Which of the Following Guidelines Are Appropriate for Inclusion in a Portfolio

question 83

Multiple Choice

Which of the following guidelines are appropriate for inclusion in a portfolio management policy?
I. Ddiversify among different types of securities and across industry and geographic lines.
II. Determine the risk level and financial situation of the individual investor.
III. Utilize beta to help align the portfolio to the risk level of the investor.
IV. Minimize the standard deviation of each security in the portfolio.

• A) I, II and IV only
• B) II, III and IV only
• C) I, II and III only
• D) I, II, III and IV

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Definitions:

Internal Rate of Return

A financial metric used to evaluate the profitability of an investment, representing the interest rate at which the net present value of all cash flows (both positive and negative) from a project or investment equal zero.

Straight-Line Depreciation

An operation for dividing the expense of a solid asset through its functional duration in even yearly sums.

Simple Rate of Return

A calculation that estimates the profitability of an investment, dividing annual incremental net operating income by the initial investment cost.

Cash Operating Costs

Expenses a business incurs through its operations that require cash payments, excluding non-cash expenses like depreciation.