I pledge on my honor that this is entirely my own work and that I have not given or received any unauthorized assistance on this assignment/examination. I acknowledge that any false statement hereof is a breach of the policies concerning academic integrity of the Gallatin School of Individualized Study at NYU.  Answer D to confirm the truth of the foregoing statement. 

a) A

b) B

c) C

d) D


2. Which of the following is most true of the notion of a moat

a) it signifies an investment having a temporary edge over competitors

b) it represents a company whose product or service is hard to replicate

c) it suggests that a company’s margins are expanding

d) it proposes that a business needs to be a castle that bridges inefficiencies   


3. Which of the following least pertains to placing a trade in capital markets

a) the outcome of a trade has a binary quality

b) trading has aspects of being a zero sum game 

c) the market is efficient and therefore always correct 

d) the sentiment of other market players has a bearing on the outcome


4.  In Ben Hunt’s Epsilon Theory he is interested in all of the following except: 

a) the extent to which behavioral phenomena of market players represent sources of return

b) the way beta is an error term that represents the systematic return of a market or asset class

c) the notion that factor-based models tend to privilege only easily quantifiable variables

d) the fact that alpha is no longer a significant explanation for generating outperformance


5. Confirmation biases tend to cause people to

a) impose extraneous transaction costs upon activities 

b) challenge the status quo more frequently

c) overcome mental impediments to being contrarian 

d) rely on past information when they confront new and novel situations   


6. Which of the following is NOT true of Soros’ idea of reflexivity 

a) the effects of the cognitive function are independent of the manipulative function 

b) markets tend to proceed in boom bust cycles 

c) agents in markets create the market realities that they are observing 

d) the efficient market hypothesis is wrong


7. Individuals who make a habit of employing meta-thinking for outperformance distinguish between internal and external meta-thinking. This distinction pertains to

a) how exogenous and endogenous factors influence what constitutes Common Knowledge about some phenomenon

b) the limits of our ability to know anything with any level of precision or certainty

c) what I think about my thinking as opposed to what I think about what other people are thinking

d) the extent to which randomness bears upon thinking because thoughts arise which we cannot control


8.  The notion of a margin of safety describes

a)  the idea of a safe asset being one which is not subject to major market volatility                                        

b) the difference between the intrinsic value of an asset and the discount at which the market is pricing the asset

c) the profit margins a company makes when it functions in a blue ocean                                                       

d) the marginal utility of incremental returns above a certain threshold


9. Which of the following is in the closest conceptual relationship with alpha generation

a) idiosyncratic returns

b) the entire market

c) luck

d) game theory


10.  The economic commentator Ben Hunt writes: “As both investors and advisors we have put our faith in the power of diversification, and when that Greater Power deserts us we are left open and exposed. We are all Tony Soprano sitting in that diner, aware that something is not quite right, but also not quite able to put our finger on it. So we go on about our business. We order a basket of onion rings. And then it happens.”  From this we can least extrapolate that 

a) assets are increasingly correlated so portfolio impairment is a now an uncomfortable fact

b) like Tony in the diner we are all about to get popped

c) diversification remains the holy grail for mitigating risk

d) insofar as startups have exposure to markets, there is no place to hide 


11. Agency costs as spoken of by Charlie Munger is best represented as situations where

a) conflicts of interest impose extraneous transaction costs

b) economic agents do not act as rational actors but instead are subject to various biases

c) generators of risk are not the entities that bear those risks

d) agents act in the best interest of principals to whom they are accountable 


12. Understanding outperformance as antifragility means that

a) it is a phenomenon like a porcelain coffee cup

b) it does not have any epistemological truth conditions

c) it is linked to convex outcomes

d) it is the product of fragile circumstances


13. Detail and dynamic complexity are notions that bear upon how agents understand the world.  Which of the following would you not consider true 

a) dynamic complexity deals with causes and effects

b) detail complexity relates to the number of variables needed to understand something 

c) privileging detail complexity tends to be linked to explanatory hubris

d) dynamic complexity entails ignoring gestalts in order to see complex relationships   


14. The concept of iceberg risk describes a phenomenon where 

a) there are convex payouts when iceberg risks materialize

b) agents are more risk-averse than risk taking

c) something cannot be anticipated

d) the significant risks lie hidden from perception


15. Please read the following iconic Robert Frost poem. 


The “Road not Taken” fallacy most pertains to

a) the view that idiosyncratic choices always yield superior consequences 

b) the idea that skill is more important than luck

c) the error of believing that choices in every circumstance have material bearing upon outcomes

d) the notion of how important it is to stand out from the crowd


16. Keynes’ beauty contest found in Chapter 12 of The General Theory of Employment, Interest and Money (1936) describes

a) how our first choice of who is the prettiest girl will likely be the same choice that others will also choose

b) an efficient system based on social proof

c) a coin toss situation since all the candidates are interchangeable as they are all pretty

d) anticipating who others think that everyone will deem the consensus candidate


17.  You see the first question on a quiz and answer it easily.  You then decide that the quiz will take you less than an hour to complete.  This is an example of 

a) the Ikea effect

b) confirmation bias

c) social proof

d) anchoring bias


18. One of Ray Dalio’s “Principles” is “don’t depersonalize mistakes.”  Which of the following does not pertain to this proposition

a) agents are required to bear the consequences of their decisions

b) individuals must put improvement ahead of ego if they seek to outperform

c) mistakes are taken to be collective failings of teams

d) this promotes a culture of radical accountability 


19. Which of the following would you least consider an epistemological claim

a) a grey swan is conceivable

b) the mind is a tabula rasa

c) how do we know to be true that there’s presently a stock market bubble 

d) there are empirical truth conditions for the statement “it is raining in upstate New York” 


20. Which of the following would you least consider a strategy oriented towards outperformance 

a) a martingale system of doubling down on losses

b) predicting the most accurate characteristics of the epsilon term

c) capturing the systematic component of an idiosyncratic return stream 

d) a work culture of radical honesty


21.  In the hedge phase of Minsky’s hypothesis

a) there is more credit than there is demand for credit

b) debtors are able to make both principal and interest payments

c) interest payments only are made to creditors

d) debtors are only kept afloat by selling assets to a “bigger fool”


22. The problem of induction is best illustrated by the following example

a) past performance being taken as an indicator of future returns

b) being cognizant that black swans are outlier events

c) reversion to the mean of any skew 

d) higher probabilities of a losing streak than a winning streak


23. Which of the following would you not consider an example of exploiting antifragility

a) shorting the markets going into the global financial crisis

b) sending a puppy to dog obedience school

c) skiing down a black diamond slope

d) cooking lentils in a pressure cooker


24. The notion of being long something and short something else are key concepts from trading. We can think of these terms in a more abstract fashion as well.  For example, a family that lives and remains in New York buys a property in Miami to benefit from the demographic uplift of people establishing residency there to avoid taxes in other jurisdictions. They are long Florida real estate.  What are they short

a) they are short crypto because the Miami property was purchased after hodling a crypto currency that appreciated 

b) they are short New York society because they are not contributing to it

c) they are short volatility of the Miami housing market

d) they are short the Art Basel Miami scene because they stay in New York during one of Miami’s hottest events 


