Portfolio - Concepts

Question 1

Which of the following statements about the steps in the portfolio management process is NOT correct?

A)
Implementing the plan is based on an analysis of the current and future forecast of financial and economic conditions.
B)
Developing an investment strategy is based on an analysis of historical performance in financial markets and economic conditions.
C)
Rebalancing the investor’s portfolio is done on an as-needed basis, and should be reviewed on a regular schedule.

Answer 1

B
Developing an investment strategy is based primarily on an analysis of the current and future financial market and economic conditions. Historical analysis serves to help develop an expectation for future conditions.

Question 2

The three steps in the portfolio management process are?

Answer 2

Planning, execution, feedback

Question 3

Which portfolio management process step is this:
Determine client needs and circumstances, including the client’s return objectives, risk tolerance, constraints, and preferences. Create, and then periodically review and update, an investment policy statement (IPS) that spells out these needs and circumstances.

Answer 3

Planning

Question 4

When is investment policy statement involved (which step in portfolio management process)

Answer 4

Planning

Question 5

Which portfolio management process step is this: 
Construct the client portfolio by determining suitable allocations to various asset classes based on the IPS and on expectations about macroeconomic variables such as inflation, interest rates, and GDP growth (top-down analysis). Identify attractively priced securities within an asset class for client portfolios based on valuation estimates from security analysts (bottom-up analysis).

Answer 5

Execution

Question 6

Determining suitable allocations to various asset classes based on the IPS and on expectations about macroeconomic variables such as inflation, interest rates, and GDP growth. This is also called ____ analysis

Answer 6

top-down anaysis

Question 7

Identify attractively priced securities within an asset class for client portfolios based on valuation estimates from security analysts. This is also called ____ analysis

Answer 7

bottom-up analysis.

Question 8

An objective of the risk management process is to:

A) eliminate the risks faced by an organization.
B) identify the risks faced by an organization.
C) minimize the risks faced by an organization.

Answer 8

The risk management process should identify an organization’s risk tolerance, identify the risks it faces, and monitor or address these risks. The goal is not to minimize or eliminate risks.