Financial Exam Help 123™
2024 Level III Mock Exam
Afternoon Session Exam #5
Questions
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Page 2 2024 Afternoon Mock Exam #5 Questions Level III
Note to Candidates
These questions and essay answer templates are in a separate file from the
case scenarios so that you can have both files open on your computer and
not have to scroll up and down as you’re working to answer the questions.
The multiple choice questions have interactive check boxes for you to
select your answers, and the templates have editable fields so that you can
type in your answers on the screen, much as you will do on the real exam.
You may, of course, print the questions and write on them, but I encourage
you to do it on the screen; it will be good practice for the real exam.
If you choose to fill in these answers on your computer, please, please,
please remember to save this file frequently; I would feel terrible if I
learned that your computer had crashed, and you had lost much of your
good work.
Best of luck!
BCIII
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Level III 2024 Afternoon Mock Exam #5 Questions Page 3
Question 1 relates to Institutional Investors
Cayman Life Case Scenario
1.1 Determine the amount that Cayman Life holds in its general account and in separate
accounts.
General Account
Separate Accounts
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Page 4 2024 Afternoon Mock Exam #5 Questions Level III
1.2 Given the expectations of Cayman Life’s management, determine the modified duration
of Cayman Life’s shareholders’ equity and the change in Cayman Life’s shareholders’
equity (in KYD).
Modified Duration of Cayman Life’s Shareholders’ Equity
Change in Cayman Life’s Shareholders’ Equity (in KYD)
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Level III 2024 Afternoon Mock Exam #5 Questions Page 5
Question 2 relates to Alternative Investments
K&F Case Scenario
2.1 Given Imaz’ and Fer’s preferences, the most appropriate managers for Dunia to
recommend for them are, respectively:
Imaz Fer
☐ a. Cissé Kirwan
☐ b. Correa Cissé
☐ c. Kirwan Correa
2.2 With regard to Kholmukhamedov’s description of merger arbitrage, Dunia should most
likely disagree with Kholmukhamedov’s understanding of the:
☐ a. Liquidity
☐ b. Optionality
☐ c. Sharpe ratio
2.3 Based on Dunia’s factor analysis, Kuk-Chol’s investment approach most likely:
☐ a. Has a short bias in both normal times and crisis times
☐ b. Switches from short credit in normal times to credit neutral in crisis times
☐ c. Changes from volatility neutral in normal times to long volatility in crisis times
2.4 Given the trustees’ objectives, the most appropriate hedge fund for Dunia to recommend
to the Endowment is:
☐ a. Ošs
☐ b. Leal
☐ c. Suberan
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Page 6 2024 Afternoon Mock Exam #5 Questions Level III
Question 3 relates to Derivative Securities
PAKL Case Scenario
3.1 To achieve Matthew’s target asset allocation, equity beta, and fixed income modified
duration, determine the action (buy or sell) and the number of bond futures contracts
required.
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Level III 2024 Afternoon Mock Exam #5 Questions Page 7
3.2 To achieve Matthew’s target asset allocation, equity beta, and fixed income modified
duration, determine the action (buy or sell) and the number of equity index futures
contracts required.
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Page 8 2024 Afternoon Mock Exam #5 Questions Level III
Question 4 relates to Equity Investments
Tunapuna–Piarco Capital Case Scenario
4.1 The factors that influence Nimely’s strategy for TIC’s equity portfolio most likely point
to a(n):
☐ a. Active strategy
☐ b. Passive strategy
☐ c. Mixed active/passive strategy
4.2 Compared to Martínez’ performance, Gurung’s performance has most likely been:
☐ a. Worse
☐ b. Equal
☐ c. Better
4.3 The most appropriate stock for the Foundation’s portfolio is most likely:
☐ a. ZWL
☐ b. VJG
☐ c. BCK
4.4 Are Vương’s and Oyuunbaatar’s remarks concerning portfolio construction most likely
accurate?
Vương Oyuunbaatar
☐ a. No No
☐ b. No Yes
☐ c. Yes Yes
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Level III 2024 Afternoon Mock Exam #5 Questions Page 9
Question 5 relates to Individual Investors
Shabalala and Briggs Case Scenario
5.1 Determine the amount of additional life insurance Ephestion will most likely recommend
for Shabalala.
(Note: round your answer to the nearest ZAR 10,000.)
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Page 10 2024 Afternoon Mock Exam #5 Questions Level III
5.2 Identify which option Briggs should buy (type and strike), and which option Briggs
should write (type and strike), to implement Ephestion’s suggested strategy. Calculate
the total cost to implement the strategy (in ZAR). Calculate the breakeven price on PES
shares.
