投资学第7版Test Bank答案26

投资学第7版Test Bank答案

Multiple Choice Questions

1. __________ refer to strategies aimed at attaining the established rate of return

requirements while meeting expressed risk tolerance and applicable constraints.

A) Investment constraints

B) Investment objectives

C) Investment policies

D) All of the above

E) None of the above

Answer: C Difficulty: Moderate

Rationale: Objectives are goals, constraints refer to actions the investor is unwilling to

take; both objectives and constraints determine policies.

2. One incorrect belief that is often cited as a reason for fully-funded pension funds to

invest in equities is

A) stocks have higher risk.

B) bonds have lower returns.

C) stocks provide a hedge against inflation.

D) stocks have higher returns.

E) all of the above are incorrect beliefs that are often cited.

Answer: C Difficulty: Moderate

Rationale: Nominal returns on stocks are highly correlated with inflation, yet many

pension managers cite inflation protection as a reason for investing in equities.

3. __________ in the process of asset allocation.

A) Deriving the efficient portfolio frontier is a step

B) Specifying asset classes to be included in the portfolio is a step

C) Specifying the capital market expectations is a step

D) All of the above are steps

E) None of the above is a step in the asset allocation process.

Answer: D Difficulty: Easy

Rationale: A, B, and C determine asset allocation.

投资学第7版Test Bank答案

4. Questionnaires and attitude surveys suggest that risk tolerance A) increases with age. B) decreases with age. C) stays constant over the life cycle for most investors. D) cannot be assessed. E) none of the above Answer: B Difficulty: Easy Rationale: The life-cycle view of investment behavior suggests that investors are more risk tolerant when they are younger, and surveys support this view. 5. __________ can be used to create a perfect inflation hedge A) Gold B) Real estate C) CPI-linked bonds D) The S&P 500 index E) None of the above Answer: C Difficulty: Moderate Rationale: The CPI is the rate of inflation, thus CPI-linked bonds can be used to create a perfect inflation hedge. 6. A fully-funded pension plan can invest surplus assets in equities provided it reduces the proportion in equities when the value of the fund drops near the accumulated benefit obligation. This strategy is referred to as A) immunization. B) hedging. C) diversification. D) contingent immunization. E) overfunding. Answer: D Difficulty: Easy Rationale: Contingent immunization allows the fund to participate in the higher returns

of the equity market while protecting the benefits of plan participants.

投资学第7版Test Bank答案

7. Workers who change jobs may wind up with lower pension benefits at retirement than

otherwise identical workers who stay with the same employer, even if the employers have defined benefit plans with the same final-pay benefit formula. This is referred to as

A) an accumulated benefit obligation.

B) an unfunded liability.

C) immunization.

D) indexation.

E) the portability problem.

Answer: E Difficulty: Easy

Rationale: The portability problem results in reduced benefits for workers who change jobs but cannot take accumulated benefits from defined benefit plans when they move.

8. The risk tolerance level is typically highest for __________.

A) banks

B) fire and casualty insurance companies

C) life insurance companies

D) A and B

E) A and C

Answer: A Difficulty: Easy

Rationale: See Table 26.2.

9. The __________ the proportion of total return that is in the form of price appreciation, the __________ will be the value of the tax-deferral option for taxable investors.

A) greater, greater

B) greater, lower

C) lower, greater

D) cannot tell from the information given.

E) none of the above

Answer: A Difficulty: Easy

Rationale: Price appreciation can be deferred and thereby taxed at the lower capital gains rate.

投资学第7版Test Bank答案

10. An important benefit of Keogh plans is that

A) they are not taxable until funds are withdrawn as benefits.

B) they are protected against inflation.

C) they are automatically insured by the Federal government.

D) A and B.

E) A and C.

Answer: A Difficulty: Easy

Rationale: Keogh plans, like other tax-deferred retirement plans, are not subject to taxes

until funds are withdrawn as benefits.

11. Variable life insurance

A) combines life insurance with a tax-deferred annuity.

B) provides a minimum death benefit that increases subject to investment

performance.

C) can be converted to a stream of income.

D) all of the above.

E) none of the above.

Answer: D Difficulty: Easy

Rationale: Variable life insurance includes all of the listed features.

12. Endowment funds are held by __________.

A) charitable organizations

B) educational institutions

C) for profit firms

D) A and B

E) B and C

Answer: D Difficulty: Easy

Rationale: Endowments are funds established for not for profit organizations, such as

colleges, universities, charities, hospitals, etc.

投资学第7版Test Bank答案

13. __________ center on the trade-off between the return the investor wants and how

much risk the investor is willing to assume.

A) Investment constraints

B) Investment objectives

C) Investment policies

D) All of the above