Question 1

A no-load mutual fund means there are no

Accepted Answer

A)  management fees 
B)  12 b-1 fees 
C)  selling fees 
D)  stocks that pay dividends in this mutual fund 
A)  management fees 
B)  12 b-1 fees 
C)  selling fees 
D)  stocks that pay dividends in this mutual fund C

Question 2

A mutual fund prospectus provides

Accepted Answer

A)  a forecast of future fund performance 
B)  a forecast of the macroeconomy over the next year 
C)  a forecast of the expected tax consequences over the next year 
D)  provides the fund's purpose and intended investment activity 
A)  a forecast of future fund performance 
B)  a forecast of the macroeconomy over the next year 
C)  a forecast of the expected tax consequences over the next year 
D)  provides the fund's purpose and intended investment activity D

Question 3

A young, well-paid professional is best suited, on average, to which primary objective?

Accepted Answer

A)  Stability of principal 
B)  Income 
C)  Growth of income 
D)  Capital appreciation 
A)  Stability of principal 
B)  Income 
C)  Growth of income 
D)  Capital appreciation D

Question 4

Two dominant factors contributing to a successful investment program are

Accepted Answer

A)  suitable investment objectives and policy, and successful managers 
B)  suitable investment objectives and risk assessment 
C)  successful managers and successful income generation 
D)  accurate risk assessment and measurement of historical return 
A)  suitable investment objectives and policy, and successful managers 
B)  suitable investment objectives and risk assessment 
C)  successful managers and successful income generation 
D)  accurate risk assessment and measurement of historical return

Question 5

For an open-end mutual fund

Accepted Answer

A)  net asset value  market value 
C)  net asset value = market value 
D)  net asset value is greater than or equal to market value 
A)  net asset value  market value 
C)  net asset value = market value 
D)  net asset value is greater than or equal to market value

Question 6

Before buying mutual fund shares, prospective investors must receive a

Accepted Answer

A)  prospectus 
B)  indenture 
C)  debenture 
D)  hypothecation agreement 
A)  prospectus 
B)  indenture 
C)  debenture 
D)  hypothecation agreement

Question 7

Principal concerns in duration matching are the

Accepted Answer

A)  present value of the outflows and their duration 
B)  future value of the outflows and their duration 
C)  annuity value of the outflows 
D)  certainty equivalent of the outflows and the present value of its duration 
A)  present value of the outflows and their duration 
B)  future value of the outflows and their duration 
C)  annuity value of the outflows 
D)  certainty equivalent of the outflows and the present value of its duration

Question 8

A growth-of-income objective

Accepted Answer

A)  sacrifices some current return for some purchasing power protection 
B)  generates maximum income as soon as possible 
C)  makes only sparing use of equity securities 
D)  generates income that declines over time 
A)  sacrifices some current return for some purchasing power protection 
B)  generates maximum income as soon as possible 
C)  makes only sparing use of equity securities 
D)  generates income that declines over time

Question 9

Establishing a secondary objective helps the portfolio manager

Accepted Answer

A)  learn more about the client's tax situation 
B)  learn more about the client's expected utility of investment 
C)  determine the appropriate level of risk for the customer 
D)  determine the necessary level of equity investment 
A)  learn more about the client's tax situation 
B)  learn more about the client's expected utility of investment 
C)  determine the appropriate level of risk for the customer 
D)  determine the necessary level of equity investment

Question 10

Some people do not like mutual funds because they

Accepted Answer

A)  have no tax advantages 
B)  are not exciting 
C)  offer less potential return than that available in securities 
D)  are too risky 
A)  have no tax advantages 
B)  are not exciting 
C)  offer less potential return than that available in securities 
D)  are too risky

Question 11

Which of the following deal with decisions that have been made about long-term decisions?

