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1. To _____ means to mitigate a financial risk.
2. In a defined benefit pension plan, the _____ bears all of the fund's investment
performance risk.
3. In a defined contribution pension plan, the _____ bears all of the fund's investment
performance risk.
4. My pension plan will pay me a yearly retirement amount equal to 2% of my highest annual
salary for each year of service. I must have ___________.
5. A ______ insurance policy provides death benefits, with no buildup of cash value.
6. If the maturity of a bank's assets is much longer than the maturity of its liabilities and it
wants to limit its interest rate risk, the bank may _________.
7. You are thinking of investing in one of two assets. Asset A has higher systematic risk than
asset B. You can be sure that asset A's _______ return will be higher than asset B's, but you can't
be sure if asset A's _______ return will be higher than asset B's.
8. A mutual fund may not hold more than ______ of the shares of any publicly traded
company.
9. Which one of the following would be considered a "cash equivalent" investment?
10. For a bank, the difference between the interest rate charged to borrowers and the interest
rate paid on liabilities is called the __________.
11. Price volatility is greatest on which one of the following investments?
12. A portfolio manager indexes part of a portfolio and actively manages the rest of the
portfolio. This is called a _________ strategy.
13. The major asset most people have during their early working years is their ________.
14. At the early stage of an individual's working career, his or her retirement portfolio should
probably consist mostly of _______.
15. If an investor wants to invest 100% of her portfolio in safe assets but does not want to
manage her portfolio, she should invest in __________.
16. Just 2 months after you put money into an investment, its price falls 25%. Assuming that
none of the investment fundamentals have changed, which of the following actions would
evidence the greatest risk tolerance?
17. To become a CFA, you must do all of the following
except
which one?
18. Which of the following is
not
one of the main areas covered in the examinations that must
be taken in order to achieve the designation of Chartered Financial Analyst?
19. As the typical investor ages, the composition of his wealth usually switches from primarily
_______ to primarily _______.
20. The two most important factors in describing an individual's or organization's investment
objectives are ________________.
21. The term
hedge
refers to an investment that is used ________________.
22. The price of your investment increases 20% one month after you buy it. You do not believe
that the stock's prospects have changed. Which one of the following actions would indicate the
lowest amount of risk aversion?
23. An individual is on the game show
Squeal or No Squeal,
and she has a choice between
receiving a certain gain of $100,000 and receiving a 50% chance of winning $200,000 or zero. If
she takes the gamble instead of the certain $100,000, she is acting ____________________.
24. Which of the following typically strives to earn a return on their investments that exceeds
the actuarially determined rate of return?
25. If an individual confers legal title to property to another person or institution to manage
the property on their behalf, the individual has created ___________.
26. Personal trusts are typically allowed to engage in which of the following investment
activities?
I. Buying and selling futures contracts.
II. Short-selling securities.
III. Purchasing and writing options.
IV. Buying stock on margin.
27. If a defined benefit pension fund's actual rate of return is _____ than the actuarial
assumed rate, then the ___________.
28. An employee has an average wage of $60,000 and has worked for the firm for 25 years.
The defined benefit pension plan pays retirees 2.5% of the average wage times the years of
service. The employee can expect to receive _______ per year upon retirement.
29. Life insurance companies try to hedge the risks inherent in whole-life insurance policies
by investing in __________.
30. A pension fund will owe $10 million to retirees in 6 years. An actuary assumes an 8% rate
of return on the funds invested in the pension plan. If the pension plan receives annual
contributions from the company sponsor, how much must the company pay each year to fully fund
the pension liability?
31. The risk that a downturn in the market may substantially reduce your investment principal
is called _______.
32. The possibility that you are too conservative and your money doesn't grow fast enough to
keep pace with inflation is called ________.
33. A pension fund will owe $15 million to retirees in 20 years. An actuary assumes a 6% rate
of return on the funds invested in the pension plan, but the fund actually earns 8%. The pension
plan receives annual contributions from the company sponsor. If the 8% rate of return is expected
to continue, by how much can the company reduce its pension payments per year?
34. Many defined benefit pension plans have a target rate of return on investment that is
equal to the ____________.
35. _______ is a life insurance policy that provides a death benefit and a fixed-rate tax-
deferred savings plan.
36. Empirical evidence confirms that investors become __________ as they approach
retirement.
37. _______ is a life insurance policy that will provide a death benefit only and has no savings
plan.
38. Of the following, the investment time horizon is typically the shortest for __________.
39. A passive asset allocation strategy involves _________.
40. An active asset allocation strategy involves _________.
41. Endowment funds are held by __________.
42. Which one of the following is a life insurance policy that will provide a fixed death benefit
and allows the policyholder to choose where to invest the policy's cash value?
43. Under a "passive core" portfolio management strategy, a manager would ___________.
44. Of the following, the most flexible type of life insurance policy from the policyholder's
perspective is probably a ___________ policy.
