PORTFOLIO MANAGEMENT EXAM 1
2025/2026 QUESTIONS AND ANSWERS
100% PASS
Portfolios are most likely to provide? - ANS Risk Reduction
Investors should use a portfolio approach to: - ANS Reduce Risk without necessarily reducing
expected returns
which of the following is the best reason for an investor to be concerned with the composition
of a portfolio? - ANS Risk Reduction
Diversification Ratio - ANS Measures the value of diversification
ratio is between 0 and 1
Individual Investor - ANS Children's education
Saving for purchase of home or vehicle
Saving for retirement (Defined Contribution Plans)
Institutional Investors - ANS defined benefit plans
Endowments and Foundations
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Banks
Insurance Company's
investment company's
Sovereign Wealth Funds
Defined benefit plans - ANS have indefinitely LONG TIME HORIZON if new members are being
admitted. Even if closed, the time horizon may still be very long
Endowments and Foundations - ANS are usually established to have perpetual lives.
Usually there are underlying objectives and constraints (e.g. social, moral)
Banks - ANS are often restricted in what they can invest in so they have enough to meet
obligations. Risk and liquidity constraints are important.
Insurance Company's - ANS also have relatively conservative investments. Life insurance
companies have longer term horizon and can invest in more risky instruments. Non-life
insurance companies like auto and home insurance invest more conservatively.
Investment Company's - ANS Mutual funds serve investors by pooling their capital for the
fund manager to manage professionally. Effective way for investors to benefit from
diversification and professional management.
Sovereign Wealth Funds - ANS are government-owned investment funds.
Sizes vary. Oil rich countries have large SWFs.
Portfolio Management Process - ANS Planning Step
-Understanding Client Needs
-Preparation of an Investment Policy Statement
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
2025/2026 QUESTIONS AND ANSWERS
100% PASS
Portfolios are most likely to provide? - ANS Risk Reduction
Investors should use a portfolio approach to: - ANS Reduce Risk without necessarily reducing
expected returns
which of the following is the best reason for an investor to be concerned with the composition
of a portfolio? - ANS Risk Reduction
Diversification Ratio - ANS Measures the value of diversification
ratio is between 0 and 1
Individual Investor - ANS Children's education
Saving for purchase of home or vehicle
Saving for retirement (Defined Contribution Plans)
Institutional Investors - ANS defined benefit plans
Endowments and Foundations
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Banks
Insurance Company's
investment company's
Sovereign Wealth Funds
Defined benefit plans - ANS have indefinitely LONG TIME HORIZON if new members are being
admitted. Even if closed, the time horizon may still be very long
Endowments and Foundations - ANS are usually established to have perpetual lives.
Usually there are underlying objectives and constraints (e.g. social, moral)
Banks - ANS are often restricted in what they can invest in so they have enough to meet
obligations. Risk and liquidity constraints are important.
Insurance Company's - ANS also have relatively conservative investments. Life insurance
companies have longer term horizon and can invest in more risky instruments. Non-life
insurance companies like auto and home insurance invest more conservatively.
Investment Company's - ANS Mutual funds serve investors by pooling their capital for the
fund manager to manage professionally. Effective way for investors to benefit from
diversification and professional management.
Sovereign Wealth Funds - ANS are government-owned investment funds.
Sizes vary. Oil rich countries have large SWFs.
Portfolio Management Process - ANS Planning Step
-Understanding Client Needs
-Preparation of an Investment Policy Statement
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
