Exam 28: Investment Policy and the Framework of the Cfa Institute

__________ refer to strategies aimed at attaining the established rate of return requirements while meeting expressed risk tolerance and applicable constraints.

__________ center on the trade-off between the return the investor wants and how much risk the investor is willing to assume.

__________ are boundaries that investors place on their choice of investment assets.

Workers who change jobs may wind up with lower pension benefits at retirement than otherwise identical workers who stay with the same employer, even if the employers have defined benefit plans with the same final-pay benefit formula.This is referred to as

The prudent investor rule requires

The first step a pension fund should take before beginning to invest is to

U.S.mutual funds are restricted to holding no more than __________ of any publicly traded corporation.

Assume that at retirement you have accumulated $750,000 in a variable annuity contract.The assumed investment return is 9% and your life expectancy is 25 years.What is the hypothetical constant benefit payment

The planning phase of the CFA Institute's investment management process

Which of the following investments does not allow the investor to choose how to allocate assets

Suppose that the pre-tax holding period returns on two stocks are the same.Stock A has a high dividend payout policy and stock B has a low dividend payout policy.If you are an individual in a high marginal tax bracket and do not intend to sell the stocks during the holding period

The CFA Institute divides the process of portfolio management into three main elements, which are ______, ______, and ______.

The governance section of an Investment Policy Statement for individual investors typically contains

The principle of duration matching is not

Alex Goh is 39 years old and has accumulated $128,000 in his self-directed defined contribution pension plan.Each year he contributes $2,500 to the plan and his employer contributes an equal amount.Alex thinks he will retire at age 62 and figures he will live to age 86.The plan allows for two types of investments.One offers a 4% risk-free real rate of return.The other offers an expected return of 11% and has a standard deviation of 37%.Alex now has 25% of his money in the risk-free investment and 75% in the risky investment.He plans to continue saving at the same rate and keep the same proportions invested in each of the investments.His salary will grow at the same rate as inflation. Of the total amount of new funds that will be invested by Alex and by his employer on his behalf, how much will Alex put into the safe account each year; how much into the risky account

The stage an individual is in his/her life cycle will affect his/her

The execution phase of the CFA Institute's investment management process

Assume that at retirement you have accumulated $825,000 in a variable annuity contract.The assumed investment return is 5.5% and your life expectancy is 18 years.If the first year's actual investment return is 7%, what is the starting benefit payment

The longest time horizons are likely to be set by

Which of the following investments allows the investor to choose how to allocate assets