Investors are willing to take on more risk in all situations

Assignment Help Financial Management

Reference no: EM131975837

1. Investors are willing to take on more risk in all of the following situations except

low initial price to make the investment

higher probability of success from the investment

the amount invested is small compared to total wealth of the individual

more risk than in a comparable investment

2. A financial planner has two investment options. Option A has a 50% chance of $5000 and a 50% chance of $1000. Option B has a 30% chance of $8,000 and a 70% chance of $500. Which one should he recommend?

Option A

Option B

Either, both options are acceptable

3. You have a client to whom you give a risk assessment test. The scale is 1 to 10 with 1 meaning the person has a low tolerance for risk and 10 meaning the person has a high tolerance for risk. Which of the following is correct?

If your client scores a 7 (moderately high tolerance), you would use that level when preparing the portfolio.

If your client scores a 7 (moderately high tolerance), you would use a level below that such as 6 when preparing the portfolio.

If your client scores a 7 (moderately high tolerance), you would use that level above that such as an 8 when preparing the portfolio.

4. Which of the following pairs are incompatible goals?

capital appreciation; growth of income

growth of income; income

income; stability of principle

stability of principle; growth of income

5. Which of the following is not part of a fiduciary duty?

a fiduciary must manage with modern portfolio theory concepts

a fiduciary must diversify the portfolio

a fiduciary does not have discretion over the funds

a fiduciary can do social investing if it is documented

6. In which type of portfolio management does one primarily hold index funds?

market timing

passive asset allocation

active asset allocation

insider allocation

7. Which of the following is FALSE?

most investors won’t make a bet unless they think their chance for success is 50%

most investors worry more about losses than they do gains

as investors increase their wealth, they need greater returns to be as satisfied as before

for success the satisfaction investors get from investing must match the time frame of the investment

8. Which of the following is NOT a common portfolio mistake?

not rebalancing consistently

not using company-sponsored plans

not approaching risk consistently

owning too little company stock

9. Which type of efficiency means that prices reflect past information?

weak

semi-strong

strong

10. This type of efficiency says that market prices reflect all public information

weak form

semi-strong form

strong form

Reference no: EM131975837

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