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1、Which of the following actions is best described as taking place in the execution step of the portfolio management process?
A. Rebalancing the portfolio.
B. Developing an investment policy statement.
C. Choosing a target asset allocation.
2、Which of the following statements about the steps in the portfolio management process is NOT correct?
A.Developing an investment strategy is based on an analysis of historical performance in financial markets and economic conditions.
B.Rebalancing the investor’s portfolio is done on an as-needed basis, and should be reviewed on a regular schedule.
C.Implementing the plan is based on an analysis of the current and future forecast of financial and economic conditions.
3、The process of risk management includes:
A. minimizing risk.
B. maximizing returns.
C. defining and measuring risks being taken.
4、Which of the following types of investors is likely to have the shortest investment horizon?
A. Foundation.
B. Property and casualty insurance company.
C. Life insurance company.
5、In addition to the usual parameters that describe a normal distribution, to completely describe 10 random variables, a multivariate normal distribution requires knowing the:
A. 45 correlations.
B. overall correlation.
C. 10 correlations.
Answer：
1、solution:C
The three major steps in the portfolio management process are (1) planning, (2) execution, and (3) feedback. The planning step includes *uating the investor’s needs and preparing an investment policy statement. The execution step includes choosing a target asset allocation, *uating potential investments based on top-down or bottom-up analysis, and constructing the portfolio. The feedback step includes measuring and reporting performance and monitoring and rebalancing the portfolio.
2、solution：A
Developing an investment strategy is based primarily on an analysis of the current and future financial market and economic conditions. Historical analysis serves to help develop an expectation for future conditions.
3、solution：C
Risks need to be defined and measured so as to be consistent with the entity’s chosen level of risk tolerance and target for returns or other outcomes.
4、solution：B
Foundations and life insurance companies typically have long investment horizons. Property and casualty insurance companies typically have shorter investment horizons than life insurance companies because claims against their policies occur sooner on average.
5、solution：A
The number of correlations in a multivariate normal distribution of n variables is computed by the formula (n)(n-1)/2, in this case (10*9) / 2 = 45