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Question 1 of 10
1. Question
Government structural policies apply to government policies that influence the limits of economic development and benefits in the private sector. Which of the following are subject to the systemic policy elements of the pro-growth government?
Correct
Throughout the first three-quarters of the twentieth century, the economies of most countries have governments that have steadily interfered. However, the tendency towards heavy government control of the economy, rather than by direct ownership, continues to be high
Incorrect
Throughout the first three-quarters of the twentieth century, the economies of most countries have governments that have steadily interfered. However, the tendency towards heavy government control of the economy, rather than by direct ownership, continues to be high
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Question 2 of 10
2. Question
Which of the following is not a challenge in setting capital market expectations?
Correct
The techniques used to formulate capital market expectations include systematic tools, survey and panel approaches, and judgment. There are systematic methods, such as statistical tools, discounted cash flow forecasts, risk premium approach, and financial market balances
Incorrect
The techniques used to formulate capital market expectations include systematic tools, survey and panel approaches, and judgment. There are systematic methods, such as statistical tools, discounted cash flow forecasts, risk premium approach, and financial market balances
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Question 3 of 10
3. Question
Which of the following statements best describes the goal of the Black–Litterman model?
Correct
This framework was designed by Fischer Black and Robert Litterman, together with the Unconstrained Black–Litterman model, to resolve the issue of estimation error, which we remember would be most critical when it comes to estimated returns. One of the key benefits of this strategy is that the starting point is a diversified portfolio with market capitalization portfolio weights that is suitable for an uninformed investor using a mean-variance approach
Incorrect
This framework was designed by Fischer Black and Robert Litterman, together with the Unconstrained Black–Litterman model, to resolve the issue of estimation error, which we remember would be most critical when it comes to estimated returns. One of the key benefits of this strategy is that the starting point is a diversified portfolio with market capitalization portfolio weights that is suitable for an uninformed investor using a mean-variance approach
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Question 4 of 10
4. Question
For a defined-benefit pension plan, net worth is called pension surplus. Some countries declare some requirements regarding pension plan contributions in terms of the funding ratio. Which of the following is not true?
Correct
The aim of the project’s sponsor is to successfully manage the excess of the pension system. If the surplus is positive, the sponsor will fund potential accrued liabilities. However, where the current value of the liabilities exceeds the value of the assets, the sponsor must make up the deficit of the assets by future payments from the sponsor’s assets or investment profits
Incorrect
The aim of the project’s sponsor is to successfully manage the excess of the pension system. If the surplus is positive, the sponsor will fund potential accrued liabilities. However, where the current value of the liabilities exceeds the value of the assets, the sponsor must make up the deficit of the assets by future payments from the sponsor’s assets or investment profits
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Question 5 of 10
5. Question
Which of the following statements least likely describes rebalancing?
Correct
Percentage-of-portfolio is also called trigger point where rebalancing occurs when an asset-class weight first passes through a rebalancing threshold. This can be done in a disciplined fashion that provides tighter control over risk than calendar-basis rebalancing.
Incorrect
Percentage-of-portfolio is also called trigger point where rebalancing occurs when an asset-class weight first passes through a rebalancing threshold. This can be done in a disciplined fashion that provides tighter control over risk than calendar-basis rebalancing.
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Question 6 of 10
6. Question
Which of the following statements does not apply with the asset allocation for individual investors that they must account for?
Correct
Individual investors are taxable and must often concentrate on after-tax returns, since they differentiate between individual investors and tax-exempt investors and other taxable investors, such as banks, who are also subject to different tax schedules than individual investors
Incorrect
Individual investors are taxable and must often concentrate on after-tax returns, since they differentiate between individual investors and tax-exempt investors and other taxable investors, such as banks, who are also subject to different tax schedules than individual investors
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Question 7 of 10
7. Question
A life annuity provides a monthly profit for the remainder of the annuitant’s life. Which of the following forms of life annuity provides a guarantee of a minimum fixed payment plus some participation in stock market gains?
Correct
In the allocation of assets, the value of a fixed annuity will almost always be stated as a risk-free asset and the value of a variable annuity as a volatile holding. An equity-indexed annuity is comparable to a risk-free asset plus a call option on equity returns. Purchasing an annuity, though, is a commodity option very different from the judgment on strategic asset allocation
Incorrect
In the allocation of assets, the value of a fixed annuity will almost always be stated as a risk-free asset and the value of a variable annuity as a volatile holding. An equity-indexed annuity is comparable to a risk-free asset plus a call option on equity returns. Purchasing an annuity, though, is a commodity option very different from the judgment on strategic asset allocation
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Question 8 of 10
8. Question
Which of the following advantages does not apply to portfolio segmentations?
Correct
Portfolio segmentation is a distinguishing characteristic of the management practices of life insurers. This is the development of sub-portfolios within the general account portfolio, depending on the product mix for each business. In this strategy, the insurer groups liabilities on the basis of the product line of the company or division
Incorrect
Portfolio segmentation is a distinguishing characteristic of the management practices of life insurers. This is the development of sub-portfolios within the general account portfolio, depending on the product mix for each business. In this strategy, the insurer groups liabilities on the basis of the product line of the company or division
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Question 9 of 10
9. Question
The portfolio of securities of a bank is subject to a distinct set of guidelines and is typically handled separately. Which of the following is not the function of the bank’s portfolio of securities?
Correct
Bank portfolios of loans and leases are typically not very liquid and may bear considerable credit risk. As a result, the bank’s portfolio of securities plays a balancing role in offering a ready source of liquidity and offsetting credit portfolio risk
Incorrect
Bank portfolios of loans and leases are typically not very liquid and may bear considerable credit risk. As a result, the bank’s portfolio of securities plays a balancing role in offering a ready source of liquidity and offsetting credit portfolio risk
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Question 10 of 10
10. Question
The tactical asset allocator should be mindful that differences from fair value based on historical valuation may continue if indeed the economic environment has changed. Which of the following are the variables for this allocator?
Correct
Tactical asset allocation entails intentionally underweighting or overweighting asset groups according to their target weights in the policy portfolio to add value. They are also based on the following three principles:
(1) Market rates directly state what returns are available
(2) Relative anticipated returns represent relative risk expectations
(3) Markets will therefore become rational and mean-revertingIncorrect
Tactical asset allocation entails intentionally underweighting or overweighting asset groups according to their target weights in the policy portfolio to add value. They are also based on the following three principles:
(1) Market rates directly state what returns are available
(2) Relative anticipated returns represent relative risk expectations
(3) Markets will therefore become rational and mean-reverting