25. Minsky’s financial instability thesis proposes that

a) markets tend towards equilibria and stability over time

b) perceptions of stability are inherently destabilizing

c) markets are in a perpetual ponzi scheme state

d) financial instability is a black swan


26. Ray Dalio’s “Template for Understanding” proposes that 

a) the economy moves in counter-cyclical ways

b) we need to understand the economy using first order claims

c) credit cycles determine periods of economic expansion and contraction

d) markets require that we be radically honest and transparent if we are to outperform


27. Which of the following is not a claim we would associate with behavioralist thinking

a) the discipline most important for understanding markets is not economics nor finance but psychology

b) herding causes people to act against their better judgment

c) people prefer information asymmetries to having full knowledge

d) human beings act according to a broad array of biases


28. The Gaussian Copula Formula was used by entities securitizing mortgages to price

a) correlated default risk 

b) the delta between houses and mortgages

c) volatility of the housing market

d) the value of homes in a particular pool of borrowers


29. Which of the following would you NOT associate with the notion of outperformance 

a) outperformance results from systems tending towards efficiency

b) second order thinking about collective behavior gives you an edge over the crowd 

c) outperformance entails doing better than the beta return achieved just from showing up 

d) when agents outperform this can be caused by skill, luck, or a combination thereof


30. The notion that markets are inversely correlated to volatility means that 

a) when markets decline volatility spikes

b) when markets are flat volatility initially goes up and then declines

c) when markets decline they bounce back to new highs

d) when markets go up they tend to be more volatile


31. According to the antifragility thesis, certain phenomena 

a) benefit from stressors and volatility and provide convex payout as a result

b) are the result of luck rather than skill so alpha cannot explain performance 

c) are fragile and provide considerable upside when they break

d) are repeatable across an extended time series


32. The concept-conception distinction describes how

a) concepts have multiple conceptions associated with them that all complement each other

b) we can have general agreement about what concepts are but variation around what particular conceptions instantiate those concepts

c) conceptions are at a higher order of generality than concepts which tend to have more specificity attached to them

d) we understand the world through conceptual mental maps


33. Mental models are ways we frame the world. Which of the following would you least consider a mental model 

a) defining outperformance as generating alpha 

b) considering second order thinking as the best methodology to get an edge over the crowd 

c) being motivated to outperform in order to get a promotion 

d) assigning validity to claims about the world based upon social proof 


34. The reflexive model of a market describes it as   

a) efficient and ontologically distinct from agents who the actors in the market 

b) a phenomenon out there in the world that stands apart from agency

c) entailing a logic of invention where agents contour market realities

d) a domain where supply and demand interact and find equilibria


35. The global minotaur metaphor describes

a) the US as the producer of last resort in the global economy 

b) the way global dollar surpluses feed the voracious Wall Street machine

c) how the global economy resolved imbalances of surpluses and deficits 

d) the extent to which economies are independent of each other 


36. The notion of a cashflow waterfall in a payout structure like a securitization means that

a) riskier tranches are paid off first when there is a default event

b) there are entities below in the waterfall that take haircuts to protect cashflows of the AAA tranche

c) an equity cushion always prevents the tranche immediately above it from being impaired

d) default correlations can be accurately modeled to structure tranches


37. The idea of a funding mismatch pertains to 

a) when the duration of a loan outlasts one’s capacity to pay because of prepayment penalties

b) when a borrower can only fund the interest on a loan because of income mismatches

c) when the term of the loan is shorter than the term of the asset being funded

d) when funding entails a higher rate of leverage than an asset can reasonably bear 


38. If you are long a credit default swap with no default exposure to the underlying credit 

a) this is a form of insurance against not being paid back if a borrower should default

b) you are speculating that the company will fail

c) in the case of a default event you will be refunded the premiums you’ve paid

d) you are short volatility


39. MMT is associated with all of the following except

a) it is predicated on the idea that there are no economic consequences to debt creation denominated in a country’s own sovereign currency

b) it believes that increasing the money supply through debt creates inflation

c) it decouples the notion paying of taxes and government spending 

d) it holds that future generations reap the benefit of their own productivity unburdened by debt overhangs


40.  Which of the following is not true if you buy a put option

a) you are long volatility with a potential convex payout

b) you have a right to sell a fixed number of shares at a given strike price within a certain time period

c) you are hoping the value of the reference asset will go down

d) your upside is potentially infinite 


41. Business Risk = Standard Deviation of Operating Income/Average of Operating Income   Which of the following most holds true

a) higher business risk means a higher return on operating income for a firm

b) when there is a lower average operating income the firm’s earnings are less volatile

c) a higher standard deviation of operating income is desirable

d) lower operating income standard deviation and higher average operating income is optimal 


42.  Which of the following is not true of the notion of assets that are endowed with a convexity bias 

a) Taleb would term them anti-fragile

b) they have low standard deviations

c) they benefit from uncertainty and disorder

d) they offer asymmetric upside 


43. The notion of Knightian uncertainty proposes that

a) all risk can be modeled

b) risks can be known but uncertainty is unknowable

c) risk management and risk mitigation are synonymous

d) uncertain risks are two standard deviations from the mean 


44.  The fact that ALM institutions sought to buy AAA tranches of mortgage backed securities can best be explained by the notion that these institutions 

a)  considered mortgages a volatile investment

b)  were too-big-to-fail
c)  preferred mortgages over other asset classes

d)  needed to reach for yield to meet future liabilities   


45.  If an asset moves in a perfectly correlated fashion with the market 

a)  it has a beta of 1                                          b)  it has a beta of -1

c)  it has a beta of 0                                          d)  it is a persistent source of alpha


46. Which of the following would you not associate with the Efficient Markets Hypothesis

a) the market prices all goods at what they are worth

b) pricing expresses all known information

c) the market vacillates between boom and bust cycles

d) mispricings are arbitraged away


47. The American Dream Downpayment Act of 2003 (ADDA) aimed to increase

homeownership among low-income communities by providing downpayment and closing cost

assistance. Which would you not consider a pertinent statement 

a) low income home ownership is treated as a public good

b) this promoted growth of subprime mortgages

c) this was bearish for real estate 

d) this effectively creates a government subsidy to the homebuilding and mortgage industries


