Q1. When constructing an investment policy statement (IPS), which of the following statements would be considered FALSE?

A)   If there are liquidity requirements, the applicable after-tax return will need to be calculated.

B)   One of the distinguishing factors between individual and institutional investors is time horizon.

C)   The use of total return analysis is almost always the wrong way to approach an IPS.

Q2. Which of the following parts of an investment policy statement (IPS) is NOT considered a constraint?

A)   Risk tolerance.

B)   Taxes.

C)   Time horizon.

Q3. When developing an investment policy statement (IPS), which of the following items should be one of the first considerations?

A)   Unique circumstances.

B)   Return objectives.

C)   Liquidity.

答案和详解如下：

Q1. When constructing an investment policy statement (IPS), which of the following statements would be considered FALSE?

A)   If there are liquidity requirements, the applicable after-tax return will need to be calculated.

B)   One of the distinguishing factors between individual and institutional investors is time horizon.

C)   The use of total return analysis is almost always the wrong way to approach an IPS.

Correct answer is C)

Use of a total return statement is almost never incorrect. Institutional investors may have infinite life but individuals do not. The other statements are true statements with respect to liquidity and time horizon.

Q2. Which of the following parts of an investment policy statement (IPS) is NOT considered a constraint?

A)   Risk tolerance.

B)   Taxes.

C)   Time horizon.

Correct answer is A)

Risk tolerance levels are part of the objectives part of the IPS, not a constraint.

Q3. When developing an investment policy statement (IPS), which of the following items should be one of the first considerations?

A)   Unique circumstances.

B)   Return objectives.

C)   Liquidity.

Correct answer is B)

When constructing an IPS, the first two considerations deal with objectives: return objectives and risk tolerance. The constraints are dealt with after the objectives have been stated.

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Thank you!