CFA Level 1 - Portfolio Management with all Correct &
100% Verified Answers |Latest Version |Already
Graded A+
Diversification ratio ✔Correct Answer-Std dev. of portfolio returns/average std dev. of returns on
portfolio assets
Define Contribution (DC) Pension plans ✔Correct Answer-• Employer contributes specified sum
each period
• No guarantee of future benefits
• Employee bears investment risk
Defined Benefit (DB) Pension Plan ✔Correct Answer-• Employer promises specific payment stream
beginning at retirement
• Contributions based on years of service, compensation at/near retirement
• Employer bears investment risk
• Separate legal entity manages plan assets
Endowments ✔Correct Answer-• provide ongoing financial support (in the USA, many universities
have large endowment funds to support their programs)
• investment horizon: LONG
• risk tolerance: HIGH
• Income needs: LOW
• Liquidity needs: LOW
Banks ✔Correct Answer-Loans are assets, excess reserves invested primarily in fixed-income and
money market securities
• Time horizon: SHORT
• Risk tolerance:LOW
Income Needs: MUST PAY INTEREST ON DEPOSITS
• Liquidity Needs: HIGH
Insurance Companies (Property Casualty-P&C- and Life) ✔Correct Answer-• Time horizon: LONG
for Life
SHORT for P&C
• Risk Tolerance: LOW
• Income Needs: LOW
• Liquidity Needs: HIGH
Portfolio Management Process ✔Correct Answer-1) Planning
2) Execution
3) Feedback
Planning Step ✔Correct Answer-• Understand client needs and constraints
• Write an Investment Policy Statement (IPS)
• Develop an investment strategy consistent with the IPS
• Specify performance benchmark
, Execution Step ✔Correct Answer-• Analyze risk and return characteristics of assets classes
• Analyze market conditions to identify attractive asset classes
• Identify attractive securities within asset classes
• Portfolio construction: Target/strategic asset allocations, individual securities weightings, risk
management
Feedback Step ✔Correct Answer-• Monitor and update investor's needs
• Monitor and update market conditions
• Rebalance portfolio as needed
• Measure and report performance
Mutual Funds ✔Correct Answer-One form of pooled investments (single portfolio that contains
investment funds from multiple investors)
Open-End Mutual Funds ✔Correct Answer-• Purchase or redeem shares at NAV
• Number of shares changes with purchases and redemptions
• Fee (%) for ongoing management
• Load Funds: Up-front charges, redemption charges or both
• No-Load Funds: Neither type of charges
Closed-End Mutual Funds ✔Correct Answer-• Fixed number of shares
• Issued as an IPO
• Trade like shares of stocks, commission and spread, and margin and shorting
• Fee (%) for ongoing management
• Market prices can (do) differ from NAV
• Do not need to hold cash or sell shares to meet redemptions as open-end funds do
Type of Mutual Funds by Investment Objective ✔Correct Answer-• Money market funds
• Bond funds: High yield, global, domestic, government, corporate, long-term, short-term, tax-
exempt, etc
• Stock funds
- Actively managed funds
- Index funds
• Balanced funds
Other Forms of Pooled Investments - Exchange Traded Funds (ETFs) ✔Correct Answer-• Typically
index funds (Passively managed)
• Trade like close-end funds
• Can be shorted or margined
• Dividends typically paid out
• In-kind purchase and redemptions keep market price close to NAV
• May have tax advantage over open-end index funds
Separately Managed Funds (Pooled Investment) ✔Correct Answer-• Owned by a single investor
• Also called wrap accounts
• Minimum investment $100-500K
Buyout Funds (Pooled Investment) ✔Correct Answer-• Buy entire public companies and take them
private (their shares no longer trade)
• The purchase of the companies is often funded with a significant increase in the firm'a debt (heavy
use of debt, high leverage)
100% Verified Answers |Latest Version |Already
Graded A+
Diversification ratio ✔Correct Answer-Std dev. of portfolio returns/average std dev. of returns on
portfolio assets
Define Contribution (DC) Pension plans ✔Correct Answer-• Employer contributes specified sum
each period
• No guarantee of future benefits
• Employee bears investment risk
Defined Benefit (DB) Pension Plan ✔Correct Answer-• Employer promises specific payment stream
beginning at retirement
• Contributions based on years of service, compensation at/near retirement
• Employer bears investment risk
• Separate legal entity manages plan assets
Endowments ✔Correct Answer-• provide ongoing financial support (in the USA, many universities
have large endowment funds to support their programs)
• investment horizon: LONG
• risk tolerance: HIGH
• Income needs: LOW
• Liquidity needs: LOW
Banks ✔Correct Answer-Loans are assets, excess reserves invested primarily in fixed-income and
money market securities
• Time horizon: SHORT
• Risk tolerance:LOW
Income Needs: MUST PAY INTEREST ON DEPOSITS
• Liquidity Needs: HIGH
Insurance Companies (Property Casualty-P&C- and Life) ✔Correct Answer-• Time horizon: LONG
for Life
SHORT for P&C
• Risk Tolerance: LOW
• Income Needs: LOW
• Liquidity Needs: HIGH
Portfolio Management Process ✔Correct Answer-1) Planning
2) Execution
3) Feedback
Planning Step ✔Correct Answer-• Understand client needs and constraints
• Write an Investment Policy Statement (IPS)
• Develop an investment strategy consistent with the IPS
• Specify performance benchmark
, Execution Step ✔Correct Answer-• Analyze risk and return characteristics of assets classes
• Analyze market conditions to identify attractive asset classes
• Identify attractive securities within asset classes
• Portfolio construction: Target/strategic asset allocations, individual securities weightings, risk
management
Feedback Step ✔Correct Answer-• Monitor and update investor's needs
• Monitor and update market conditions
• Rebalance portfolio as needed
• Measure and report performance
Mutual Funds ✔Correct Answer-One form of pooled investments (single portfolio that contains
investment funds from multiple investors)
Open-End Mutual Funds ✔Correct Answer-• Purchase or redeem shares at NAV
• Number of shares changes with purchases and redemptions
• Fee (%) for ongoing management
• Load Funds: Up-front charges, redemption charges or both
• No-Load Funds: Neither type of charges
Closed-End Mutual Funds ✔Correct Answer-• Fixed number of shares
• Issued as an IPO
• Trade like shares of stocks, commission and spread, and margin and shorting
• Fee (%) for ongoing management
• Market prices can (do) differ from NAV
• Do not need to hold cash or sell shares to meet redemptions as open-end funds do
Type of Mutual Funds by Investment Objective ✔Correct Answer-• Money market funds
• Bond funds: High yield, global, domestic, government, corporate, long-term, short-term, tax-
exempt, etc
• Stock funds
- Actively managed funds
- Index funds
• Balanced funds
Other Forms of Pooled Investments - Exchange Traded Funds (ETFs) ✔Correct Answer-• Typically
index funds (Passively managed)
• Trade like close-end funds
• Can be shorted or margined
• Dividends typically paid out
• In-kind purchase and redemptions keep market price close to NAV
• May have tax advantage over open-end index funds
Separately Managed Funds (Pooled Investment) ✔Correct Answer-• Owned by a single investor
• Also called wrap accounts
• Minimum investment $100-500K
Buyout Funds (Pooled Investment) ✔Correct Answer-• Buy entire public companies and take them
private (their shares no longer trade)
• The purchase of the companies is often funded with a significant increase in the firm'a debt (heavy
use of debt, high leverage)