Option to buy
Option to write
Total cost
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Level III 2024 Afternoon Mock Exam #5 Questions Page 11
Breakeven share price
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Page 12 2024 Afternoon Mock Exam #5 Questions Level III
Question 6 relates to Trade Strategy and Execution
Gamut Group Case Scenario
6.1 For Al-Omzae’s purchase of SJA common stock, the delay cost and execution cost, in
basis points, are, respectively, closest to:
Delay Execution
Cost Cost
☐ a. −8.5 bps −3.5 bps
☐ b. 5.0 bps −3.5 bps
☐ c. 5.0 bps 11.9 bps
6.2 For his trades for the Foundation, the most appropriate benchmark price for Kiteishvili to
use is:
☐ a. TWAP
☐ b. VWAP
☐ c. Arrival price
6.3 For his sale of ICEP common stock, the most appropriate type of execution algorithm for
Hernández to use is:
☐ a. Scheduled
☐ b. Opportunistic
☐ c. Dark aggregator
6.4 The trading approaches used by Goodwin and James will most likely reduce, respectively:
Goodwin James
☐ a. Execution risk Execution risk
☐ b. Execution risk Market impact risk
☐ c. Market impact risk Execution risk
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Level III 2024 Afternoon Mock Exam #5 Questions Page 13
Question 7 relates to Derivative Securities
Ojamaa-Vassiljev Wealth Case Scenario
7.1 Concerning the factors that might point to a more conservative or a more liberal strategic
currency bias for the Foundation, it is most likely that:
☐ a. All of the factors suggest a more liberal bias
☐ b. All of the factors suggest a more conservative bias
☐ c. Some factors suggest a liberal bias, and some suggest a conservative bias
7.2 The maximum amount that the Foundation could lose on its OXYQ position in the next
six months is closest to:
☐ a. EUR 217,000
☐ b. EUR 712,000
☐ c. EUR 1,206,000
7.3 To achieve the Foundation’s target USD equity allocation/betas, the number of large-cap
equity index contracts that Kuusk must buy or sell and the number of small-cap equity
index contracts that Kuusk must buy or sell are, respectively, closest to:
Large-Cap Small-Cap
☐ a. Sell 22 Buy 40
☐ b. Buy 22 Sell 36
☐ c. Sell 24 Buy 36
7.4 To achieve his goal with respect to the Foundation’s RNM exposure, the position Kuusk
should take in an RNM forward contract is closest to a:
☐ a. Short position on 8,200 shares
☐ b. Short position on 5,000 shares
☐ c. Long position on 1,800 shares
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Page 14 2024 Afternoon Mock Exam #5 Questions Level III
Question 8 relates to Fixed Income Investments
Vásquez Family Foundation Case Scenario
8.1 Discuss one characteristic that suggests lower liquidity for UFH bonds than for TPS
bonds.
8.2 Discuss two characteristics that suggest higher liquidity for UFH bonds than for TPS
bonds.
Characteristic 1
Characteristic 2
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Level III 2024 Afternoon Mock Exam #5 Questions Page 15
8.3 Determine whether dos Santos should buy or sell the CDS on AEI bonds.
Justify your determination.
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Page 16 2024 Afternoon Mock Exam #5 Questions Level III
Question 9 relates to Ethical and Professional Standards
Andes Wealth Case Scenario
9.1 With regard to Washington’s investment in Ndzila’s ETF, have Ndzila or Barinov most
likely violated Standard III(A) Loyalty, Prudence, and Care?
Ndzila Barinov
☐ a. No Yes
☐ b. Yes No
☐ c. Yes Yes
9.2 Have Văn Cường’s actions most likely violated Standard III(C) Suitability or
Standard V(A) Diligence and Reasonable Basis?
Diligence and
Suitability Reasonable Basis
☐ a. No Yes
☐ b. Yes No
☐ c. Yes Yes
9.3 The information that Andraž possesses on GC and FTI is most likely:
☐ a. Material nonpublic information
☐ b. Material information, but likely public
☐ c. Nonpublic information, but possibly not material
9.4 Do the actions of Hùng Dũng most likely violate Standard IV(C) Responsibilities of
Supervisors?
☐ a. Yes
☐ b. No, because the trade monitoring system is supposed to detect and prevent
unauthorized trades
☐ c. No, because Hùng Dũng hasn’t authorized Fernández’ frontrunning trades; her
assistant authorized them
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Level III 2024 Afternoon Mock Exam #5 Questions Page 17
Question 10 relates to Equity Investments
Gasper Mihailovic Case Scenario
10.1 Determine the most appropriate portfolio structure (long only, 130/30 long extension,
low risk market neutral) for Boyd given his beliefs and objectives.
For each structure not selected, discuss one reason why it is not appropriate.
(Note: restating case facts without additional support will not receive credit.)
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Page 18 2024 Afternoon Mock Exam #5 Questions Level III
10.2 Identify which of Choupo-Moting’s statements is most likely inaccurate.
Justify your identification.
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Level III 2024 Afternoon Mock Exam #5 Questions Page 19
10.3 Based on the information in Exhibit 1, compute the gross exposure and net exposure of
the Endowment’s equity portfolio (in KES).
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Page 20 2024 Afternoon Mock Exam #5 Questions Level III
Question 11 relates to Performance Evaluation
Aioani Cáceres Case Scenario
11.1 Of Golinucci’s comments about the selection process used by PFS, the one that least
accurately categorizes the components of the selection process is:
☐ a. Comment 1
☐ b. Comment 2
☐ c. Comment 3
11.2 The most likely conclusion that Deira might reach based on New Kent’s fee structure is
that:
☐ a. New Kent’s interests are well-aligned with those of PFS
☐ b. New Kent may have incentive to be a closet indexer for PFS
☐ c. New Kent will have less incentive to become active in down markets than they
will have to become active in up markets
11.3 Based on the data in Exhibit 2, New Kent’s capture ratio is closest to:
☐ a. 1.02
☐ b. 1.15
☐ c. 1.33
11.4 Based on the data in Exhibit 2, New Kent’s return profile is best described as:
☐ a. Symmetric, low beta
☐ b. Symmetric, high beta
☐ c. Asymmetric, high beta
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