1. Which of the following is the most difficult to quantify, while preparing an investment policy statement?

A. Time horizon.
B. Willingness to expect risk.
C. Ability to take risk.


2. An investment policy statement that includes a risk objective of “Return should be within 4% of the S&P 500 index return” is best characterized as having a(n):

A. arbitrage-based risk objective.
B. absolute risk objective.
C. relative risk objective


3. A financial advisor gathers the following information about a new client:

  • The client is a famous physics professor at one of the biggest universities in New York.
  • The client owns a penthouse and two cars with currently zero outstanding debt.
  • The client is currently working full-time and plans to continue this way for another five years after which he will work part time for 4 years before retirement.
  • The client has accumulated retirement savings of approximately $ 1.75 million through their employer’s retirement plan and anticipates retirement spending needs of $80,000 per year.
  • Despite the concern regarding the current condition of the global economy, the client maintains to remain a long-term investor.
  • The client follows numerous financial publications closely and is aware of the evolving markets.

Based on the above information, which of the following best describes this client?

A. High ability to take risk and a high willingness to take risk.
B. Low ability to take risk, but a high willingness to take risk.
C. High ability to take risk, but a low willingness to take risk.

Answers: SelectShow


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