Reading 14: Managing Individual Investor Portfolios －LOS j class, Investment, investment, procedures

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Q6. Jessica Paskiet, a portfolio manager for Porthouse Investment Management is drafting an investment policy statement for her new client, Kenneth Moon. Which of the following procedures should Paskiet follow when drafting the risk and return objectives for her client?

Procedure 1:                Consider the client’s risk tolerance and return objective separately from one another.   

Procedure 2:                Focus on the investor’s required returns only, as desired returns are not important when drafting the IPS.

With regard to the procedures Paskiet has proposed:

         Procedure 1                      Procedure 2

 

A)  Incorrect                                 Correct

B)  Correct                                   Incorrect

C)  Incorrect                                 Incorrect

Q7. Which of the following statements distinguishes the ability to take risk from the willingness to take risk? The:

A)   ability to take risk is more amenable to quantitative measures whereas the willingness to take risk is more qualitative in nature.

B)   ability to take risk is more qualitative in nature whereas the willingness to take risk can be measured in a quantitative nature.

C)   willingness to take risk is connected with primary goals and objectives.

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