Portfolio Management Section Quiz

Question 1

Your clients, the Fredricksons, are concerned about meeting their expenses in retirement. You have
created a portfolio for the couple that takes into consideration the market value of their plan assets as
well as the present value of the couple’s future liabilities. The goal of your approach is to manage the risk
and return for the total portfolio of assets and liabilities. What is the technique you are using to manage
the Fredrickson’s portfolio?

A) Liability-driven investing
B) Goal-based Investing
C) Diversification
D) Risk-Return Management

Answer 1

A) Liability-driven investing

Question 2

According to the information provided by Bob Rice about private equity investments, which of the
following could be included to meet an income strategy?

A) distressed credit
B) buy-outs
C) infrastructure and natural resources
D) concentrated portfolios

Answer 2

A) distressed credit

Question 3

Which of the following is a risk management strategy that relies on the negative correlation of a variety of asset classes to mitigate volatility?

A) Hedging
B) Diversification
C) Market timing
D) Risk budgeting

Answer 3

B) Diversification

Question 4

When reviewing Morningstar and comparable reporting services, an advisor should look for the following
in order to make better tax-aware investment decisions:

A) tax lot information, unrealized gain/loss position, turnover rate
B) tax rates, realized gain/loss position, tax-aware score
C) tax-cost information, taxable portfolio turnover, tax history
D) tax-cost information, unrealized gain/loss position, tax-aware score

Answer 4

D) tax-cost information, unrealized gain/loss position, tax-aware score

Question 5

Which of the following sustainable or socially responsible investment styles utilizes negative screening?

A) SRI
B) ESG
C) Thematic investing
D) Impact investing

Answer 5

A) SRI

Question 6

Selecting securities from industries or sectors expected to do well under specific global economic
conditions is referred to as:

A) Modern Portfolio Theory
B) A top-down approach to active investment selection
C) A bottom-up approach to active investment selection
D) Passive investing

Answer 6

B) A top-down approach to active investment selection

Question 7

The Berk family is interested in making a social impact with their wealth. Mrs. Berk is interested in
supporting growing alternative energy companies. The couple wants to invest a portion of their wealth in
private equity funds that support smaller alternative energy companies. Which of the following best describes the socially responsible investment strategy the Berks want to implement?

A) ESG investing
B) Negative screening
C) Impact investing
D) Positive screening

Answer 7

C) Impact investing

Question 8

What is the term used to describe an investment strategy that seeks to limit an investment loss through a
transaction that offsets the existing position?

A) Risk budgeting
B) Market timing
C) Hedging
D) Diversification

Answer 8

C) Hedging

Question 9

Socially responsible investing strategies are now commonly categorized using these terms:

A) ESG investing, impact investing, thematic investing
B) human rights, governance, positive investing
C) divestment, go-green funds, responsibility funds
D) social funds, no-sin stocks, environment friendly

Answer 9

A) ESG investing, impact investing, thematic investing

Question 10

Your client, Joseph, is very ill and wishes to protect against a decrease in portfolio value to preserve it for
his heirs. However, he does not want to sell his portfolio to take advantage of the step up in basis his
appreciated positions may receive at death. Given Joseph’s wishes, what type of risk management
strategy might be indicated for this client?

A) Market timing
B) Diversification
C) Risk budgeting
D) Hedging

Answer 10

D) Hedging