Question 1

The Prudent Man Rule,which applies to fiduciaries,is a relatively new concept in investment management.

Accepted Answer

A) True 
 B)False

Question 2

The first step of the portfolio management process is:

Accepted Answer

A)  to assess market conditions.
B)  to determine investor objectives,constraints,and preferences.
C)  to develop strategies and implement them.
D)  portfolio construction.

Question 3

Financial plans should be monitored and updated on an ongoing basis.Examples of changes that can necessitate financial plan updating include changes in wealth,time horizon,liquidity requirements,tax circumstances,and regulations.

Accepted Answer

A) True 
 B)False

Question 4

A market timing approach that increases the proportion of funds in stocks when the stock market is expected to rise,and increases cash when stocks are expected to fall is a:

Accepted Answer

A)  strategic asset allocation.
B)  tactical asset allocation.
C)  portfolio optimization.
D)  liquidity timing allocation.

Question 5

The document that describes an investor's objectives and constraints is:

Accepted Answer

A)  the prospectus.
B)  the indenture.
C)  the investment policy statement.
D)  the portfolio optimization contract.

Question 6

Relative to a conservative allocation,an aggressive asset allocation would contain larger proportions of:

Accepted Answer

A)  value stocks and bonds.
B)  bonds and large-cap stocks.
C)  small-cap and international stocks.
D)  defensive stocks.

Question 7

The Markowitz model identifies the set of portfolios that offers the:

Accepted Answer

A)  highest return for any given level of risk.
B)  least-risk for conservative investors.
C)  long-run approach to wealth accumulation for young investors.
D)  risk-free alternative for risk-averse investors.

Question 8

In the investment policy statement (IPS) ,investor objectives focus on:

Accepted Answer

A)  accumulation and consolidation.
B)  return and taxes.
C)  risk and return.
D)  security selection and asset allocation.

Question 9

How does the prudent investor rule affect asset allocation?

Accepted Answer

Whenever there is an investmen...

Question 10

The spending phase of the life cycle is avoided by investors who follow the prudent man rule.

Accepted Answer

A) True 
 B)False

Question 11

The long-term geometric mean return for the S&P 500 is between 15 and 20%.

Accepted Answer

A) True 
 B)False

Question 12

One aspect of the tax considerations in asset allocation is that:

Accepted Answer

A)  capital gains are often taxed at a higher rate than dividend and interest income.
B)  Roth accounts offer a tax savings in the year they are opened.
C)  investors are exempt from taxes on capital gains once they reach age 65.
D)  taxes on capital gains are deferred until the gain is realized.

Question 13

Mr.Baker,a single person in early retirement,owns a house,a well-used car,and minimal life insurance.He has pension assets of about half a million dollars.He wants it all in tax-exempt municipal bonds so that "I won't lose any money,and I won't have to pay taxes."Considering the life-cycle theory of asset allocation,would you suggest any alternatives to this client?

Accepted Answer

Considering the client's need for income...

Question 14

Under the life cycle approach,the lowest risk and lowest return should come during the spending and gifting stages.

Accepted Answer

A) True 
 B)False

Question 15

An efficient set of portfolios offers maximum risk for any level of return.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is an advantage of monitoring and rebalancing a portfolio over time?

Accepted Answer

A)  Lower commissions
B)  Lower taxes
C)  A portfolio that is better aligned with objectives
D)  A portfolio with greater expected return C

Question 17

Portfolio performance evaluation is an important determinant of your success in financial planning.

Accepted Answer

A) True 
 B)False  True

Question 18

Which of the following is not part of the portfolio management process?

Accepted Answer

A)  Determining investor objectives,constraints,and preferences
B)  Selling weak performing securities from the portfolio
C)  Forming expectations for the economy and its sectors
D)  Developing and implementing a strategy

Question 19

Investor expectations about expected returns from various asset classes should start with:

Accepted Answer

A)  long-term rates of return of those asset classes.
B)  last month's rate of return of those asset classes.
C)  last year's rate of return of those asset classes.
D)  the correlation of returns from asset classes over the past two years.

Question 20

Which of the following is not among the usual constraints and preferences considered when formulating an investment policy statement?

Accepted Answer

A)  Avoidance of so-called "sin" stocks (alcohol,tobacco,firearms,etc. ) 
B)  Liquidity needs
C)  Economic assessment
D)  Time horizon C

Exam 21: Portfolio Management

The Prudent Man Rule,which applies to fiduciaries,is a relatively new concept in investment management.