48. “Contrarian” investors consider that investment success lies in going against the crowd, because the crowd is usually wrong. Which of the following does not follow from the foregoing

a) herding causes mispricings that contrarians seek to exploit

b) sentiment-driven markets reflect prices irrelevant to fundamentals

c) crowded trades are usually taken to be erroneous

d) contrarians seek to find opportunities before the market recognizes them


49.  The idea that ARM resets triggered the financial crisis is associated with the notion that

a) the Gaussian Copula formula sought to measure correlated default risk

b) low teaser rates ratcheted up which started a default cycle

c) CDO squareds could no longer be effectively tranched

d) reflexivity promotes market agents to engage in boom bust behavior


50. Ray Dalio writes: “Since people are the largest cost of production, it follows that those countries that offer the best “value” (i.e., the most productive workers per dollar of cost) will, all else being equal, experience the most demand for their people. That is why the per-hour-worked cost differences of educated people (i.e., their income after adjusting for hours worked each year) is one of the best indicators of productivity. Other obvious and important factors that influence productivity include cost of uneducated people, levels of bureaucracy, attitudes about work, raw material costs, lending, and capital market efficiencies—i.e., everything that affects the value of what is produced relative to the cost of making it.” Which of the following statements would you least consider to be a corollary of Dalio’s statement

a) there is a global labor market where demand and supply for productive labor play out 

b) labor arbitrage is a source of growth for countries in the global economy

c) work ethic has bearing upon the economic productivity

d) uneducated workers who provide cheap labor make an economy more competitive


51. Consider the following chart:



Which of the following is not true

a) GDP has been steadily growing since the 1970s

b) the US economy is at an unprecedented level of leverage 

c) a range bound debt to GDP ratio was abandoned in the 1980s

d) there has been exponential credit expansion in recent times


52.  Which of the following would you not consider something finance enables us to accomplish 

a) it gives investors access to future earnings today

b) it acts as an economic “time machine,” allowing savers to transport today’s surplus income into the future       

c) it allows us to understand how money in the future is worth more than the same amount of money today   

d) it affords us a safety net, insuring against potential adverse events in the future 


53.  A balance sheet is useful for analyzing all of the following except

a) profitability                                      b) financial flexibility

c) solvency                                           d) liquidity


54.  All of the following are true of securitization except 

a) it passes risk on from an originator to another risk bearer

b) it allows risk to be pooled thereby giving access to financing to otherwise uncreditworthy entities

c) it frees up liquidity thereby making more opportunities financeable 

d) it tranches risk by giving the most risky seniority over the least risky 


55. If your house happens nearly paid off and you run into financial trouble and default on your mortgage, the bank will foreclose on a low LTV mortgage first. Which of the following statements best flows from the foregoing 

a) there is a moral hazard associated with paying down your mortgage 

b) a house should always be leveraged as much as possible

c) a home loan is a form of recourse asset

d) the bank has a first lien on a property


56. The notion of markets as a phenomenon that stands apart from human agency may be associated with

a) Soros’ theory of reflexivity

b) Adam’s Smith’s idea of the invisible hand

c) Keynes’ notion of government intervention to stimulate aggregate demand

d) Marx’s definition of capitalism as private ownership of the means of production


57.  Which of the following is not an example of a market failure

a) monopolies                                                  b) the efficient market hypothesis

c) public goods                                                d) externalities


58. The modeling of correlated defaults on mortgages 

a) used CDS on mortgages as a proxy for pricing risk 

b) suggests that default rates approach 1 as correlations move towards zero 

c) entails regressing the riskiness of the asset against the creditworthiness of the borrower 

d) applied three sigmas of standard deviation to default probabilities 


59. If a foreign country borrowed $100 million at 10% in US dollar-denominated debt and its currency depreciated and the exchange rate to the dollar became 5 to 1, which of the following is not true 

a) in terms of its own currency it would owe $50 million in debt service per year

b) its debt load has come down by a five-fold factor

c) the cost of its debt has augmented

d) it needs to pay $10 million of interest per year in US dollar terms


60.  The notion that certain investments are safe and deliver returns at the risk-free rate 

a) expresses the idea of a margin of safety 

b) illustrates how the market prices certain assets at a significant discount to intrinsic value

c) points to the notion that there is a premium that Mr. Market places on risk taking 

d) suggests that markets are efficient


61. The so-called manipulative function associated with the reflexivity thesis holds that

a) markets manipulate agents into acting against their best interests

b) agents in markets create price realities

c) there is a linear function that describes behavior of agents that reflects their psychologies

d) markets are a reflexive phenomenon that agents manipulate to suit their notions of efficiency


62. The concept of tail risk associated with private assets most relates to the following notion

a) private assets tend to be less correlated to financial markets

b) inflows to private assets such as venture funds has been increasing

c) private assets draw performance from valuation discounts and risk premia

d) liquidity in private assets is usually disrupted much longer during a crisis


63. Which of the following is not an assumption attendant in the Capital Asset Pricing Model

a) it posits that the return on an asset is related to the market return and the risk free rate

b) it assumes frictionless transaction costs

c) it acknowledges that investors have different time horizons 

d) it assumes investors are risk averse so assets price accordingly


64.  The following chart illustrates all of the following except:



a) median family income is more or less back to where it was 20 years ago in the mid-1990s

b) the middle class is not faring better from one generation to the next

c) market bubbles push up median income in various anomalous situations 

d) a middle class is necessary for a healthy and vibrant consumer-driven economy 


65. The idea that a dollar today is worth more than a dollar in the future is associated with all of the following except

a) the time value of money                                           b) inflation

c) deflation                                                                  d) the ability to invest the dollar risk free


66.  When you buy an option which of the following is NOT true

a) you are short volatility

b) you are trading a derivative that tracks the price change of an underlying instrument

c) you are betting that future volatility will be greater than what the market is pricing implied volatility at today

d) the seller of the option is obliged to perform when you seek to exercise the option 


67.   In Henry IV (ref. https://www.youtube.com/watch?v=TzVmxT_bV60) one character says “…I can call spirits from the vasty deep.” The other responds, “why so can I and so can any man, but will they come when you do call for them.” This metaphor 

a) expresses the idea that there are deep pools of liquidity exploited by higher frequency traders 

b) suggests that sovereign entities cannot default as they can always print money

c) helps us determine whether a discount is sufficiently deep to warrant us purchasing an asset 

d) proposes that exogenous facts limit the ability of agents to deliver on promises they make 


68.   HELOCs or home equity lines of credit are 

a) based on the notion that market-to-market values of homes are higher than original financed valuations

b) predicated on homes prices appreciating at a rate higher than inflation

c) on the opposite side of a balance sheet from housing-linked credit default swaps

d) always issued based upon floating adjustable rates


69.  Which of the following is not an investment objective 

a) capital appreciation                                      b) capital preservation

c) illiquidity                                                     d) income generation


70.  Which is not a way to make money in a market 

a) exploit an information asymmetry

b) follow the herd and hold an asset till the last speculator has sold 

c) find a bigger fool to unload an overpriced asset

d) recognize a behavioral inefficiency such as the “recency effect” causing inflation of a particular hot asset


