CFA 2026 Level II Vignettes Portfolio Strategy Performance Evaluation Free Quiz 1

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CFA 2026 Level II Vignettes Portfolio Strategy Performance Evaluation Free Quiz 1

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CFA 2026 Level II Vignettes Portfolio Strategy Performance Evaluation Free Quiz 1

Practice CFA 2026 Level II Vignettes Portfolio Strategy MCQs from Performance Evaluation. Get instant results with Explanation.

General10 MCQs

1. Vignette 1: Performance Evaluation - Case Study: A portfolio manager's performance is being evaluated. What is performance evaluation and what does it involve?

A. Performance evaluation only measures returnsB. Performance evaluation measures returns and assesses skill on a risk-adjusted basisC. Performance evaluation is the same as performance attributionD. Performance evaluation is not used in practice

2. What is the time-weighted rate of return (TWR) and why is it used for manager evaluation?

A. TWR is affected by the timing of cash flowsB. TWR is the same as the money-weighted returnC. TWR eliminates the impact of external cash flows and is used for manager evaluationD. TWR is not used in practice

3. What is the money-weighted rate of return (MWR) and when is it used?

A. MWR is the IRR of the portfolio cash flows, affected by the timing of contributionsB. MWR is not affected by cash flowsC. MWR is the same as TWRD. MWR is used to evaluate manager skill

4. When should TWR be used versus MWR?

A. TWR is always better than MWRB. MWR is always better than TWRC. Only one measure is ever usedD. TWR is used for manager evaluation; MWR is used for investor experience

5. What are the characteristics of a good benchmark?

A. Any index can serve as a benchmarkB. A benchmark should be appropriate, investable, and transparentC. Peer group averages are always the best benchmarkD. Benchmarks are not important for performance evaluation

General10 MCQs

6. Vignette 2: Performance Evaluation - Case Study: An analyst compares two portfolios using the Sharpe ratio. What is the Sharpe ratio and what does it measure?

A. Sharpe ratio = (Portfolio Return - Risk-Free Rate) / BetaB. Sharpe ratio = (Portfolio Return - Risk-Free Rate) × Standard DeviationC. Sharpe ratio = (Portfolio Return - Risk-Free Rate) / Standard DeviationD. Sharpe ratio = (Portfolio Return - Benchmark Return) / Tracking Error

7. What is the Treynor ratio and when is it used?

A. Treynor ratio = (Portfolio Return - Risk-Free Rate) / BetaB. Treynor ratio = (Portfolio Return - Risk-Free Rate) / Standard DeviationC. Treynor ratio = (Portfolio Return - Benchmark Return) / Tracking ErrorD. Treynor ratio = (Portfolio Return - Risk-Free Rate) × Beta

8. What is the Sortino ratio and how does it differ from the Sharpe ratio?

A. Sortino ratio uses total standard deviationB. Sortino ratio uses betaC. Sortino ratio is the same as the Sharpe ratioD. Sortino ratio uses downside deviation (negative returns only)

9. What is the information ratio and what does it measure?

A. Information ratio = (Portfolio Return - Risk-Free Rate) / Tracking ErrorB. Information ratio = (Portfolio Return - Benchmark Return) / Tracking ErrorC. Information ratio = (Portfolio Return - Benchmark Return) / Standard DeviationD. Information ratio = (Benchmark Return - Risk-Free Rate) / Tracking Error

10. What is Jensen's alpha and what does it indicate?

A. Jensen's alpha is the slope of the regression lineB. Jensen's alpha measures total riskC. Jensen's alpha measures excess return over CAPM (positive = skill)D. Jensen's alpha is the same as the Sharpe ratio

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Conducting Body: CFA Institute

Frequency: 4 times a year (February, May, August, November) | Time: 135 Minutes

Negative Marking: No

⚡ Test Pattern (Total: 90 MCQs):

Alternative Investments: 8 MCQs
Corporate Issuers: 7 MCQs
Derivatives: 5 MCQs
Economics: 7 MCQs
Equity Investments: 12 MCQs
Ethics: 16 MCQs
Financial Statement Analysis: 11 MCQs
Fixed Income: 11 MCQs
Portfolio Management: 9 MCQs
Quant Methods: 6 MCQs

Merit Formula: -

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