Exam 22: Investors and the Investment Process

Which one of the following is a life insurance policy that will provide a fixed death benefit and allows the policyholder to choose where to invest the policy's cash value?

Under a "passive core" portfolio management strategy, a manager would ________.

In a defined benefit pension plan, the ________ bears all of the fund's investment performance risk.

Of the following, the most flexible type of life insurance policy from the policyholder's perspective is probably a ________ policy.

A family will retire in a few years. They have a high tax bracket and are concerned about their after-tax rate of return. A meeting with their financial planner reveals that they are primarily focused on safety of principal and will need a 6% to 8% average rate of return on their portfolio. They desire a diversified portfolio, and liquidity is likely to be a concern due to health reasons. Which of the following asset allocations seems to best fit this family's situation?

An investor with high risk aversion will likely prefer which of the following risk and return combinations?

For a bank, the difference between the interest rate charged to borrowers and the interest rate paid on liabilities is called the ________.

Many defined benefit pension plans have a target rate of return on investment that is equal to the ________.

The asset universe is the ________.

A passive asset allocation strategy involves ________.

An investor has a long time horizon and desires to earn the market rate of return. However, the investor will need to withdraw funds each year from her investment portfolio. The biggest constraint a planner would face with this client is a ________ constraint.

Just 2 months after you put money into an investment, its price falls 25%. Assuming that none of the investment fundamentals have changed, which of the following actions would evidence the greatest risk tolerance?

Both a wife and her husband work in the airline industry. They are in their 40s, and they have a high tax bracket and are concerned about their after-tax rate of return. A meeting with their financial planner reveals that they are primarily focused on long-term capital gains and will need at least a 9% to 11% average rate of return to meet their retirement goals. They desire a diversified portfolio, and liquidity is not currently a major concern. Which of the following asset allocations seems to best fit their situation?

If a defined benefit pension fund's actual rate of return is ________ than the actuarial assumed rate, then the ________.

To become a CFA, you must do all of the following except which one?

You are thinking of investing in one of two assets. Asset A has higher systematic risk than asset B. You can be sure that asset A's ________ return will be higher than asset B's, but you can't be sure if asset A's ________ return will be higher than asset B's.

The possibility that you are too conservative and your money doesn't grow fast enough to keep pace with inflation is called ________.

An investor refuses to invest in any firm that produces alcohol or tobacco. This is an example of a ________ constraint.

Under the provisions of a typical defined benefit pension plan, the employer is responsible for ________.

The major asset most people have during their early working years is their ________.