Accepted Answer

A)  Investment constraints 
B)  Fiduciary interest 
C)  Investment strategy 
D)  Investment policy 
A)  Investment constraints 
B)  Fiduciary interest 
C)  Investment strategy 
D)  Investment policy

Question 12

Money market mutual funds are sometimes added in a portfolio to

Accepted Answer

A)  reduce the duration 
B)  increase the duration 
C)  move from an income objective to a growth in income objective 
D)  decrease the short-term tax consequences 
A)  reduce the duration 
B)  increase the duration 
C)  move from an income objective to a growth in income objective 
D)  decrease the short-term tax consequences

Question 13

The portfolio objective with the highest risk is

Accepted Answer

A)  stability of principal 
B)  capital appreciation 
C)  income 
D)  growth of income 
A)  stability of principal 
B)  capital appreciation 
C)  income 
D)  growth of income

Question 14

If someone wants no chance of a loss of principal value, the appropriate primary objective is

Accepted Answer

A)  stability of principal 
B)  income 
C)  growth of income 
D)  capital appreciation 
A)  stability of principal 
B)  income 
C)  growth of income 
D)  capital appreciation

Question 15

Another name for portfolio dedication is

Accepted Answer

A)  liability funding 
B)  technical analysis 
C)  fundamental analysis 
D)  strategic investment 
A)  liability funding 
B)  technical analysis 
C)  fundamental analysis 
D)  strategic investment

Question 16

A common third category of investment (in addition to bonds and stock) is

Accepted Answer

A)  cash equivalents 
B)  municipal securities 
C)  American depository receipts 
D)  repurchase agreements 
A)  cash equivalents 
B)  municipal securities 
C)  American depository receipts 
D)  repurchase agreements

Question 17

Which of the following primary/secondary objective combinations is infeasible?

Accepted Answer

A)  Stability of principal, income 
B)  Income, stability of principal 
C)  Growth of income, stability of principal 
D)  Capital appreciation, growth of income 
A)  Stability of principal, income 
B)  Income, stability of principal 
C)  Growth of income, stability of principal 
D)  Capital appreciation, growth of income

Question 18

Tax-free income can be earned by investing in

Accepted Answer

A)  corporate bonds 
B)  municipal bonds 
C)  treasury bonds 
D)  common stock 
A)  corporate bonds 
B)  municipal bonds 
C)  treasury bonds 
D)  common stock

Question 19

A disadvantage of portfolio splitting is that it

Accepted Answer

A)  enables overseers to avoid making tough decisions 
B)  reduces current income 
C)  reduces the potential for capital appreciation 
D)  sacrifices liquidity 
A)  enables overseers to avoid making tough decisions 
B)  reduces current income 
C)  reduces the potential for capital appreciation 
D)  sacrifices liquidity

Question 20

Cash matching involves assembling a portfolio such that it

Accepted Answer

A)  has the duration desired 
B)  has a cash flow stream that matches the requirements of a liability stream 
C)  optimizes the risk/return combination 
D)  is informationally efficient 
A)  has the duration desired 
B)  has a cash flow stream that matches the requirements of a liability stream 
C)  optimizes the risk/return combination 
D)  is informationally efficient

Exam 3: Setting Portfolio Objectives

A no-load mutual fund means there are no

A mutual fund prospectus provides

A young, well-paid professional is best suited, on average, to which primary objective?

Two dominant factors contributing to a successful investment program are

For an open-end mutual fund

Before buying mutual fund shares, prospective investors must receive a

Principal concerns in duration matching are the

A growth-of-income objective

Establishing a secondary objective helps the portfolio manager

Some people do not like mutual funds because they

Which of the following deal with decisions that have been made about long-term decisions?

Money market mutual funds are sometimes added in a portfolio to

The portfolio objective with the highest risk is

If someone wants no chance of a loss of principal value, the appropriate primary objective is

Another name for portfolio dedication is

A common third category of investment (in addition to bonds and stock) is

Which of the following primary/secondary objective combinations is infeasible?

Tax-free income can be earned by investing in

A disadvantage of portfolio splitting is that it

Cash matching involves assembling a portfolio such that it

The Process of Portfolio Management

Valuation, Risk, Return, and Uncertainty

Investment Policy

The Mathematics of Diversification

Why Diversification Is a Good Idea

International Investment and Diversification

The Capital Markets and Market Efficiency

Picking the Equity Players

Equity Valuation Tools

Security Screening

Bond Pricing and Selection

The Role of Real Assets

Alternative Assets

Revision of the Equity Portfolio

Revision of the Fixed-Income Portfolio

Principles of Options and Option Pricing

Option Overwriting

Performance Evaluation

Fiduciary Duties and Responsibilities

Principles of the Futures Market

Benching the Equity Players

Removing Interest Rate Risk

Integrating Derivative Assets and Portfolio Management

Contemporary Issues in Portfolio Management

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