Trade Settlement

Question 1

What is portfolio management?

Answer 1

The art and science of making decisions about investment mix and policy to match financial goals.

Question 2

True or False: Trade settlement refers to the process of transferring ownership of securities after a trade has been executed.

Answer 2

True

Question 3

Fill in the blank: The __________ is the date on which a trade is executed.

Answer 3

trade date

Question 4

What is the primary goal of portfolio management?

Answer 4

To maximize returns while minimizing risk.

Question 5

Multiple Choice: Which of the following is NOT a type of portfolio management strategy? A) Active B) Passive C) Reactive D) Strategic

Answer 5

C) Reactive

Question 6

What does the term ‘diversification’ mean in portfolio management?

Answer 6

The practice of spreading investments across various assets to reduce risk.

Question 7

True or False: The settlement date is typically one business day after the trade date for most securities.

Answer 7

False

Question 8

What are the two main types of trade settlements?

Answer 8

Cash settlement and delivery settlement.

Question 9

Fill in the blank: In portfolio management, __________ refers to the balance between risk and return.

Answer 9

risk-return trade-off

Question 10

Multiple Choice: What is the primary purpose of trade settlement? A) To finalize the trade B) To analyze the market C) To increase trading volume D) To issue dividends

Answer 10

A) To finalize the trade

Question 11

What is an example of a portfolio management tool?

Answer 11

Asset allocation models.

Question 12

True or False: Trade settlement can occur through electronic systems or manual processes.

Answer 12

True

Question 13

What is meant by ‘liquidity’ in the context of portfolio management?

Answer 13

The ease with which an asset can be converted into cash without affecting its market price.

Question 14

Fill in the blank: A __________ is a financial instrument that represents ownership in a company.

Answer 14

stock

Question 15

Multiple Choice: Which of the following is a common risk in portfolio management? A) Market Risk B) Credit Risk C) Operational Risk D) All of the above

Answer 15

D) All of the above

Question 16

What does the term ‘settlement risk’ refer to?

Answer 16

The risk that one party in a transaction will fail to deliver the terms of the contract.

Question 17

True or False: The clearinghouse acts as a mediator between buyers and sellers during trade settlement.

Answer 17

True

Question 18

What is the role of a custodian in trade settlement?

Answer 18

To safeguard financial assets and manage the settlement process.

Question 19

Fill in the blank: The __________ is the agreed-upon price at which a security will be bought or sold.

Answer 19

execution price

Question 20

Multiple Choice: What is a benefit of active portfolio management? A) Lower costs B) Potential for higher returns C) Less time-consuming D) Simplicity

Answer 20

B) Potential for higher returns

Question 21

What does ‘rebalancing’ mean in portfolio management?

Answer 21

Adjusting the weights of assets in a portfolio to maintain a desired risk level.

Question 22

True or False: All trades must be settled on the same day they are executed.

Answer 22

False

Question 23

What is a key consideration when selecting securities for a portfolio?

Answer 23

The correlation of the securities with each other.

Question 24

Fill in the blank: __________ analysis is used to evaluate the performance of a portfolio.

Answer 24

Performance

Question 25

Multiple Choice: Which of the following is a common metric for evaluating portfolio performance? A) Return on Investment B) Debt to Equity Ratio C) Current Ratio D) Price to Earnings Ratio

Answer 25

A) Return on Investment