CRPC exam 2023/2024 with 100% correct answers

2-1 What are the two purposes of investment policy? Investment policy serves two purposes: - correct answer It provides a foundation of goals, time horizons, and constraints on which the client portfolio is constructed. For example, the policy may establish the goal of preserving the purchasing power of the portfolio while providing periodic distributions, and it may limit the acceptable securities to large-company stocks and U.S. Treasury securities. The goals, time horizons, and constraints provide a basis for periodic review by the client and money manager. 2-1 Why is a long-term perspective essential as an element of investment policy? - correct answer U.S. financial markets and many markets overseas have a positive bias in favor of the investor. But this positive bias generally plays out over time. In the short term, the investments that produce sizable returns generally go hand-in-hand with price fluctuations. By taking a long-term view, however, these short-term fluctuations can be ignored. 2-1 Why is it important that investment policy be clearly defined? - correct answer A clear definition of the investment policy helps the planner avoid errors and reduces the chance of disputes between planner and client. An example of a clear definition would be any of the following: No securities or mutual funds with betas greater than 1.15 will be permitted in the portfolio. Only listed stocks may be purchased. The portfolio will not use options or futures except to hedge risk. 2-1 At a minimum, what five elements should every investment policy contain? Briefly explain or provide examples. GRASP - correct answer G-R-A-S-P Goals: A clear statement of the client's investment goals. Goals can be stated in relative terms (e.g., stock re