recall | F 1 Score | Accuracy |\n| A | 0.50 | 0.95 | 0.87 | 0.91 | 0.91 |\n| B | 0.35 | 0.93 | 0.90 | 0.91 | 0.92 |\n| C | 0.65 | 0.86 | 0.97 | 0.92 | 0.91 |\n\n\nAzarov and Bector evaluate the Dataset XYZ performance metrics for Confusion Matrices A, B, and C in Exhibit 1. Azarov says, “For Ganymede’s purposes, we should be most concerned with the cost of Type I errors.”Azarov requests that Bector apply the ML model to the test dataset for Dataset XYZ, assuming a threshold p-value of 0.65. Exhibit 2 contains a sample of results from the test dataset corpus.\n| Exhibit 210 Sample Results of Test Data for Dataset XYZ |\n| Sentence# | Actual Sentiment | Targetp-Value |\n| 1 | 1 | 0.75 |\n| 2 | 0 | 0.45 |\n| 3 | 1 | 0.64 |\n| 4 | 1 | 0.81 |\n| 5 | 0 | 0.43 |\n| 6 | 1 | 0.78 |\n| 7 | 0 | 0.59 |\n| 8 | 1 | 0.60 |\n| 9 | 0 | 0.67 |\n| 10 | 0 | 0.54 |\n\n\nBector makes the following remarks regarding model training:Remark 1: Method selection is governed by such factors as the type of data and the size of data.Remark 2: In the performance evaluation stage, model fitting errors, such as bias error and variance error, are used to measure goodness of fit.\nWhich of Bector’s remarks related to model training is correct?\nOption A:Only Remark 1.\nOption B:Only Remark 2.\nOption C:Both Remark 1 and Remark 2.", "output": "A"}, {"instruction": "Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.", "input": "Doris Honore is a securities analyst with a large wealth management firm. She and her colleague Bill Smith are addressing three research topics: how investment fund characteristics affect fund total returns, whether a fund rating system helps predict fund returns, and whether stock and bond market returns explain the returns of a portfolio of utility shares run by the firm.To explore the first topic, Honore decides to study US mutual funds using a sample of 555 large-cap US equity funds. The sample includes funds in style classes of value, growth, and blend (i.e., combining value and growth characteristics). The dependent variable is the average annualized rate of return (in percent) over the past five years. The independent variables are fund expense ratio, portfolio turnover, the natural logarithm of fund size, fund age, and three dummy variables. The multiple manager dummy variable has a value of 1 if the fund has multiple managers (and a value of 0 if it has a single manager). The fund style is indicated by a growth dummy (value of 1 for growth funds and 0 otherwise) and a blend dummy (value of 1 for blend funds and 0 otherwise). If the growth and blend dummies are both zero, the fund is a value fund. The regression output is given in Exhibit 1.\n| Exhibit l.Multiple Regression Output for Large-Cap Mutual Fund Sample |\n| Coefficient | Standard Error | t-Statistic |\n| Intercept | 10.9375 | 1.3578 | 8.0551 |\n| Expense ratio(%) | -1.4839 | 0.2282 | -6.5039 |\n| Portfolio tu mox ex(%) | 0.0017 | 0.0016 | 1.0777 |\n| ln(fund size in$) | 0.1467 | 0.0612 | 2.3976 |\n| Manager tenure(years) | -0.0098 | 0.0102 | -0.9580 |\n| Multiple manager dummy | 0.0628 | 0.1533 | 0.4100 |\n| Fund age(years) | -0.0123 | 0.0047 | -2.6279 |\n| Growth dummy | 2.4368 | 0.1886 | 12.9185 |\n| Blend dummy | 0.5757 | 0.1881 | 3.0611 |\n| ANOVA | df | SS | MSS |\n| Regression | 8 | 714.169 | 89.2712 |\n| Residual | 546 | 1583.113 | 2.8995 |\n| Total | 554 | 2297.282 |\n| Multiple R | 0.5576 |\n| R | 0.3109 |\n| Adjusted R | 0.3008 |\n| Standard euro x(%) | 1.7028 |\n| Observations | 555 |\n\n\nBased on the results shown in Exhibit 1, Honore wants to test the hypothesis that all of the regression coefficients are equal to zero. For the 555 fund sample, she also wants to compare the performance of growth funds with the value funds.Honore is concerned about the possible presence of multicollinearity in the regression. She states that adding a new independent variable that is highly correlated with one or more independent variables already in the regression model, has three potential consequences:1. The R2 is expected to decline.2. The regression coefficient estimates can become imprecise and unreliable.3. The standard errors for some or all of the regression coefficients will become inflated.Another concern for the regression model (in Exhibit 1) is conditional heteroskedasticity. Honore is concerned that the presence of heteroskedasticity can cause both the F-test for the overall significance of the regression and the t-tests for significance of individual regression coefficients to be unreliable. She runs a regression of the squared residuals from the model in Exhibit 1 on the eight independent variables, and finds the R2 is 0.0669.As a second research project, Honore wants to test whether including Morningstar's rating system, which assigns a one- through five-star rating to a fund, as an independent variable will improve the predictive power of the regression model. To do this, she needs to examine whether values of the independent variables in a given period predict fund return in the next period. Smith suggests three different methods of adding the Morningstar ratings to the model:■ Method 1: Add an independent variable that has a value equal to the number of stars in the rating of each fund.■Method 2: Add five dummy variables, one for each rating.■Method 3: Add dummy variables for four of the five ratings.As a third research project, Honore wants to establish whether bond market returns (proxied by returns of long-term US Treasuries) and stock market returns (proxied by returns of the S&P 500 Index) explain the returns of a portfolio of utility stocks being recommended to clients. Exhibit 2 presents the results of a regression of 10 years of monthly percentage total returns for the utility portfolio on monthly total returns for US Treasuries and the S&P 500.\n| Exhibit 2.Regression Analysis of Utility Portfolio Returns |\n| Coefficient | Standard | t-Statistic | p-Value |\n| Error |\n| Intercept | -0.0851 | 0.2829 | -0.3008 | 0.7641 |\n| US Treasury | 0.4194 | 0.0848 | 49474 | <0.0001 |\n| S&P500 | 0.6198 | 0.0666 | 9.3126 | <0.0001 |\n| ANOVA | df | SS | MSS | Significance |\n| F |\n| Regression | 2 | 827.48 | 413.74 | 46.28 | <0.0001 |\n| Residual | 117 | 1045.93 | 8.94 |\n| Total | 119 | 1873.41 |\n| Multiple R | 0.6646 |\n| R | 0.4417 |\n| Adjusted R | 0.4322 |\n| Standard error(%) | 2.99 |\n| Observations | 120 |\n\n\nFor the time-series model in Exhibit 2, Honore says that positive serial correlation would not require that the estimated coefficients be adjusted, but that the standard errors of the regression coefficients would be underestimated. This issue would cause the t-statistics of the regression coefficients to be inflated. Honore tests the null hypothesis that the there is no serial correlation in the regression residuals and finds that the Durbin-Watson statistic is equal to 1.81. The critical values at the 0.05 significance level for the Durbin-Watson statistic are dl = 1.63 and du = 1.72.Smith asks whether Honore should have estimated the models in Exhibit 1 and Exhibit 2 using a probit or logit model instead of using a traditional regression analysis.\nHonore is concerned about the consequences of heteroskedasticity. Is she correct regarding the effect of heteroskedasticity on the reliability of the F-test and t-tests?\nOption A:Yes\nOption B:No, she is incorrect with regard to the F-test\nOption C:No, she is incorrect with regard to the t-tests", "output": "A"}]