Quiz_ Portfolio Management: An Overview
N Answer N Answer
A Portfolio Approach to Investing: 1 10
2 11
1. Investors should use a portfolio approach to: 3 12
A. reduce risk. 4 13
B. monitor risk. 5 14
C. eliminate risk. 6 15
7 16
2. Which of the following is the best reason for an investor to be 8 17
concerned with the composition of a portfolio? 9 18
A. Risk reduction.
B. Downside risk protection.
C. Avoidance of investment disasters.
3. With respect to the formation of portfolios, which of the following statements is most accurate?
A. Portfolios affect risk less than returns.
B. Portfolios affect risk more than returns.
C. Portfolios affect risk and returns equally.
Types of Investors:
4. Which of the following institutional investors is most likely to manage investments in mutual funds?
A. Insurance companies.
B. Investment companies.
C. University endowments.
5. A defined benefit plan with a large number of retirees is likely to have a high need for
A. income.
B. liquidity.
C. insurance.
6. Which of the following investment products is most likely to trade at their net asset value per share?
A. Exchange traded funds.
B. Open-end mutual funds.
C. Closed-end mutual funds.
7. Which of the following financial products is least likely to have a capital gain distribution?
A. Exchange traded funds.
B. Open-end mutual funds.
C. Closed-end mutual funds.
8. Which of the following forms of pooled investments is subject to the least amount of regulation?
A. Hedge funds.
B. Exchange traded funds.
C. Closed-end mutual funds.
9. Which of the following pooled investments is most likely characterized by a few large investments?
A. Hedge funds.
B. Buyout funds.
C. Venture capital funds.
10. In a defined contribution pension plan:
A. the employee accepts the investment risk.
B. the plan sponsor promises a predetermined retirement income to participants.
C. the plan manager attempts to match the fund's assets to its liabilities.
11. In a defined benefit pension plan:
A. the employee assumes the investment risk.
B. the employer contributes to the employee's retirement account each period.
C. the plan sponsor promises a predetermined retirement income to participants.
12. Low risk tolerance and high liquidity requirements best describe the typical investment needs of a(n):
A. defined-benefit pension plan.
B. foundation.
C. insurance company.
13. Compared to exchange-traded funds (ETFs), open-end mutual funds are typically associated with lower:
A. brokerage costs.
B. minimum investment amounts.
C. management fees.
14. Both buyout funds and venture capital funds:
A. expect that only a small percentage of investments will payoff.
B. play an active role in the management of companies.
C. restructure companies to increase cash flow.
15. Hedge funds most likely:
A. have stricter reporting requirements than a typical investment firm because
of their use of leverage and derivatives.
B. hold equal values of long and short securities.
C. are not offered for sale to the general public.
Steps in the Portfolio Management Process:
16. With respect to the portfolio management process, the asset allocation is determined in the:
A. planning step.
B. feedback step.
C. execution step.
17. The planning step of the portfolio management process is least likely to include an assessment of the client’s
A. securities.
B. constraints.
C. risk tolerance.
18. With respect to the portfolio management process, the rebalancing of a portfolio’s composition is most likely
to occur in the:
A. planning step.
B. feedback step.
C. execution step.