71.  Which of the following is not true with respect to a balance sheet

a) equity is a residual claim on assets

b) more senior debt has a priority claim on assets versus junior or subordinated debt

c) equity is the last part of the cap structure to be wiped out in case of bankruptcy

d) assets are the sum of liabilities plus equity


72.  If you borrow money from someone and collateralize the loan with a highly volatile asset, what kind of haircut would you expect to take on the loan amount associated with the pledged asset

a) a haircut that would be the same as if there were no collateral at all

b) a large haircut to mitigate price fluctuations of the underlying collateral

c) a small haircut since the loan has collateral associated with it

d) no haircut since the loan has an asset collateralizing it


73.  Which of the following would you not associate with idea of Homo Economicus 

a) agents are rationally self-interested

b) the aggregation of self-interest yields market efficiencies and equilibria 

c) the benevolence of agents makes them other-regarding and reflexive

d) agents seek to maximize utility as an economic actors


74.  All of the following are activities that a country might engage in to protect its domestic economy except 

a) tariffs on exports of goods going out of the country 

b) regulations on foreign products 

c) devaluation of its currency

d) negotiated limits on exports by other countries 


75. Which of the following does not necessarily pertain to the following statement: Given the extended period of monetary accommodation, most of assets are at their high end of historical valuations.

a) assets have appreciated to unprecedented levels

b) central banks pumping liquidity into the system has a causal relationship with asset prices

c) credit-related assets are at inflated valuations

d) central bank monetary policies are on the verge of being tightened 


76. Which of the following would least consider one of the causes of the Global Financial Crisis (GFC) 

a) credit default swaps passing on default risk to underwriters

b) the shift to the originate-to-distribute model of risk-taking with attendant moral hazard 

c) persistently low interest rates creating cheap cost of capital 

d) global structural imbalances with the recycling of dollars from trade deficits into the US economy 


77.  Which the following is not a challenge to the efficient market hypothesis

a) market equilibria                                                      b) Minsky’s financial instability thesis 

c) reflexivity                                                                 d) persistent alpha generation


78. The main problem with the Gaussian copula formula was that it 

a) sought to measure the probability of correlated default risk

b) widened default correlation spreads by a margin that could not be empirically justified 

c) passed on default risk to a counterparty that had no capacity to pay

d) relied upon housing CDS as a proxy for default risk in an inflationary price environment


79. Which of the following is not a notion that we would associate with Taleb’s “fooled by randomness” thesis

a) correlation does not imply causation

b) black swans are more common than anticipated

c) random events are often ascribed to being part of a meaningful sequence

d) skilled activity is a more prevalent phenomenon than acts of luck


80.  The biggest creditor of the United States is

a) China                                                                       b) Saudi Arabia

c) Japan                                                                        d) the US itself


81.  The idea of being compensated for the assumption of risk is at the core of how one earns a return. Which of the following risks would you least consider to be a source of compensation 

a) capturing a risk premium associated with illiquidity associated with the investment

b) return related to country-specific macro risk

c)  compensation for exposure to systemic risk of the financial system 

d) a spread above the risk-free rate for the probability of losing money


82. Barely a year after setting disputed related to its $95 billion sovereign default, in June 2017 Argentina sold $2.75 billion of 100-year bonds. The issue was over-subscribed and reportedly sold at 90c on the dollar for a yield of 7.917%. This occurrence suggests all of the following except

a) Argentina is no longer treated as an emerging market reflected in its sovereign risk interest rate 

b) bond buyers are seeking to lock in higher yields for an extended period of time

c) higher yielding bonds are strongly in demand 

d) investor risk appetite for Argentina has not been quelled by the fact that the country has been a serial defaulter


83. The difference between sales and cost of goods sold (COGS) is known as   

a) unrealized gain                                                         b) gross profit

c) stock dividends                                                        d) inventory


84. In addition to reflexivity, boom bust cycles are produced in markets due to   

a) priming                                                                    b) herding

c) survivorship bias                                                      d) the gambler’s paradox


85. If an investor desires less volatility risk than the market, she buys stocks   

a) with alphas of zero                                                   b) with betas greater than 1

c) with betas less than 1                                               d) which do not outperform the risk-free rate


86. The idea that the GFC was triggered by a funding mismatch pertains to the fact that 

a) subprime borrowers could not match their income with their credit obligations 

b) the fed funds rate started to rise

c) short term repo funding was used to hold longer duration mortgage backed securities 

d) mismatching sources of risk and return resulted in funding drying up


87. The relevance of McGilchrist’s thesis about the divided brain to markets is that 

a) we tend to believe that our analytical modeling of risk maps directly onto domains of uncertainty 

b) we normally appropriately use both hemispheres when thinking about markets

c) we privilege right brain thinking when making investment decisions

d) our left brain tends to make us want to be perpetually long volatility   


88.  The date at which a portfolio or asset is expected to be fully or partially liquidated is known as the 

a) margin of safety                                                       b) investment time horizon

c) default probability of the investment                       d) return requirements of the investment


89.   Vanguard has an Exchange Traded Fund (ETF) that allows you to buy world stock markets. The ticker: VT. If you buy this ETF

a) you are trying to generate alpha in global equities

b) you consider that some markets will do better than others and are seeking to overweight outperformers 

c) you a long global economic growth

d) you are privileging active over passive investing


90. The risk that offsetting investments in a hedging strategy will not experience price changes in entirely opposite directions from each other is called basis risk.  This suggests that 

a) volatility does not always negatively correlate in a symmetrical manner

b) hedging can be perfectly accomplished   

c) basis risk can be hedged by other asset classes 

d) offsetting one investment by exposure to another is a way to generate alpha 


91.  Low-liquidity investments have all of the following characteristics except

a) their returns are highly correlated with the market

b) the cost of buying and selling them is relatively high

c) they are often sold in auction markets

d) the quality of these investments is not uniform


92.  Which of the following statements concerning monetary policy is correct

a) easy monetary policy tends to produce low interest rates which is bullish for stocks

b) tight monetary policy tends to produce high interest rates which is bullish for stocks

c) easy monetary policy tends to produce high interest rates which is bearish for bonds 

d) tight monetary policy tends to produce low interest rates which is bearish for bonds


93. A money manger writes the following in his quarterly letter: “The worst economic recovery of the post-war period will continue to be restrained by a consumer sector burdened by paltry income growth, a low and falling savings rates associated with Federal Reserve policy. Additionally, with the extremely high level of U.S. government debt and deteriorating fiscal situation, the economy is unlikely to benefit from any debt-financed tax changes.” Which of the following does not follow from his view

a) he does not think tax cuts will be a net positive for the economy

b) sluggish wage growth is taken to be negative to consumption

c) Fed policy is discouraging savings

d) US economic recovery has caused a deteriorating fiscal condition 


94.  Stock market indices are used for all of the following except

a) to serve as a benchmark for judging performance of asset managers

b) to help analyze stock market returns on a global basis

c) to identify alpha which is what it means to track the market 

d) to help perform technical analysis of the overall market


95.  Which of the following least explains why people are slow to sell a losing stock

a) loss aversion                                                            b) the endowment effect

c) the gambler’s paradox                                              d) moral hazard


