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

Interest earned and received appears on the individual's balance sheet.

An individual's cash budget differs from a firm's income statement because

Possible investment objectives may include 1.capacity to meet financial emergencies 2)preservation of capital 3)desire to finance retirement

In a well-diversified portfolio,the risk associated with fluctuations in securities prices is reduced.

An enumeration of an individual's receipts and disbursements is called an income statement.

One passive investment strategy suggests that the individual construct a portfolio consisting of index funds.

While the investor is able to reduce asset-specific risk,other sources of risk remain.

Long-term bonds subject the investor to interest rate risk,purchasing power risk,and the possibility of default.

If an investor earns a return that exceeds the return on the S&P 500 stock index,that investor outperformed the market on a risk-adjusted basis.

The individual seeking the help of a professional financial planner must be willing to reveal personal financial information (e.g.,salary and outstanding debts).