Investment Advisor Client Suitability and Portfolio Management 2

Question 1

Which asset allocation approach involves periodically resetting a portfolio to its original target weights?

Accepted Answer

Rebalancing

Answer

Tactical asset allocation

Answer

Buy-and-hold

Answer

Market timing

Question 2

A client with a high risk tolerance and a 30-year time horizon is generally most appropriate for a portfolio weighted toward:

Accepted Answer

Equities with a small fixed income allocation

Answer

Short-term Treasury bills

Answer

Money market funds

Answer

Certificates of deposit only

Question 3

The Sharpe Ratio measures:

Accepted Answer

Excess return per unit of total risk

Answer

Total portfolio return

Answer

Portfolio correlation to a benchmark

Answer

The dividend yield of a portfolio

Question 4

A client who panics and sells investments during market downturns is exhibiting which behavioral bias?

Accepted Answer

Loss aversion

Answer

Confirmation bias

Answer

Anchoring bias

Answer

Overconfidence bias

Question 5

In a client needs analysis, 'liquidity needs' refer to:

Accepted Answer

The need for readily accessible funds to cover short-term obligations

Answer

The client's desire for dividend income

Answer

The preference for liquid stock markets

Answer

The client's desire to avoid real estate investments

Question 6

Which portfolio strategy involves adjusting asset allocation in response to changing market conditions, rather than maintaining a fixed target?

Accepted Answer

Tactical asset allocation

Answer

Strategic asset allocation

Answer

Passive indexing

Answer

Dollar-cost averaging