Q1. What are the main factors that underlie the determination of an appropriate investment policy when using a life-cycle approach, what is the main concern involved with determination of feasible retirement income, and what methods can be used to address this potential problem?

A)   The main factors that underlie investment policy under a life-cycle approach are the investor’s stage of life and level of wealth. The main issue to be addressed in determining the feasible level of retirement income is that of outliving one’s assets and income, and this can be addressed by spending only the real returns on assets held, incorporating a margin of safety in life expectancy calculations, or by using life annuities.

B)   The main factors that underlie investment policy under a life-cycle approach are the investor’s stage of life and level of wealth. The main issue to be addressed in determining the feasible level of retirement income is that of maintaining purchasing power, and this can be addressed by spending only the real returns on assets held, incorporating a margin of safety in life expectancy calculations, or by using life annuities.

C)   The main factors that underlie investment policy under a life-cycle approach are the investor’s stage of life and liability structure. The main issue to be addressed in determining the feasible level of retirement income is that of outliving one’s assets and income, and this can be addressed by spending only the real returns on assets held, incorporating a margin of safety in life expectancy calculations, or by using life annuities.

Q2. Which of the following statements concerning an investor’s age and level of wealth is most accurate? The investor’s level of risk tolerance is usually:

A)   decreasing with age, and decreasing with wealth.

B)   decreasing with age, but increasing with wealth.

C)   increasing with age, and increasing with wealth.

答案和详解如下：

Q1. What are the main factors that underlie the determination of an appropriate investment policy when using a life-cycle approach, what is the main concern involved with determination of feasible retirement income, and what methods can be used to address this potential problem?

A)   The main factors that underlie investment policy under a life-cycle approach are the investor’s stage of life and level of wealth. The main issue to be addressed in determining the feasible level of retirement income is that of outliving one’s assets and income, and this can be addressed by spending only the real returns on assets held, incorporating a margin of safety in life expectancy calculations, or by using life annuities.

B)   The main factors that underlie investment policy under a life-cycle approach are the investor’s stage of life and level of wealth. The main issue to be addressed in determining the feasible level of retirement income is that of maintaining purchasing power, and this can be addressed by spending only the real returns on assets held, incorporating a margin of safety in life expectancy calculations, or by using life annuities.

C)   The main factors that underlie investment policy under a life-cycle approach are the investor’s stage of life and liability structure. The main issue to be addressed in determining the feasible level of retirement income is that of outliving one’s assets and income, and this can be addressed by spending only the real returns on assets held, incorporating a margin of safety in life expectancy calculations, or by using life annuities.

Correct answer is A)

The main factors that underlie investment policy under a life-cycle approach are the investor’s stage of life and level of wealth. Stage of life is a proxy for the length of the investment horizon. The longer the investment horizon, the greater the risk-tolerance, and the more aggressive the appropriate investment policy. Wealth is measured by the amount of discretionary wealth (that above and beyond what is required to meet current and future liabilities) relative to total assets. The greater the investor’s wealth, the greater the risk-tolerance, and the more aggressive the appropriate investment policy.

The main issue to be addressed in determining the feasible level of retirement income is that of outliving one’s assets and income. This potential problem can be addressed by spending only the real returns on assets held, incorporating a margin of safety in life expectancy calculations, or by using life annuities.

Q2. Which of the following statements concerning an investor’s age and level of wealth is most accurate? The investor’s level of risk tolerance is usually:

A)   decreasing with age, and decreasing with wealth.

B)   decreasing with age, but increasing with wealth.

C)   increasing with age, and increasing with wealth.

Correct answer is B)

The investor’s level of risk tolerance is typically decreasing with age, but increasing with wealth.

Thank you!