Reading 72: The Portfolio Management Process and the Inve individual, black, class, impact, different

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1.Individual investors and institutional investors can be impacted differently by different constraints. Which constraints have a large impact on individual investors and a large impact on pension funds, respectively?

A)   Legal and regulatory issues for individual investors and tax considerations for pensions.

B)   Liquidity concerns for individual investors and tax considerations for pensions.

C)   Tax considerations for individual investors and legal and regulatory issues for pensions.

D)   Legal and regulatory issues for individual investors and unique considerations for pensions.

2.Which of the following statements about investment policy statements (IPS) is least accurate? The IPS:

A)   can be readily implemented by current or future investment advisors.

B)   promotes long-term discipline for portfolio decisions.

C)   is an informal statement of objectives and constraints.

D)   helps insure against short-term shifts in strategy when either market environments or portfolio performance cause panic or overconfidence.

3.Investment constraints are best defined as factors:

A)   encouraging investment choices.

B)   restricting investment choices.

C)   determining investment choices.

D)   expanding investment choices.

4.Which of the following is not considered an investment constraint?

A)   High-risk securities.

B)   Liquidity requirements.

C)   Time horizon factors.

D)   Unique considerations.

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答案和详解如下：

1.Individual investors and institutional investors can be impacted differently by different constraints. Which constraints have a large impact on individual investors and a large impact on pension funds, respectively?

A)   Legal and regulatory issues for individual investors and tax considerations for pensions.

B)   Liquidity concerns for individual investors and tax considerations for pensions.

C)   Tax considerations for individual investors and legal and regulatory issues for pensions.

D)   Legal and regulatory issues for individual investors and unique considerations for pensions.

The correct answer was C)

Individual investors are taxable entities, whereas pensions are tax exempt. Institutional investors must operate under ERISA regulations, whereas individuals can invest as they see fit. Liquidity concerns and unique considerations do affect both individual investors and pensions.

2.Which of the following statements about investment policy statements (IPS) is least accurate? The IPS:

A)   can be readily implemented by current or future investment advisors.

B)   promotes long-term discipline for portfolio decisions.

C)   is an informal statement of objectives and constraints.

D)   helps insure against short-term shifts in strategy when either market environments or portfolio performance cause panic or overconfidence.

The correct answer was C)

Investment policy statements should always be formally written documents that take into account objectives and constraints and governs investment decision-making.

3.Investment constraints are best defined as factors:

A)   encouraging investment choices.

B)   restricting investment choices.

C)   determining investment choices.

D)   expanding investment choices.

The correct answer was B)

Investment constraints are those factors limiting or restricting investment choices.

4.Which of the following is not considered an investment constraint?

A)   High-risk securities.

B)   Liquidity requirements.

C)   Time horizon factors.

D)   Unique considerations.

The correct answer was A)

Although there may be reasons why high-risk securities are not included in an overall portfolio, they are only a consequence of constraining factors. Liquidity requirements, time horizon factors, and unique considerations are all constraining factors.