ECON 101 PFP Chapter 9 Complete Q&A (2022/2023.)

. Which of the following is not a step in the planning system for asset allocation? A. Consider personal factors. B. Identify and review investment alternatives. C. Employ portfolio management principles. D. All of the above are steps in the planning system. E. None of the above is a step in the planning system. 2. Why can investments be viewed as a delivery mechanism? A. Because they increase the household's risk level. B. Because they help create sufficient assets to fund our goals. C. Because they transform current savings into future spending. D. Because they transform future income into current spending. E. Investments are not viewed as delivery mechanism. 3. Which of the following factors is not a personal consideration that enters into the asset allocation process? A. Current available resources. B. Projected future cash flows. C. Taxes. D. Risk neutrality. E. All of the above are personal considerations that enter into the asset allocation process. 4. Which of the following time frames is associated with a long-term horizon? A. 2-7. B. 10-20. C. 2-4. D. 4-10. E. 15-35. 5. Which of the following is not part of the investment policy associated with a short-term horizon? A. Short-term bond funds. B. Money market. C. U.S. government bonds. D. Certificates of deposit. E. All of the above are part of the investment policy associated with a short-term horizon. 6. Normal long-term asset allocation is the investment policy associated with which of the following horizons? A. Intermediate-term. B. Long-term. C. Very long-term D. Both a and b. E. Both b and c. 7. Which of the following influences one's risk tolerance? A. Personality. B. Upbringing. C. Type of future cash flows for the household. D. All of the above. E. None of the above. This study source was downloaded by from CourseH on :16:47 GMT -06:00 8. Which of the following is the holding period return? A. (Sum of dividends or interest paid - Gains in principal invested)/Original cost. B. (Sum of dividends or interest paid + Gains in principal invested)/Original cost. C. (Gains in principal invested - Sum of dividends or interest paid)/Original cost. D. (Gains in principal invested + Sum of dividends - interest paid)/Original cost. E. None of the above. 9. If the sum of dividends is $45,000, gains in principal invested are $2,500, and the original cost is $365,500, what is the holding period return? A. Approximately 13% B. Approximately 11.5% C. Approximately 11% D. Approximately 10.5% E. None of the above. 10. What is liquidity risk? A. The risk of a decline in the overall stock or bond market. B. The risk of unfavorable business conditions caused by weakness in the overall economy. C. The risk of receiving a lower than market price upon sale of your holding. D. The risk of an unexpected rise in prices that reduces purchasing power. E. None of the above. 11. The risk of unfavorable business conditions caused by weakness in the overall economy is: A. Market risk. B. Inflation risk. C. Regulatory risk. D. Company risk. E. None of the above.