96.  An asset allocation decision is a choice to allocate risk to some idiosyncratic source of return.  A corollary to this decision is the belief that exposure to these specific sources of return 

a) allows you to outperform the systematic return of the market

b) is negatively correlated to other sources of return

c) is less risky than allocating risk to another idiosyncratic return stream   

d) insulates you from boom bust cycles 


97.  Which of the following would you least consider as a valid dichotomy associated with investor decision making 

a) if you invest, you will lose money if the market declines vs if you don’t invest, you will miss out on gains if the market rises

b) market timing will add value if it can be done right vs buy-and-hold will produce better results as timing can’t be done right 

c) if you concentrate your portfolio, your mistakes will kill you vs if you diversify, the payoff from your successes will be diminished

d) if you employ leverage, your returns will be diminished by funding costs vs if you employ leverage, your returns will be more volatile


98. A company has 10mm shares outstanding in the public capital markets which trade at $50 per share.  It decides to split its shares two for one.  Which of the following is not true 

a) there are now 20mm shares outstanding

b) the stock split dilutes the stock price

c) the market cap of the company doubles

d) a shareholder with 1,000 shares will now have 2,000 at $25 per share


99. The idea that economic cycles must also be thought of in relationship to expansion and contraction of credit cycles suggests that 

a) in an economy demand is constrained by willingness of creditors and debtors to extend and receive credit

b) the economic and credit cycles are negatively correlated to each other 

c) if credit expands, the assets in an economy decline and liabilities go up

d) when credit dries up, an economy can take over since people no longer bear the burden of debt loads


100.  Which of the items below cannot be reasonably inferred from the following chart



a) CPI which measures inflation somewhat misstates the cost of living because energy is not included

b) college costs have risen at a rate much higher than CPI components

c) core CPI which measures long term inflation by excluding transitory price hikes is higher than CPI

d) medical care is the most inflationary aspect of the CPI


101. Referring to Quantitative Easing (QE) where the Fed bought $3.5 trillion of bonds with money it created, former Fed Chair Janet Yellen stated that continued that the prevailing low inflation was a “mystery.” She is referring to all of the following except

a) increasing the money supply is supposed to cause inflation with more money chasing the same amount (or fewer) goods

b) she’s saying she does not understand how despite boosting the money supply as a “demand-side” economic tool, inflation and economic growth have both been weak and demand has not accelerated

c) although the Fed boosted bank reserves, banks never lent out and multiplied money like they had in previous decades

d) the Fed is challenging its notion that QE saved the economy because inflation has not accelerated 


102.  Which proposition does not necessarily follow from the notion that markets are reflexive 

a) agents are more involved in a logic of price creation rather than discovery 

b) markets are dependent upon behavioral understandings of agents who tend to create boom bust cycles 

c) the market does not have an ontological status independently of agents who comprise it

d) agents do not experience the utility of gain in the same manner as the disutility of commensurate loss


103. In the last quarter of 2017, global stock market capitalization skyrocketed by $15 trillion to over $85 trillion

and a record 113% of global GDP. From this we can infer that 

a) money has been pouring into global equities inflating prices

b) there is a herding effect where investors are all in crowded trades 

c) global GDP is not correlated to earnings from investing in equities 

d) there is a major decoupling between stock markets and underlying economies of countries 


104. US government debt is about 100% of GDP, or $20 trillion, and growing around $1 trillion a year. Which of the following is not true

a) including state and local debt is another $3 trillion or 115% of GDP which is a more accurate measure to compare the US to other countries

b) this is still less than the 500% of debt-to-GDP that Japan faces 

c) the US took just eight years to run up a $10 trillion debt after the 2008 recession

d) the Bank of Japan simply monetizes debt by buying it up and putting it on the central bank’s balance sheet 


105.  A particular successful money manager proposed the following behavioral matrix:


Which of the following does not follow from the foregoing matrix

a) for those who define investment success as being “average or better,” three of the four cells of the matrix represent satisfactory outcomes.

b) if you define success strictly as being superior, only one of the four will do, and it requires unconventional behavior 

c) avoiding being contrarian is the way to generate superior performance 

d) maintaining an unconventional investment profile requires idiosyncratic behavior, which frequently appears strange in the eyes of conventional wisdom


106. Which of the following is most likely to show Taleb’s antifragile qualities

a)  a water utility company                                                       b) treasury bonds

c) the Nikkei index                                                                  d) a stock market crash


107.  Which of the following statements least pertains to the dollar as the global reserve currency 

a) global demand for dollars keeps the value relatively high

b) foreign central banks hold dollars which they use to manage local exchange rates

c) the US can print money with less inflationary hazard than other countries 

d) international trade is denominated in currencies other than dollars to keep the dollar supply constant 


108. Which of the following is least true of financial crises

a) in a crisis people are put in forced sale situations of whatever assets they can unload at fire sale prices

b) in a crisis liquidity tends to dry up   

c) in crises correlations move towards 1

d) in a crisis equity holders are forced to take haircuts and bond holders get wiped off the capital structure


109. Which of the following does not pertain to the Fed

a) in the wake of the GFC, it engaged in aggressive economic stimulus measures via quantitative easing 

b) it possesses the twin mandates of promoting employment and controlling inflation

c) it is the main author of fiscal policy in the United States

d) it engages in expansionary policies by lowering interest rates or buying bonds through open market operations


110.  A high risk tolerance is most associated with the notion that 

a) one finds volatility palatable 

b) one’s time horizon is long

c) one is willing to tolerate less return per unit of risk

d) one can accept extreme capital impairment


111. Peter Navarro is an economist who directed the White House Office of Trade and Manufacturing Policy. He’s a hardline protectionist, especially towards China. In his view, insufficiently protectionist trade policies weakened the US manufacturing base and he thinks this created other socioeconomic costs – from domestic violence to lower fertility rates. Which of the following is not consistent with Navarro’s view

a) he considers job losses to be a root cause of various collateral negative factors

b) he considers that economies cannot be competitive on Ricardian comparative advantage factors alone 

c) he is a proponent of free trade and open markets

d) when factories close Navarro argues people turn to drugs, quit their marriages, commit crimes


112.  Hyman Minsky’s “financial instability thesis” proposes a mechanism that pushes an economy towards a crisis associated with accumulation of debt by the non-government sector. He identified three types of borrowers that contribute to the accumulation of insolvent debthedge borrowers, speculative borrowers, and Ponzi borrowers. Which of the following statements is not true 

a) a greater tilt towards Ponzi borrowers in the housing market caused the subprime crisis

b) hedge borrowers were unable to meet their financial obligations when ARMs reset caused default rates to rise c) commercial real estate is primarily made up of speculative borrowers

d) securitzation of mortgages gave Ponzi borrowers access to liquidity to finance their purchases 


