1. Modern portfolio theory stresses the correlation between:
A. particular portfolio and a benchmark portfolio.
B. individual securities within a portfolio.
C. individual securities macroeconomic variables.
2. The planning step in the portfolio management process includes:
A. deciding the asset allocation between equities, fixed income securities and cash.
B. preparation of an investment policy statement.
C. identifying attractive investments in particular market segments.
3. Which of the following institutional investors is most likely to have a low risk tolerance and relatively high liquidity needs?
A. Endowment foundations.
B. Defined benefit pension plans.
C. Insurance companies.
Tomorrow’s questions of the day will be on the topic of R42: Portfolio Risk and Return: Part I.