Question 1

Contributions to an IRA appear on the individual's estimate of cash receipts and disbursements.

Accepted Answer

A) True 
 B)False  True

Question 2

Asset allocation is important to help diversify a portfolio but has little impact on the portfolio's return.

Accepted Answer

A) True 
 B)False  False

Question 3

Which of the following is excluded from an individual's cash budget?

Accepted Answer

A)  wages and salary 
B)  retirement account 
C)  social security tax payments 
D)  alimony 
A)  wages and salary 
B)  retirement account 
C)  social security tax payments 
D)  alimony B

Question 4

The amount in a Keogh account appears on the investor's estimate of cash receipts and disbursements.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is included in an individual's cash budget?

Accepted Answer

A)  stock 
B)  social security payments 
C)  home mortgage owed 
D)  credit card balances 
A)  stock 
B)  social security payments 
C)  home mortgage owed 
D)  credit card balances

Question 6

An investor who wants to make passive investments would prefer

Accepted Answer

A)  long-term federal corporate bonds 
B)  exchange traded funds 
C)  stocks in the Dow Jones industrial average 
D)  closed-end investment companies 
A)  long-term federal corporate bonds 
B)  exchange traded funds 
C)  stocks in the Dow Jones industrial average 
D)  closed-end investment companies

Question 7

An individual's cash budget differs from a firm's balance sheet because the cash budget 1.is for a period of time
2)enumerates assets and equity
3)is concerned with receipts and disbursements

Accepted Answer

A)  1 and 2 
B)  1 and 3 
C)  2 and 3 
D)  all of these choices 
A)  1 and 2 
B)  1 and 3 
C)  2 and 3 
D)  all of these choices

Question 8

Diversification is an important concept in finance and investments because it

Accepted Answer

A)  reduces the risk associated with market price fluctuations 
B)  increases the investor's return 
C)  decreases the need for investment planning 
D)  decreases the variability of returns 
A)  reduces the risk associated with market price fluctuations 
B)  increases the investor's return 
C)  decreases the need for investment planning 
D)  decreases the variability of returns

Question 9

One of the first steps an investor should take is to establish the goals of the portfolio.

Accepted Answer

A) True 
 B)False

Question 10

An individual's net worth is determined by subtracting liabilities from assets.

Accepted Answer

A) True 
 B)False

Question 11

If an investor believes that financial markets are inefficient,that argues for the individual to pursue a more active portfolio strategy.

Accepted Answer

A) True 
 B)False

Question 12

A financial life cycle suggests that investors follow a period of accumulation by a period drawing down their financial assets.

Accepted Answer

A) True 
 B)False

Question 13

The process of financial planning requires the individual to 1.establish financial goals
2)identify and quantify the value of his or her assets
3)hire professional financial advisors

Accepted Answer

A)  1 and 2 
B)  1 and 3 
C)  2 and 3 
D)  all of these choices 
A)  1 and 2 
B)  1 and 3 
C)  2 and 3 
D)  all of these choices

Question 14

Since virtually all investments involve risk,the individual should develop a diversified portfolio.

Accepted Answer

A) True 
 B)False

Question 15

Investors seeking to avoid actively managing their portfolios will prefer which of the following assets?

Accepted Answer

A)  common stock 
B)  index funds 
C)  financial futures 
D)  real estate 
A)  common stock 
B)  index funds 
C)  financial futures 
D)  real estate

Question 16

Which of the following short-term securities is inappropriate for an individual desiring funds for financial emergencies?

Accepted Answer

A)  Treasury bills 
B)  certificates of deposit 
C)  financial futures 
D)  savings accounts 
A)  Treasury bills 
B)  certificates of deposit 
C)  financial futures 
D)  savings accounts

Question 17

If financial markets are efficient,that negates the importance of financial planning.

Accepted Answer

A) True 
 B)False

Question 18

In an efficient securities market,the investor should earn,over a period of years,a return comparable to the amount of risk the individual bears.

Accepted Answer

A) True 
 B)False

Question 19

The amount of an outstanding mortgage appears on the individual's balance sheet.

Accepted Answer

A) True 
 B)False

Question 20

An active portfolio strategy is premised on

Accepted Answer

A)  the stock market being efficient 
B)  the stock market being inefficient 
C)  the investor's being able to obtain public information 
D)  the portfolio manager's access to corporate management 
A)  the stock market being efficient 
B)  the stock market being inefficient 
C)  the investor's being able to obtain public information 
D)  the portfolio manager's access to corporate management

Exam 24: Portfolio Planning and Management in an Efficient Market Context

Contributions to an IRA appear on the individual's estimate of cash receipts and disbursements.

Asset allocation is important to help diversify a portfolio but has little impact on the portfolio's return.

Which of the following is excluded from an individual's cash budget?

The amount in a Keogh account appears on the investor's estimate of cash receipts and disbursements.

Which of the following is included in an individual's cash budget?

An investor who wants to make passive investments would prefer

An individual's cash budget differs from a firm's balance sheet because the cash budget 1.is for a period of time 2)enumerates assets and equity 3)is concerned with receipts and disbursements

Diversification is an important concept in finance and investments because it

One of the first steps an investor should take is to establish the goals of the portfolio.

An individual's net worth is determined by subtracting liabilities from assets.

If an investor believes that financial markets are inefficient,that argues for the individual to pursue a more active portfolio strategy.

A financial life cycle suggests that investors follow a period of accumulation by a period drawing down their financial assets.

The process of financial planning requires the individual to 1.establish financial goals 2)identify and quantify the value of his or her assets 3)hire professional financial advisors

Since virtually all investments involve risk,the individual should develop a diversified portfolio.

Investors seeking to avoid actively managing their portfolios will prefer which of the following assets?

Which of the following short-term securities is inappropriate for an individual desiring funds for financial emergencies?

If financial markets are efficient,that negates the importance of financial planning.

In an efficient securities market,the investor should earn,over a period of years,a return comparable to the amount of risk the individual bears.

The amount of an outstanding mortgage appears on the individual's balance sheet.

An active portfolio strategy is premised on

An Introduction to Investments

The Creation of Financial Assets

Securities Markets

The Time Value of Money

The Tax Environment

Risk and Portfolio Management

Investment Companies: Mutual Funds

Closed-End Investment Companies

The Valuation of Common Stock

Investment Returns and Aggregate Measures of Stock Markets

Dividends: Past, present, and Future

The Macroeconomic Environment for Investment Decisions

Analysis of Financial Statements

Behavioral Finance and Technical Analysis

The Bond Market

The Valuation of Fixed-Income Securities

Government Securities

Convertible Bonds and Convertible Preferred Stock

An Introduction to Options

Option Valuation and Strategies

Commodity and Financial Futures

Investing in Foreign Securities

Investing in Nonfinancial Assets: Collectibles, resources, and Real Estate

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