113. Which of the following statements least pertains to the following chart 




a) housing prices should be in a rational relationship with other phenomena such as median income and financing costs

b) exponential upticks are generally indicative of a negative state of affairs 

c) the curve is essentially range bound presently within normalized parameters of cyclicality

d) we can reasonably infer that extraneous variables caused the chart to extend beyond normalized ranges


114.  “In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them. There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.  Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.” – Frédéric Bastiat (1850) “That Which Is Seen and That Which Is Unseen”  Bastiat’s main point can best be summarized as follows

a) the economic sphere is more an art than a science

b) the ability to foresee is only available with the benefit of hindsight 

c) consequences are more important than adherence to principles in economic activity

d) unintended, unforeseen and non-immediate negative consequences need to be considered when taking economic actions 


115. Nassim Nicholas Taleb argues that $1 million earned as a dentist is not the same as $1 million earned as a rockstar. Which of the following is not part of Taleb’s argument 

a) they are different because success as an artist depends much more on chance and for every successful rockstar there are legions of artists who have failed 

b) becoming a rockstar entails a form of career roulette

c) there are more starving artists than starving dentists

d) dentists are more like black swans than rockstars


116.  If you have a leveraged asset for which you put down 20% as equity and the asset goes up in value by 50%, by how much does your equity increase

a) 50%                                                             b) 250%

c) 80%                                                             d) 100%


117. “The individual investor should act consistently as an investor and not as a speculator,” admonished Ben Graham. Which of the following is not a counter-argument to Graham

a) valuation analyses not that relevant because fundamentals do not identify turning points in markets

b) technical or sentiment indicators signal when a market trend will change direction

c) an investor is a speculator who is stuck in a position s/he cannot exit 

d) finding undervalued stocks with a margin of safety is easier said than done


118. The reason why the future value of an asset needs to be discounted to the present is because

a) the time value of money means a dollar today is worth more than a dollar in the future

b) money can be invested risk free and one expects to be compensated for risks assumed into the future

c) the present value of an asset is always higher than its future value

d) inflation erodes the value of money in the future


119.  Which of the following is not a likely consequence if the US raises interest rates

a) the price of treasuries will go down

b) the US dollar will go down

c) inflation will be reduced

d) the yield on treasuries will go up


120. In managing a business, having an understanding of fixed and variable costs is important.  Which of the following is least true 

a)  in the short run some costs are variable but most costs are fixed

b)  in the long run more fixed costs can change

c)  the cost structure of a business is more shaky with a large percentage of variable costs

d)  in the long run all costs become fixed   


121. The thesis of the accountants versus economists article is that

a) an accounting treatment shows how the US trade deficit is ballooning

b) an economist captures the notion of higher and lower margins for imports and exports

c) when an economist performs forensic accounting there is more accurate profit recognition 

d) accounting shows how the US is able to keep a greater portion of profits on higher margin goods 


122.  A well-functioning securities market has all of the following except

a) it is transparent meaning that timely and accurate information about trade prices and volume are available

b) it is liquid meaning that the price differential between consecutive trades is relatively low

c) it is fragmented meaning that the same securities can readily be traded in different markets and time zones

d) it is efficient meaning that transaction costs are low and the market adjusts quickly to new information


123. In the “euphoric” phase of the cycle of emotions pertaining to rising and falling performance of an investment 

a) one is more likely to engage in imprudent risk-taking

b) one engages in capitulation that “markets are not for me”

c) one is liable to change one’s mind about an investment multiple times

d) one accepts and rationalizes declines by saying one is a long term investor       


124. Which of the following does not describe the global financial system

a) it provides a mechanism for dealing with surpluses and deficits

b) it matches supply and demand across different economies   

c) it recycles savings into borrowing across the financial terrain

d) it syncs economic cycles and smooths inefficiencies between developed and emerging markets 


125.  The neuro-behavioral thesis about how we are moved to action is best described as

a) we are irrational creatures that have no control over our conduct

b) many of our actions are driven by variables which are cognitive but of which we are not necessarily conscious

c) the emotive aspects of the brain is consistently preponderant over the logical elements

d) the subconscious mind and its latent desires are really why we do what we do 


126.  Which of the following is not true of the so-called shadow banking sector

a) it is a form of regulatory arbitrage

b) only unregulated banks engage in shadow banking

c) it has resulted in a proliferation of credit intermediary entities

d) sometimes assets in shadow banking are held off balance sheet


127. Inter alia, the notion of the time value of money proposes all of the following except

a) an investment in the future needs to beat the hurdle of the risk-free rate

b) time is money and an investor needs to be compensated for the time it takes to assess an investment’s riskiness 

c) money is worth more the sooner it is received 

d) allocation to a long-term risk asset needs to provide an illiquidity premium and a risk premium 


128.  In a securitzation that is operating properly, in the event that default rates ratchet to beyond certain critical collateralization thresholds 

a) the senior tranche amortizes by diverting cashflows from lower tranches that are wiped out in order not to impair AAA

b) the cashflow waterfall diverts to support equity which has an ownership claim on assets 

c) the CDO automatically converts to a CDO squared

d) a leverage mismatch occurs so various tranches end up blowing up due to capital shortfalls


129.  What is the best conclusion that can be drawn from the following chart



a) the relationship between the labor pool and employment in advanced economies is robust 

b) globalization can be viewed as an engine for urbanization and wage inflation in developing economies

c) the labor arbitrage trend of outsourcing labor to developing economies is reversing

d) wage disparities between east and west are causing the latter to move to higher paying skilled jobs 


130.  The following is a chart of US household debt as a percentage of gross disposable income 




From the foregoing, we can reasonably conclude all of the following except 

a) US households remain at the same hyper-leveraged levels they possessed during the subprime crisis

b) after the excesses associated with the GFC, households are deleveraging but are not yet at trendline levels 

c) during or following periods of economic recessions in the past, household debt tended to fall below the trendline 

d) the general historical trend has been for households to take on more leverage relative to income


131.  Which of the following is not true for credit default swaps

a) an investor can pass on default risk of a credit asset to another party in return for paying a premium 

b) only someone with exposure to the underlying credit risk with an insurable interest can buy a CDS

c) the underwriter must pay the buyer of CDS in the case of a default event

d) the seller of a CDS is short volatility


132. The cost of possession is the full cost of using any non-consumable good, from a house to a car to a fountain pen, over a given period of time.  Which of the following best pertains to this notion

a) carrying costs such as interest on leverage, maintenance, property taxes, improvements, etc., must factor into how we value an asset and calculate ROI

b) possession is distinct from buying an asset by borrowing to finance the purchase

c) a fountain pen typically has a lower cost of possession that a consumable good

d) the use value of an asset is distinct from its tradeable value as an asset that can be subject to speculation 


