MULTIPLE CHOICE QUESTIONS - Weebly



Chapter 10

MULTIPLE CHOICE QUESTIONS

Question 1. Investment planning process involves:

A. analysis of the current investment portfolio

B. determination of the client’s risk tolerance level

C. analysis of the client’s investment preferences

D. all of the above

Question 2. The concept of investment planning involves:

A. time horizon

B. life cycle

C. tax planning

D. all of the above

Question 3. Which of the following statements is true:

A. clients usually appreciate the power of diversification

B. clients know their needs for liquidity and current income

C. investment planning objectives are usually easy to formulate

D. investment goals change with time

Question 4. When a client comes to a financial planner, he usually

I. knows his objectives

II. knows general investment and tax saving strategies

III. doesn’t know his current income needs

IV. knows the desired rate of growth of his funds

A. I, II and III

B. III

C. III and IV

D. II and IV

Question 5. Which of the following is not part of the investment life cycle:

A. preparation

B. accumulation

C. acceleration

D. preservation

Question 6. Which of the following is not true for the accumulation stage:

A. necessity to build cash reserves and emergency funds

B. high level of security

C. buying basic assets like home

D. necessity to create funds for children’s education

Question 7. 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

A. I and II

B. II, III and IV

C. I, II and III

D. IV

Question 8. Which stage of the financial life cycle an investor is in after entering the peak earning years and taking care of family responsibilities?

A. Acceleration

B. Accumulation

C. Preservation

D. Deceleration

E. Post acceleration

Question 9. 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

A. I and II

B. I, II and III

C. II, III and IV

D. I, II, III and IV

Question 10. 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

A. I, II and III

B. I, III and IV

C. II and III

D. I, II, III and IV

Question 11. Which of the following statements regarding a client’s risk tolerance level is true?

A. The determination of a client’s risk tolerance level is precisely done

B. It is easy to express as a specific number or level

C. Over time a risk tolerance level typically increases, then decreases as the client gets older

D. It is generally an objective measurement

E. C and D

Question 12. With respect to a target investment portfolio, which of the following statements is true?

A. Once the target investment portfolio is constructed it is relatively easy to implement

B. Once the target investment portfolio is constructed it may not be achievable due to unfavorable tax considerations

C. Once the target investment portfolio is constructed it may not be achievable due to the presence of illiquid investments in the portfolio

D. B and C

E. None of the above is true

Question 13. Which of the following is not an investment planning principle?

A. Determination of client’s risk tolerance

B. Tax evasion planning

C. Reducing the estate tax on wealth

D. Growth of investment over time

E. All are relevant factors

Question 14. Which of the following investments offers the potential for appreciation in value?

A. Income

B. Growth

C. Cash reserves

D. Tax sheltered investments

E. A and B

Question 15. 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

A. I, II and III

B. I, III and IV

C. II, III and IV

D. III and IV

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