ch21 - Chapter 21 PORTFOLIO MANAGEMENT Multiple Choice...

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Chapter 21 PORTFOLIO MANAGEMENT Multiple Choice Questions Portfolio Management as a Process 1. Maginn and Tuttle emphasize that portfolio management is: a. an ad hoc procedure. b. an inflexible system. c. a process. d. a set of rules. c, easy) 2. The first step of portfolio management according to Maginn and Tuttle is : a. to assess market conditions. b. to determine objectives, constraints and preferences. c. to develop strategies and implement them. d. to adjust the portfolio as necessary. (b, moderate) 3. A major difference between individual and institutional investors is their very different: a. approaches to market analysis. b. evaluations of return. c. time horizons. d. types of securities held in their portfolios. (c, moderate) 4. Individuals define risk as: a. deviation from some expected return. b. a cost of investing. c. a quantitative measure. d. “losing money.” (d, moderate) Chapter Twenty-one Portfolio Management 16
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5. Which of the following statements regarding individual and institutional investors is true? a. Taxes are generally more important to institutional investors than to individual investors. b. Institutional investors tend to be less precise about their assets and liabilities than individual investors. c. Individuals generally have greater freedom in their investment decisions than do institutional investors. d. Institutional investors are more defined by their personalities than are individual investors. (c, difficult) 6. Which of the following is not true regarding life-cycle funds? a. They are balanced funds. b. They automatically adjust to a more conservative position as the investor nears retirement age. c. They are not available for 401(k) plans. d. They are also known as target-date funds. (c, moderate) Formulate An Appropriate Investment Policy 7. The steps to establishing an investment policy are to state the a. minimum investment and maximum fees. b. SEC guidelines for prudent man investing. c. objectives and constraints and preferences. d. asset allocation parameters and time horizons. (c, easy) 8. Which of the following is NOT one of the phases of the life-cycle theory of asset allocation? a. Accumulation phase b. Consolidation phase c. Taxation phase d. Gifting phase (c, moderate Chapter Twenty-one Portfolio Management 17
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9. Investors can normally afford to assume larger risks in the ____ phase of the life-cycle. a. accumulation b. consolidation c. spending d. gifting (a, moderate) 10. Which of the following is NOT among the usual constraints and preferences considered when formulating an investment policy? a. Gifting requirements b. Liquidity needs c. Tax considerations d. Time horizon (a, easy) 11. Living expenses are covered from accumulated assets rather than from earned income in the __________ phase of the life cycle. a.
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ch21 - Chapter 21 PORTFOLIO MANAGEMENT Multiple Choice...

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