133.  An asset with a higher standard deviation relative to the market 

a) is more volatile than the market as a whole

b) is less volatile than the market

c) has a higher margin of safety than the market

d) is less volatile than its peers 


134.  Those who engage in algorithmic or systematic trading 

a) tend not to consider that people can exercise intelligent, winning discretion in markets   

b) believe subjectivity of human beings allows them to respond with alacrity to market volatility 

c) model the future based upon what occurred in the past 

d) tend to believe machines can make better trading decisions than humans


135. The notion of a multiplier effect associated with debt is predicated on the notion that 

a) credit and liabilities offset each other and one is a multiple of the other on balance sheets

b) when debt is converted to equity its value multiplies because it is a residual claim on assets

c) an IOU can be used as collateral and borrowed against so debtors can become creditors

d) debt proliferates through the financial system through hedge, speculative and ponzi phases


136.  Which of the following is not a claim we would associate with MMT

a) taxes are not necessarily correlated with government spending

b) large budget deficits do not create a drag on the economy 

c) sovereign entities need to borrow money by selling bonds

d) taxes are used to take money out of the economy and not to finance government programs


137.  In our modern economy, excluding QE who is most responsible for money creation

a) central banks printing money

b) commercial banks making loans

c) FX traders taking large speculative positions in currency pairs

d) forgers creating fake bills in large denominations


138.  Which of the following would you consider least important when building an investment case

a) what are the drivers of return and a catalyst for causing price movement

b) what are appropriate entry and exit points

c) how can the investment be hedged

d) who are other holders of the asset or asset class


139.  On Nov 19, 2021 Grant’s reported that the Financial Industry Regulatory Authority stated that domestic margin debt rose to a record $936 billion last month, up 42% from a year ago and 61% above the October average across 2018 and 2019. Jason Goepfert, chief research officer at SentimentTrader said margin debt exceeds brokerage house cash available for withdrawal by $500 billion, the largest sum on record.  From this we can reasonably extrapolate all of the following except

a) appreciation in equities is occurring from buying with borrowed funds

b) a downturn triggering margin calls will exacerbate downward pressure on the markets

c) buying pressure is likely skewing P/E ratios towards untenable mutiples 

d) investor sentiment will turn bearish soon


140.  Which of the following would you not consider correct for Iain McGilchrist’s “Master and his Emissary” thesis

a)  he is concerned about the puzzle of why the brain is asymmetrical and divided although it sits in a symmetrical skull with 32 bones fused together

b)  he views the left brain as the master and the right brain as the emissary

c)  he believes we can explain western civilization in terms of left/right brain tussle

d)  many aspects of the financial crisis can be explained in terms of the divided brain thesis 


141.  In finance, capitalism is generally thought of as a system whereby

a) capital seeks to find the most efficient way to generate value usually via productivity to achieve an optimal return

b)  a risk-free rate is the baseline of what is a marginally acceptable return on capital assets

c)  capital is the difference of assets minus liabilities

d)  labor moves freely by capital tends to be more static and accumulate in particular industries or geographies


142.  Sensitivity analysis in finance is a way to ascertain

a) what particular triggers are likely to make market participants feel micro-aggressed

b) what factors can influence the price of an asset

c)  the extent to which the market is sensitive to systematic factors versus the idiosyncratic features of an asset

d)  how fundamentals work as an analytical tool and trump sentiment


143.  Moral hazards are defined as 

a)  when people fail to respect others as market participants

b)  the notion of markets being neutral and not imbued with moral judgment

c)  perverse incentives that cause market failures

d)  speed bumps in investing that are hazardous for generating alpha


144.  The chart below tracks the Percentage of Global Assets with Annual Negative Total Return in U.S. Dollar Terms (1901-2018).  This graph suggests that



a) the US dollar is the currency that denominates all assets in every market

b) negative returns in the global market are an unprecedented phenomenon

c) currency appreciations mitigate low returns in non-dollarized markets

d) close to all assets in the global economy are negative when converted to dollars


145.  Debt peonage is a form of indentured servitude where debt must be paid off with work.  This is most analogous to 

a)  originate-to-distribute                                 b)  student loans

c)  mortgage refinancing                                  d) moral hazard


146. The decimation of the American Middle Class is most concerning because

a)   in an economy where 70% of GDP is consumption, the middle class is the consumption engine

b)  the US has a massive savings deficit relative to borrowing

c)  the middle class are those responsible for household formation and the replacement ratio

d)  the middle class are those who vote and swing elections


147. Adam Smith saw the task of political economy as the pursuit of “two distinct objects:” first, to provide a plentiful revenue or subsistence for the people, or more properly to enable them to provide such a revenue or subsistence for themselves; and second, to supply the state or commonwealth with a revenue sufficient for the public services”. He defended public services as free education and poverty relief, while demanding greater freedom and support for the indigent.  Which of the following would you not hold true

a)  the intellectual reception history of Adam Smith falsely portrays him as an unequivocal proponent of laissez-faire economics

b)  Smith is consonant with Locke in the latter’s conviction that property is an antecedent natural right

c)  The Wealth of Nations tends not to be read in conjunction with The Theory of Moral Sentiments

d)  Smith is not in favor of market forces being allowed to prevail in an unfettered manner 


148. Varoufakis’ metaphor of the global minotaur does all of the following except

a) it posits the US as the manufacturing engine in the global economy

b) it considers that feeding the minotaur entails the dollars in the world being funneled into the Wall Street machine

c) it proposes that the biggest export of the US is greenbacks 

d) it illustrates how the rest-of-the-world (ROTW) funds the US economy keeping US interest rates low because of persistent demand for US debt 


149. The delta between two phenomena represents

a) the way one asset is inversely correlated to another

b) the rate of change of one relative to the other

c) the manner in which one phenomenon cannot be used as a proxy for another

d) the differential capacities of the two phenomena to generate alpha


150.  When spreads widen between the risk-free rate and other credit assets this indicates that

a) investors want to be compensated more per unit of risk they are being exposed to 

b) there is widening bullish investor sentiment that indicates greater comfort with risk-taking

c) the risk-free rate has been increased because of Central Bank policy

d) Quantitative Easing (QE) is being wound down and the Fed is selling assets


151. Which of the following is not true of Minsky’s ponzi stage of finance

a)  there is no ability to pay off principal nor even service debt 

b)  this is the stage of sheer instability

c)  the system evinces stability which promotes more reckless risk-taking 

d)  the only way to stay afloat is to unload leveraged assets to bigger fools


152.  Which of the following would you not consider to be a phenomenon associated with securitization

a)   it attenuates risk by distributing it across a broader swath of risk bearers

b)   it promotes access to liquidity

c)   it allows risk to be tradeable in secondary markets

d)   it makes capital markets less efficient        


153.  Which of the following would you not associate with Ray Dalio’s Template for Understanding

a)  he considers markets to be efficient and that they price assets accurately

b)  he holds that the economy moves in various cycles that can be interposed upon each other

c)  he asserts that the credit cycle is an important determinant for whether asset prices expand or contract

d)  he says that credit is a promise to deliver money in the future


154. Covenant-lite debt issuance pertains to

a)  when markets price debt according to a company’s ability to refinance it

b)  debt issuance where there are few contractual protections for the lender

c)  debt that carries a floating interest rate that resets in tandem with prevailing rates in the market

d)  debt that cannot be rated if it is securitized


155. Which of the following is least likely to bear upon the price of an asset

a)  supply and demand of the asset

b)  the size of the asset

c)  the market’s expectations around the volatility of the asset

d)  the price of similarly placed comparable assets


156.  Many asset managers are allocating to short-maturity, high quality corporate bonds. This suggests all of the following except 

a)  they believe that rates will continue to rise

b) they are bearish more leveraged corporate credit 

c)  they are valuing liquidity

d)  they are short corporate bonds 


157. If the price of a company’s CDS is rising, this suggests that 

a)  the market believes that the probability of default is rising

b)  the company is improving its performance and concomitant ability to achieve debt coverage

c)  the implied downside volatility of the company is being priced with a margin of safety

d)  the company is more likely to become part of an index such as the Dow or S&P 500