Correct Answer
verified

The first step of the portfolio management process is:

Correct Answer
verified

Financial plans should be monitored and updated on an ongoing basis.Examples of changes that can necessitate financial plan updating include changes in wealth,time horizon,liquidity requirements,tax circumstances,and regulations.

Correct Answer
verified

A market timing approach that increases the proportion of funds in stocks when the stock market is expected to rise,and increases cash when stocks are expected to fall is a:

Correct Answer
verified

The document that describes an investor's objectives and constraints is:

Correct Answer
verified

Relative to a conservative allocation,an aggressive asset allocation would contain larger proportions of:

Correct Answer
verified

The Markowitz model identifies the set of portfolios that offers the:

Correct Answer
verified

In the investment policy statement (IPS) ,investor objectives focus on:

Correct Answer
verified

How does the prudent investor rule affect asset allocation?

Correct Answer
verified
Whenever there is an investmen...
View Answer

The spending phase of the life cycle is avoided by investors who follow the prudent man rule.

Correct Answer
verified

The long-term geometric mean return for the S&P 500 is between 15 and 20%.

Correct Answer
verified

One aspect of the tax considerations in asset allocation is that:

Correct Answer
verified

Correct Answer
verified
Considering the client's need for income...
View Answer

Under the life cycle approach,the lowest risk and lowest return should come during the spending and gifting stages.

Correct Answer
verified

An efficient set of portfolios offers maximum risk for any level of return.

Correct Answer
verified

Which of the following is an advantage of monitoring and rebalancing a portfolio over time?

Correct Answer
verified
C

Portfolio performance evaluation is an important determinant of your success in financial planning.

Correct Answer
verified
True

Which of the following is not part of the portfolio management process?

Correct Answer
verified

Investor expectations about expected returns from various asset classes should start with:

Correct Answer
verified

Which of the following is not among the usual constraints and preferences considered when formulating an investment policy statement?

Correct Answer
verified
C

Exam 21: Portfolio Management

The Prudent Man Rule,which applies to fiduciaries,is a relatively new concept in investment management.

Correct AnswerverifiedShow Answer

The first step of the portfolio management process is:

Correct AnswerverifiedShow Answer

Financial plans should be monitored and updated on an ongoing basis.Examples of changes that can necessitate financial plan updating include changes in wealth,time horizon,liquidity requirements,tax circumstances,and regulations.

Correct AnswerverifiedShow Answer

A market timing approach that increases the proportion of funds in stocks when the stock market is expected to rise,and increases cash when stocks are expected to fall is a:

Correct AnswerverifiedShow Answer

The document that describes an investor's objectives and constraints is:

Correct AnswerverifiedShow Answer

Relative to a conservative allocation,an aggressive asset allocation would contain larger proportions of:

Correct AnswerverifiedShow Answer

The Markowitz model identifies the set of portfolios that offers the:

Correct AnswerverifiedShow Answer

In the investment policy statement (IPS) ,investor objectives focus on:

Correct AnswerverifiedShow Answer

How does the prudent investor rule affect asset allocation?

Correct AnswerverifiedWhenever there is an investmen...View AnswerShow Answer

The spending phase of the life cycle is avoided by investors who follow the prudent man rule.

Correct AnswerverifiedShow Answer

The long-term geometric mean return for the S&P 500 is between 15 and 20%.

Correct AnswerverifiedShow Answer

One aspect of the tax considerations in asset allocation is that:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedConsidering the client's need for income...View AnswerShow Answer

Under the life cycle approach,the lowest risk and lowest return should come during the spending and gifting stages.

Correct AnswerverifiedShow Answer

An efficient set of portfolios offers maximum risk for any level of return.

Correct AnswerverifiedShow Answer

Which of the following is an advantage of monitoring and rebalancing a portfolio over time?

Correct AnswerverifiedC

Portfolio performance evaluation is an important determinant of your success in financial planning.

Correct AnswerverifiedTrue

Which of the following is not part of the portfolio management process?

Correct AnswerverifiedShow Answer

Investor expectations about expected returns from various asset classes should start with:

Correct AnswerverifiedShow Answer

Which of the following is not among the usual constraints and preferences considered when formulating an investment policy statement?

Correct AnswerverifiedC

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified
Whenever there is an investmen...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Considering the client's need for income...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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C

Correct Answer
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True

Correct Answer
verified

Correct Answer
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Correct Answer
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C