Question 1

Which act governs employer-sponsored retirement plans?

Accepted Answer

A) Investors Advisors Act 
B) Investment Company Act 
C) Security Investors Protection Act 
D) Employment Retirement Income Security Act 
A) Investors Advisors Act 
B) Investment Company Act 
C) Security Investors Protection Act 
D) Employment Retirement Income Security Act

Question 2

Pension funds are governed by the prudent man rule since specific pension fund legislation has never passed.

Accepted Answer

A) True 
 B)False

Question 3

An individual investor's marginal tax rate is:

Accepted Answer

A) higher than the investor's effective tax rate. 
B) lower than the investor's effective tax rate. 
C) equal to the investor's effective tax rate. 
D) higher than the investor's effective tax rate only when the investor is wealthy. 
A) higher than the investor's effective tax rate. 
B) lower than the investor's effective tax rate. 
C) equal to the investor's effective tax rate. 
D) higher than the investor's effective tax rate only when the investor is wealthy.

Question 4

Living expenses are covered from accumulated assets rather than from earned income in the:

Accepted Answer

A) accumulation phase of the life cycle. 
B) consolidation phase of the life cycle. 
C) spending phase of the life cycle. 
D) saving phase of the life cycle. 
A) accumulation phase of the life cycle. 
B) consolidation phase of the life cycle. 
C) spending phase of the life cycle. 
D) saving phase of the life cycle.

Question 5

In order to arrive at an investment policy,it is necessary to determine whether the market is headed for a bull or bear market.

Accepted Answer

A) True 
 B)False

Question 6

Investors following a constant proportion portfolio insurance (CPPI)investment strategy:

Accepted Answer

A) increase their allocation to stocks after stock prices rise. 
B) increase their allocation to bonds after stock prices rise. 
C) increase their allocation to cash after stock prices rise. 
D) hedge their portfolio after stock prices rise. 
A) increase their allocation to stocks after stock prices rise. 
B) increase their allocation to bonds after stock prices rise. 
C) increase their allocation to cash after stock prices rise. 
D) hedge their portfolio after stock prices rise.

Question 7

Which of the following is not a major consideration in the asset allocation process?

Accepted Answer

A) Return requirements 
B) Risk tolerance 
C) Ease of monitoring progress 
D) Time horizon 
A) Return requirements 
B) Risk tolerance 
C) Ease of monitoring progress 
D) Time horizon

Question 8

What are the differences between individual investors and institutional investors?

Accepted Answer

(1)Their definition of risk differs.
(2)

Question 9

Which of the following is not true regarding the life-cycle approach to investment?

Accepted Answer

A) It is most appropriate for institutions. 
B) It automatically becomes more conservative as the investor nears retirement age. 
C) It is suited to 401(k)plans. 
D) It can be implemented using life-cycle (also known as target-date)funds. 
A) It is most appropriate for institutions. 
B) It automatically becomes more conservative as the investor nears retirement age. 
C) It is suited to 401(k)plans. 
D) It can be implemented using life-cycle (also known as target-date)funds.

Question 10

The "lockup" problem involved in rebalancing refers to the problem that:

Accepted Answer

A) retirement accounts cannot be liquidated prior to retirement. 
B) trust accounts cannot be traded without incurring administrative costs. 
C) taxable accounts are subject to capital gains taxes if appreciated assets are sold. 
D) illiquid fixed income securities must be held until maturity. 
A) retirement accounts cannot be liquidated prior to retirement. 
B) trust accounts cannot be traded without incurring administrative costs. 
C) taxable accounts are subject to capital gains taxes if appreciated assets are sold. 
D) illiquid fixed income securities must be held until maturity.

Question 11

Monitoring and revision are part of the portfolio management process.

Accepted Answer

A) True 
 B)False

Question 12

Retirement programs offer tax sheltering for individual U.S.investors.

Accepted Answer

A) True 
 B)False

Question 13

Common stocks are not always an inflationary hedge,but have a long history of strong performance over time.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not one of the phases of the life-cycle theory of asset allocation?

Accepted Answer

A) Accumulation 
B) Consolidation 
C) Gifting 
D) Retirement 
A) Accumulation 
B) Consolidation 
C) Gifting 
D) Retirement

Question 15

An investor with high liquidity needs and a short time horizon should have a relatively high allocation to:

Accepted Answer

A) real estate. 
B) bonds. 
C) money market securities. 
D) low beta stocks. 
A) real estate. 
B) bonds. 
C) money market securities. 
D) low beta stocks.

Question 16

To avoid problems of underperformance,passive investing through the use of indexed mutual funds and ETFs is generally the way to go for most individuals.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following investors should allocate a relatively high portfolio weight to municipal bonds?

Accepted Answer

A) A tax-exempt institution 
B) An individual investor in the accumulation phase of the life cycle 
C) An individual investor with high liquidity needs 
D) An individual investor in a high tax bracket 
A) A tax-exempt institution 
B) An individual investor in the accumulation phase of the life cycle 
C) An individual investor with high liquidity needs 
D) An individual investor in a high tax bracket

Question 18

Retirees would likely have a greater percentage of their wealth in common stock than would a recent college graduate.

Accepted Answer

A) True 
 B)False

Question 19

The consolidation phase of the life cycle begins when the investor reaches retirement.

Accepted Answer

A) True 
 B)False

Question 20

In order to protect principal against possible loss caused by distressed selling,individuals are typically recommended to have a:

Accepted Answer

A) 1-month emergency fund. 
B) 2-month emergency fund. 
C) 6-month emergency fund. 
D) 12-month emergency fund 
A) 1-month emergency fund. 
B) 2-month emergency fund. 
C) 6-month emergency fund. 
D) 12-month emergency fund

Exam 21: Portfolio Management

Which act governs employer-sponsored retirement plans?

Pension funds are governed by the prudent man rule since specific pension fund legislation has never passed.

An individual investor's marginal tax rate is:

Living expenses are covered from accumulated assets rather than from earned income in the:

In order to arrive at an investment policy,it is necessary to determine whether the market is headed for a bull or bear market.

Investors following a constant proportion portfolio insurance (CPPI)investment strategy:

Which of the following is not a major consideration in the asset allocation process?

What are the differences between individual investors and institutional investors?

Which of the following is not true regarding the life-cycle approach to investment?

The "lockup" problem involved in rebalancing refers to the problem that:

Monitoring and revision are part of the portfolio management process.

Retirement programs offer tax sheltering for individual U.S.investors.

Common stocks are not always an inflationary hedge,but have a long history of strong performance over time.

Which of the following is not one of the phases of the life-cycle theory of asset allocation?

An investor with high liquidity needs and a short time horizon should have a relatively high allocation to:

To avoid problems of underperformance,passive investing through the use of indexed mutual funds and ETFs is generally the way to go for most individuals.

Which of the following investors should allocate a relatively high portfolio weight to municipal bonds?

Retirees would likely have a greater percentage of their wealth in common stock than would a recent college graduate.

The consolidation phase of the life cycle begins when the investor reaches retirement.

In order to protect principal against possible loss caused by distressed selling,individuals are typically recommended to have a:

Understanding Investments

Investment Alternatives

Indirect Investing

Securities Markets and Market Indexes

How Securities Are Traded

The Risks and Returns From Investing

Portfolio Theory

Portfolio Selection

Asset Pricing Models

Common Stock Valuation

Common Stocks: Analysis and Strategy

Market Efficiency

Economy Market Analysis

Industry Analysis

Company Analysis

Technical Analysis

Bond Yields

Bonds: Analysis and Strategy

Options

Futures

Evaluation of Investment Performance

Filters