158.  In his market commentary, an asset manager writes, “Completing parallels with the subprime mortgage experience, leveraged loans now total $1.3 trillion, so the category is already larger than the 2006 subprime mortgage market and growing just as fast. S&P estimates total 2018 leveraged-loan origination is likely to exceed last year’s record $650 billion.” Which of the following least flows from the foregoing statement

a) the writer believes that a crisis is potentially imminent

b) the leverage in the market is again at elevated levels

c)  companies are piling on debt and inflating the liability side of their balance sheets

d)  leveraged loans are being securitized and sold like subprime mortgages to yield-hungry investors


159.  The notion of who bears risk and what incentives exist for different actors to act in particular ways vis-à-vis risk-taking is most illustrated by the notion of

a)  trade wars                                                               b)  too-big-to-fail

c)  repo agreements                                                     d)  student loans


160. Ray Dalio uses this chart in his essay “Our Biggest Issue.” 


His point is that

a)  we are at untenable levels of populism in contemporary life

b)  wealth and income skews are a destabilizing force in the social and economic system 

c)  the economy has been growing at a healthy clip

d)  economic growth trickles down and benefits all segments of the population


161. The so-called New Financial Architecture (NFA) is a regime marked by all the following except

a) increasing deregulation of the financial sector

b) risk being generated or held by various non-traditional forms of credit intermediaries termed shadow banking 

c) increased complexity and opacity of financial instruments

d) enhanced transparency as to the nature of counter-party exposures


162.  The combined debt of the US, Eurozone, Japan, and China has increased more than ten times as much as their combined GDP [growth].  In other words, the world’s largest economies are generating debt 10X faster than economic growth. Lakshman writes, “Remarkably, then, the global economy—slowing in sync despite soaring debt—finds itself in a situation reminiscent of the Red Queen Effect we referenced 15 years ago, when tax cuts boosted the US budget deficit much more than GDP. As the Red Queen says to Alice in Lewis Carroll’s Through the Looking Glass, “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”  The upshot of this statement is that

a)  there is a mismatch between debt and the growth needed to service it

b)  the world’s largest economies are deleveraging at an alarming rate

c)  we are in a so-called Goldilocks economy which is neither too hot nor too cold, but just right

d)  debt to GDP ratios are stable and not expanding


163. Inflation entails all of the following except

a) it erodes purchasing power 

b) it is associated with the Goldilocks scenario

c) it is associated with expansion of the money supply and increase in velocity of money

d) it makes prior debt less expensive


164. A notion about trade deficits not apparent to economists but understood by accountants is that

a) a trade deficit country benefits from goods that are cheap

b) a trade deficit country may have a strategic edge with regard to margin capture

c) trade deficits are structural imbalances in the global economy

d) trade deficits are cyclical and generally reverse over time 


165. If spreads between the risk-free rate and other credit assets are widening

a) macro conditions are becoming more risky

b) there is more liquidity chasing fewer opportunities

c) macro conditions are becoming less risky

d) the macro perceived risk is unchanged


166. The notion of Common Knowledge in Epsilon Theory describes

a) what everyone believes about what everyone believes

b) how alpha can be generated by market participants

c) how the narrative is interpreted by a few elite players of the game who move markets

d) the behavior of champions in League of Legends who are analogous to market outperformers


167. Which of the following is an example of the representativeness heuristic which is often a source of epistemological error

a) you see multiple representations of birds in Central Park so conclude that Central Park is a sanctuary for birds

b) there are many people lining up at a hot dog stand so you believe it is a tourist trap

c) Jill enjoys analyzing balance sheets so she is more likely to be a finance major than a marketing major   

d) everyone in my NYU class cheats on tests so I should cheat as well


168. Isaiah Berlin’s metaphor of the hedgehog and the fox 

a) suggests how foxes can make superior claims about the world because of non-specialized knowledge and mental agility

b) is an attempt to explain how being sly like a fox allows the fox to prevail over all creatures except prickly hedgehogs

c) illustrates the principle of slow and steady being superior to fast and loose

d) proposes that there is hierarchical ordering in the animal kingdom which has analogs in human societies


169. The notion of market returns being non-ergodic means that 

a) everyone in the market over the long haul receives the systematic return

b) timing of entry and exit points matters

c) the market vacillates between boom and bust cycles

d) mis-pricings are arbitraged away


170. A takeaway from our knowledge of financial crises is that 

a) there are a multiplicity of causes that contribute to systemic failure

b) the emergent properties in complex systems are easy to explain

c) all financial systems tend towards equilibria and crises are an anomaly 

d) causes can be reduced to a single phenomenon


171.  ESG as a source of alpha is predicated on the notion that

a) non-economic factors can lead to outperformance

b) companies are solely responsible to shareholders for whom they must generate profits

c) E and S are more important than G factors

d) arbitraging out of business companies that do not conform to ESG criteria


172.  Crypto-currencies are now a multi-billion dollar part of the financial landscape. Which of the following would you not hold true for this asset class

a) they are considered an alternative form of storing and transacting value than fiat currencies

b) technology is used to generate trust in the absence of a central authority

c) the fundamentals concerning valuation are clear and transparent

d) they are associated with so-called Web 3.0


173. The notion of credit pertains to all of the following except

a) junior creditors are higher in the capital structure than senior creditors

b) credit is a liability for the borrower and an asset for the lender

c) it comes with potential default risk

d) it is a promise to deliver cash in the future


174. The proposition that we are hardwired to fail even if we are great stock pickers is based on the notion that

a) markets always prevail over individuals just like the house does better than any individual gambler

b) we tend to make concentrated bets instead of being well diversified across non-correlated asset classes

c) we can time markets perfectly but do not know how to employ leverage effectively to juice up returns

d) loss aversion linked to evolutionary survival means we exit positions too soon


175. Which of the following is not one of the “Seven Immutable Laws of Investing”

a) being contrarian

b) identifying that this time it is different

c) being wary of leverage

d) understanding your sources of return