Fin 455: CSU- Test 1 Questions and Answers
IPS ✔✔IPS stands for investment policy statement which is a 5-10 page contract
between client and investor
Types of Investment Constraints ✔✔Liquidity
Time Horizon
Tax Concerns
Legal and regulatory factors
Unique circumstances
IPS--> RRTTLLU ✔✔Return Objective
Risk Objective
Time Horizon
Tax Requirement
Liquidity
Legal and regulatory factors
Unique cirmumstances
For an individual client, what must be considered in the risk objective? ✔✔Both
the ability and willingness to take on risk
Are conservative investors more or less willing to take on risk? ✔✔Less willing
, Are aggressive investors more or less willing to take on risk? ✔✔More willing
An individuals ability to take on risk is both and ?
✔✔Objective and a financial measure
An individuals willingness to take on risk is both and ? ✔✔Subjective
and a psychological measure
What was the traditional belief about individuals looking to invest? ✔✔That they
are fully rational
What does behavioral finance argue? ✔✔That many financial phenomena are the
result of less than fully rational behavior on the part of some participants
What was Eugene Fama's study of expertise in? ✔✔Market Efficiency- He won the
nobel price in 2013
What were Shiller and Thaler's study of expertise in? ✔✔Economics- Also won
nobel price in 2013
When people invest, in what areas do we see them make mistakes in a predictable
fashion? ✔✔Over optimism or fear
IPS ✔✔IPS stands for investment policy statement which is a 5-10 page contract
between client and investor
Types of Investment Constraints ✔✔Liquidity
Time Horizon
Tax Concerns
Legal and regulatory factors
Unique circumstances
IPS--> RRTTLLU ✔✔Return Objective
Risk Objective
Time Horizon
Tax Requirement
Liquidity
Legal and regulatory factors
Unique cirmumstances
For an individual client, what must be considered in the risk objective? ✔✔Both
the ability and willingness to take on risk
Are conservative investors more or less willing to take on risk? ✔✔Less willing
, Are aggressive investors more or less willing to take on risk? ✔✔More willing
An individuals ability to take on risk is both and ?
✔✔Objective and a financial measure
An individuals willingness to take on risk is both and ? ✔✔Subjective
and a psychological measure
What was the traditional belief about individuals looking to invest? ✔✔That they
are fully rational
What does behavioral finance argue? ✔✔That many financial phenomena are the
result of less than fully rational behavior on the part of some participants
What was Eugene Fama's study of expertise in? ✔✔Market Efficiency- He won the
nobel price in 2013
What were Shiller and Thaler's study of expertise in? ✔✔Economics- Also won
nobel price in 2013
When people invest, in what areas do we see them make mistakes in a predictable
fashion? ✔✔Over optimism or fear
