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Exam 22: Investors and the Investment Process

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Question 21

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A passive asset allocation strategy involves _________.

A) investing in the stock of companies which are price takers
B) maintaining approximately the same proportions of a portfolio in each asset-class over time
C) varying the proportions of a portfolio in each asset-class in response to changing market conditions
D) selecting individual securities in different sectors that are believed to be undervalued

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Question 22

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Which one of the following typically strives to earn a return on their investments that exceeds the actuarially determined rate of return?

A) Banks
B) Thrifts
C) Mutual funds
D) Pension funds

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Question 23

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Which of the following is not one of the main areas covered in the examinations that must be taken in order to achieve the designation of Chartered Financial Analyst?

In a defined contribution pension plan,the _____ bears all of the fund's investment performance risk.

An individual is on the game show "Squeal or No Squeal" and she has a choice between receiving a certain gain of $100,000 or a 50% chance of winning $200,000 or zero.Which one of the following correctly completes the statement below? If she takes the gamble instead of the certain $100,000 she is acting ____________________.

Which one of the following would be considered to be a "cash equivalent" investment?

Personal trusts are typically allowed to engage in which of the following investment activities? I.Buying and selling futures contracts II.Short selling securities III.Purchasing and writing options IV.Buying stock on margin

A pension fund will owe $15 million to retirees in 20 years.An actuary assumes a 6% rate of return on the funds invested in the pension plan but the fund actually earns 8%.The pension plan receives annual contributions from the company sponsor.If the 8% rate of return is expected to continue,by how much can the company reduce its pension payments per year?

Of the following,the investment time horizon is typically the shortest for __________.

Your sister,an avid outdoors person,works in the airline industry and she has come to you (the financial guru) for investment advice.She is looking at purchasing stocks she knows something about.She is considering purchasing stock in Boeing,Lockheed Martin,United Technologies (maker of aircraft engines) and Cabela's Sporting Goods.Based only on the information given which stock should your recommend for her?

Which of the following is the least likely to be included in the portfolio management process?

Price volatility is greatest on which one of the following investments?

The choice of an active portfolio management strategy rather than a passive strategy assumes ___________.

Many defined benefit pension plans have a target rate of return on investment ____________.

The possibility that you are too conservative and your money doesn't grow fast enough to keep pace with inflation is called ________.

Which one of the following is a life insurance policy that will provide a fixed death benefit and allows the policyholder to choose where to invest the policy's cash value?

The risk that a downturn in the market may substantially reduce your investment principal is called _______.

A life insurance firm wants to minimize its interest rate risk and it is planning on paying out $250,000 in five years.Which one of the following investments best matches its goal?

The term "hedge" refers to an investment that is used ________________.

Conservative investors are likely to want to invest in __________ mutual funds while risk-tolerant investors are likely to want to invest in __________.