Reading 49: The Asset Allocation Decision - LOS a, (Part following, investing, policy, style, black

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1.Which of the following is NOT a rationale for the importance of the policy statement in investing? It:

A)   identifies specific stocks the investor may wish to purchase.

B)   forces investors to understand their needs and constraints.

C)   helps investors understand the risks and costs of investing.

D)   guides the actions of the portfolio manager.

2.Which of the following is NOT a rationale for the importance of the policy statement in investing? It:

A)   allows the investor to judge performance by objective standards.

B)   specifies a benchmark against which to judge performance.

C)   imposes investment discipline.

D)   forces investors to take risks.

3.Which of the following best describes the importance of the policy statement? It:

A)   limits the risks taken by the investor.

B)   maximizes the returns to the investor.

C)   outlines the best investments.

D)   states the standards by which the portfolio's performance will be judged.

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答案和详解如下：

1.Which of the following is NOT a rationale for the importance of the policy statement in investing? It:

A)   identifies specific stocks the investor may wish to purchase.

B)   forces investors to understand their needs and constraints.

C)   helps investors understand the risks and costs of investing.

D)   guides the actions of the portfolio manager.

The correct answer was A)

The policy statement outlines broad objectives and constraints but does not get into the details of specific stocks for investment.

2.Which of the following is NOT a rationale for the importance of the policy statement in investing? It:

A)   allows the investor to judge performance by objective standards.

B)   specifies a benchmark against which to judge performance.

C)   imposes investment discipline.

D)   forces investors to take risks.

The correct answer was D)

By no means should the policy statement force the investor to take risks. The statement forces investors to understand the risks of investing.

3.Which of the following best describes the importance of the policy statement? It:

A)   limits the risks taken by the investor.

B)   maximizes the returns to the investor.

C)   outlines the best investments.

D)   states the standards by which the portfolio's performance will be judged.

The correct answer was D)

The policy statement should state the performance standards by which the portfolio's performance will be judged and specify the benchmark that represents the investors risk preferences.