Question 1

With respect to a target investment portfolio, which of the following statements is true?

Accepted Answer

While it is true that constructing a target investment portfolio is an important early step, implementing it may not be as simple as it seems. Unfavorable tax considerations may make achieving the desired portfolio difficult, and illiquid investments may also present challenges. Therefore, both option B and C are true.

Question 2

Investors can use Asset Allocation Model for the following purposes: 
I. maximizing portfolio returns
II. balancing risk and return
III. finding the perfect mix of funds
IV. increasing safety of the portfolio

Accepted Answer

Asset Allocation Model is used for maximizing portfolio returns, balancing risk and return, finding the perfect mix of funds, and increasing the safety of the portfolio. It is a strategy to diversify investments among different asset classes to achieve these goals.

Question 3

Which of the following is not true for the accumulation stage:

Accepted Answer

The accumulation stage is focused on building wealth and acquiring assets, so the high level of security is not necessarily a priority. Instead, the other options listed (building cash reserves and emergency funds, buying basic assets like a home, and creating funds for children's education) are typical goals during this stage.

Question 4

Which stage of the financial life cycle an investor is in after entering the peak earning years and taking care of family responsibilities?

Accepted Answer

The answer of Which stage of the financial life cycle...

Question 5

Which of the following is not an investment planning principle?

Accepted Answer

Tax evasion planning is illegal, and therefore not a legitimate investment planning principle. The other options listed are all relevant factors in investment planning.

Question 6

Which of the following investments offers the potential for appreciation in value?

Accepted Answer

Growth investments offer the potential for appreciation in value. Income investments, like bonds, provide a regular income stream but do not typically increase in value. Cash reserves, such as savings accounts, do not offer the potential for growth in value. Tax sheltered investments, like 401(k)s and IRAs, offer tax benefits but do not guarantee appreciation in value. Therefore, only choice B, growth investments, is the best choice for potential appreciation in value.

Question 7

Which of the following statements regarding a client's risk tolerance level is true?

Accepted Answer

Risk tolerance can change over time, often increasing with experience and decreasing as one approaches retirement. It is subjective, not objective.

Question 8

During the acceleration stage the following is true: 
I. investor can take more risks
II. investor has more resources
III. portfolio should be more growth oriented
IV. portfolio should exclude all income oriented investments

Accepted Answer

During the acceleration stage, investors can take more risks, as they have more resources at their disposal. Therefore, portfolio should be more growth oriented, but it should not necessarily exclude all income-oriented investments. Hence, statement III is true, whereas IV is not necessarily true. Statement I is also true, as investors can take more risks during this stage. Therefore, choice C is the best option.

Question 9

Common measures of value are: 
I. low P/E ratio
II. low price-to-book ratio
III. high dividend yield
IV. high EPS rate growth

Accepted Answer

Measures of value typically include metrics that indicate a stock is undervalued or offers a solid return relative to its price, such as a low price-to-earnings (P/E) ratio, a low price-to-book ratio, and a high dividend yield. High EPS growth rate is more associated with growth investing rather than value investing.

Question 10

Rebalancing your portfolio from time to time will help you achieve the following goal: 
I. maintain a consistent strategy of investment
II. sell high
III. invest at lower prices
IV. reduce your capital gain taxes

Accepted Answer

Rebalancing your portfolio helps maintain a consistent investment strategy by adjusting the weightings of assets to their target levels. It often involves selling assets that have increased in value ("sell high") and buying more of those that have decreased in value ("invest at lower prices"), thus maintaining the desired asset allocation.

Quiz 10: Investment Planning Strategies

With respect to a target investment portfolio, which of the following statements is true?

Investors can use Asset Allocation Model for the following purposes: I. maximizing portfolio returns II. balancing risk and return III. finding the perfect mix of funds IV. increasing safety of the portfolio

Which of the following is not true for the accumulation stage:

Which stage of the financial life cycle an investor is in after entering the peak earning years and taking care of family responsibilities?

Which of the following is not an investment planning principle?

Which of the following investments offers the potential for appreciation in value?

Which of the following statements regarding a client's risk tolerance level is true?

During the acceleration stage the following is true: I. investor can take more risks II. investor has more resources III. portfolio should be more growth oriented IV. portfolio should exclude all income oriented investments

Common measures of value are: I. low P/E ratio II. low price-to-book ratio III. high dividend yield IV. high EPS rate growth

Rebalancing your portfolio from time to time will help you achieve the following goal: I. maintain a consistent strategy of investment II. sell high III. invest at lower prices IV. reduce your capital gain taxes