LOS b: Describe the steps of the portfolio management process and the components of those steps.

Q1. Which of the following is not part of the general steps of the portfolio management process?

A)   Feedback.

B)   Performance evaluation.

C)   Planning.

Q2. Which of the following is not a step in the portfolio management process?

A)   Feedback.

B)   Execution.

C)   Developing an IPS.

Q3. In which step of the portfolio management process developing an IPS occur?

A)   Planning.

B)   Strategic asset allocation.

C)   Feedback

Q4. Which of the following most accurately identifies the three main steps in the portfolio management process?

A)   Objectives, constraints, risk tolerance.

B)   Planning, execution, feedback.

C)   Planning, asset allocation, security selection.

Q5. Which of the following is not considered to be an investment constraint?

A)   Risk tolerance.

B)   Tax concerns.

C)   Time horizon.

LOS b: Describe the steps of the portfolio management process and the components of those steps. fficeffice" />

Q1. Which of the following is not part of the general steps of the portfolio management process?

A)   Feedback.

B)   Performance evaluation.

C)   Planning.

Correct answer is B)

Performance evaluation is a substep under the feedback process. The three general steps are planning, execution, and feedback, in that order.

Q2. Which of the following is not a step in the portfolio management process?

A)   Feedback.

B)   Execution.

C)   Developing an IPS.

Correct answer is C)

Developing an IPS is a subset of the planning process.

Q3. In which step of the portfolio management process developing an IPS occur?

A)   Planning.

B)   Strategic asset allocation.

C)   Feedback

Correct answer is A)

Developing an IPS occurs in the planning steps of the process. The purpose of developing an IPS is to govern decision making.

Q4. Which of the following most accurately identifies the three main steps in the portfolio management process?

A)   Objectives, constraints, risk tolerance.

B)   Planning, execution, feedback.

C)   Planning, asset allocation, security selection.

Correct answer is B)

The three main steps in the portfolio management process are planning, execution, and feedback. The other items listed are subcomponents of these steps.

Q5. Which of the following is not considered to be an investment constraint?

A)   Risk tolerance.

B)   Tax concerns.

C)   Time horizon.

Correct answer is A)

An investor’s risk tolerance is included under objectives. Constraints include liquidity needs, time horizon, tax concerns, legal and regulatory factors, and unique circumstances.