MT. CARMEL COLLEGE OF SAN FRANCISCO, INC.

San Francisco, Agusan del Sur

FM MC 6 – Investment & Portfolio Management - PREFINAL EXAM

I. IDENTIFICATION. Write the letter of the terms that best describe the phrase below. (2 points each)

a.) Business Risk f.) Investment k.) Goal Factors

b.) Financial Risk g.) Investing l.) Risk Tolerance
c.) Liquidity Risk h.) Asset Allocation m.) Time Horizon
d.) Exchange Risk i.) Liquidity n.) Overweight Stocks
e.) Political Risk j.) Volatility o.) Underweight Stocks

1. These are individual aspirations to achieve a given level of return or saving for a particular reason or
desire. K
2. It is the process of deciding how to distribute an investor's wealth among different countries and asset
classes for investment purposes. H
3. The act of allocating resources, usually capital with the expectation of generating an income, profit, or
gains. G
4. An investment term that describes when a market or security experiences periods of unpredictable,
and sometimes sharp, price movements.
5. The risk of incurring losses resulting from the inability to meet payment obligations in a timely manner
when they become due or from being unable to do so at a sustainable cost.
6. The uncertainty of returns caused by the possibility of a major change in the political or economic
environment of a country.
7. It refers to how much an individual is willing and able to lose a given amount of their original
investment in anticipation of getting a higher return in the future.
8. They expect the stock to outperform its industry in the market.
9. The uncertainty introduced by the method by which the firm finances its investments
10. The uncertainty of income flows caused by the nature of a firm's business.
11. The expected return is below the average return of the industry, the sector, or the market that has
been chosen as a point of comparison.
12. An asset or item acquired with the goal of generating income or appreciation.
13. The time horizon factor depends on the duration an investor is going to invest.
14. The uncertainty of returns to an investor who acquires securities denominated in a currency different
from his or her own.
15. The ability to convert the investment into cash quickly and easily.

II. TRUE or FALSE. Write T for True and F for False (2 points each)

1. Saving is to grow one's money over time. Investing

2. Investors study historical return data when trying to forecast future returns.
3. The less certain the income flows of the firm, the less certain the income flows to the investor.
4. A retail food company would typically experience stable sales and earnings growth over time than a firm
in the auto or airline industry.
5. If a firm uses only common stock to finance investments, it only incurs business risk.
6. The likelihood of incurring this risk is becoming lesser as investors buy and sell assets around the world.
Greater
7. Bonds are among a number of investments known as fixed-income securities.
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 MT. CARMEL COLLEGE OF SAN FRANCISCO, INC.
San Francisco, Agusan del Sur
FM MC 6 – Investment & Portfolio Management - PREFINAL EXAM

8. The higher the price volatility, the shorter the investment time horizon. Longer
9. The amount of cash and cash equivalents on hand speaks to a company's financial health.
10. Different goals do not affect how a person invests and assume risks. It affects
11. Investors who prefer professional money management generally have wealth managers looking after
their investments.
12. The spectrum of assets in which one can invest and earn a return is a very wide one.
13. An asset is anything you own that adds financial value.

14. A well-diversified portfolio is not vital to any investor's success.

15. The more risk you can bear, the more aggressive your portfolio will be.
16. There is no simple formula that can find the right asset allocation for every individual.
17. Bonds are among a number of investments known as fixed-income securities.
18. The less risk you can assume, the more conservative your portfolio will be.
19. Investment does not need a change over a person's life cycle. It needs
20. The main goal of a conservative portfolio is to protect its value.

III. DISCUSSION

1. Differentiate Investing from Gambling. (5 points)

2. Differentiate Investing from Savings. (5 points)
3. What is the core premise of investing? (5 points)
4. Give at least 5 Common Types of Investments. (1 point each)
5. Discuss the four (4) Steps in Building a Profitable Portfolio. (10 points)