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If we define an investors equity holding cycle as a series of stages, beginning with entrepreneurial, moving to executive, and then to investor, we generally expect risk to:

A)	decrease overall, and be fully eliminated.

B)	increase overall, but non-systematic risk to remain the same.

C)	increase overall, but non-systematic risk to decrease.

D)	decrease overall, but not be fully eliminated.

If we define an investors equity holding cycle as a series of stages, beginning with entrepreneurial, then moving to executive, and then to investor, we generally expect risk to decrease overall, but not be fully eliminated.

The main difference between risk during the entrepreneurial stage and the executive stage is that the:

A)	securities held are not publicly traded during the executive stage.

B)	non-systematic risk is greater during entrepreneurial stage.

C)	non-systematic risk is greater during executive stage.

D)	securities held are not publicly traded during the entrepreneurial stage.

The main difference between risk during the entrepreneurial stage and the executive stage is that the securities held are not publicly traded during the entrepreneurial stage. This implies liquidity risk that is not present during the executive stage. Non-systematic risk is believed to be roughly the same during both stages.

With respect to the risk from a concentrated holding, the investment advisors overall objective is to diversify the portfolio until all:

A)	liquidity risk is eliminated.

B)	systematic risk is eliminated.

C)	non-systematic risk is eliminated.

D)	risk is eliminated.

With respect to the risk from a concentrated holding, the investment advisors overall objective is to diversify the portfolio until all non-systematic risk is eliminated. Systematic risk will still be present if any long position in equity securities is held.

What is typically the main issue surrounding the holding of a large position of low-basis stock, and which strategy for dealing with this issue is most likely to take the longest to implement?

A)	Investors with large positions in low-basis stock are often deterred from selling for tax and emotional reasons, and the main problem is that this typically results in concentrated portfolios with excess risk. A hedging strategy is likely to take the longest to implement.

B)	Investors with large positions in low-basis stock are often deterred from selling for tax and emotional reasons, and the main problem is that this typically results in concentrated portfolios with excess risk. A completion portfolio strategy is likely to take the longest to implement.

C)	Investors with large positions in low-basis stock typically bear excess liquidity risk that can be diversified away with the appropriate strategy. A completion portfolio strategy is likely to take the longest to implement.

D)	Investors with large positions in low-basis stock typically bear excess liquidity risk that can be diversified away with the appropriate strategy. An exchange fund strategy is likely to take the longest to implement.

Investors with large positions in low-basis stock are often deterred from selling for tax reasons (because the capital gains taxes will likely be large), and emotional reasons (such as the family name continuing to be associated with the company). The main problem is that this typically results in concentrated (i.e., inadequately diversified) portfolios with excess risk. A completion portfolio strategy, using a target portfolio to diversify risk and permit the orderly liquidation of the concentrated position as tax losses occur, is likely to take the longest to implement.