Reading 49: The Asset Allocation Decision LOS a习题精选 color, policy, process, management, 2010

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Session 12: Portfolio Management
Reading 49: The Asset Allocation Decision

LOS a: Describe the steps in the portfolio management process and explain the reasons for a policy statement.

Which of the following concerning the steps in the portfolio management process is least accurate?

FOCUS

ACTIONS

A) Monitoring Feedback loop Update investor’s needs

B) Implementation Current and future market conditions Identify risk tolerance

C) Investment strategy Short-term and intermediate term market expectations Construct a strategy based on the policy statement

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The implementation process focuses on putting the plan that has been devised to work. The portfolio is constructed and assets are allocated based on the investment strategy and market forecasts. The identification of the risk tolerance should be accomplished during the development of the investor’s policy statement, which should occur prior to the implementation of the investment plan.

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Which of the following is least likely part of the portfolio-management process?

A) identifying the investor’s goals and constraints.

B) rebalancing the portfolio.

C) limiting the portfolio’s tax liability.

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Limiting the tax liability may be a wise move depending on an investor’s circumstances, but it should not be the primary objective of the portfolio management process. Satisfying the investor’s risk, return, liquidity, and other constraints are primary objectives. Addressing the tax liability should be addressed after the primary objectives have been satisfied. Rebalancing the portfolio is part of the “monitor and update” step. Identifying goals and restraints is part of the “write a policy statement” step.

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Which of the following statements about the steps in the portfolio management process is FALSE?

A) Rebalancing the investor’s portfolio is done on an as-needed basis, and should be reviewed on a regular schedule.

B) Implementing the plan is based on an analysis of the current and future forecast of financial and economic conditions.

C) Developing an investment strategy is based on an analysis of historical performance in financial markets and economic conditions.

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Developing an investment strategy is based primarily on an analysis of the current and future financial market and economic conditions. Historical analysis serves to help develop an expectation for future conditions.

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Which of the following is NOT one of the four general steps in the portfolio management process?

A) Monitoring and updating the investor’s needs and market conditions.

B) Specifying strategic asset allocations.

C) Implementing the plan.

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Specifying strategic asset allocations is a specific step contained within the third step, implementing the plan.

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Which of the following is generally the first general step in the portfolio management process?

A) Develop an investment strategy.

B) Specify capital market expectations.

C) Write a policy statement.

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The policy statement is the foundation of the entire portfolio management process. Here, both risk and return are integrated to determine the investor’s goals and constraints.

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Which of the following is NOT a rationale for the importance of the policy statement in investing? It:

A) identifies specific stocks the investor may wish to purchase.

B) helps investors understand the risks and costs of investing.

C) forces investors to understand their needs and constraints.

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The policy statement outlines broad objectives and constraints but does not get into the details of specific stocks for investment.

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Which of the following best describes the importance of the policy statement? It:

A) outlines the best investments.

B) states the standards by which the portfolio's performance will be judged.

C) limits the risks taken by the investor.

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The policy statement should state the performance standards by which the portfolio's performance will be judged and specify the benchmark that represents the investors risk preferences.

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Which of the following is NOT a rationale for the importance of the policy statement in investing? It:

A) forces investors to take risks.

B) allows the investor to judge performance by objective standards.

C) specifies a benchmark against which to judge performance.

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By no means should the policy statement force the investor to take risks. The statement forces investors to understand the risks of investing.