CFA Practice Question

There are 294 practice questions for this study session.

CFA Practice Question

Which of the following statement(s) regarding individual and institutional investors is (are) incorrect?

I. Individuals define risk as "losing money" while institutions view risk as the variance (or standard deviation) of returns.

II. Individuals are categorized according to their personalities and unique circumstances, whereas institutions are categorized by the investment characteristics of those with a beneficial interest in the portfolios of pension funds, endowment funds, banks, insurance companies, and mutual funds.

III. Individuals are defined financially by their assets and goals (particularly as they relate to their life cycle), while institutions are typically concentrated within precise asset and liability parameters.

IV. Institutions have great flexibility in selecting their investments, whereas individuals are managed and regulated by ERISA (Employee Retirement Income Security Act) as well as other legal constraints.
A. II and IV
B. I and III
C. IV only
Explanation: Individuals have great flexibility in selecting their investments, whereas institutions are managed and regulated by ERISA (Employee Retirement Income Security Act) as well as other legal constraints.

User Contributed Comments 5

User Comment
iceluke Individuals have greater flexibility
achu Read question carefully. This was actually not very difficult!
ljamieson i really should read ...
plumbot Suggest highlighting negatives in question such as "incorrect" in this case. That way it's LESS likely to make a stupid mistake.
kiranyadava I assume the IV option say other way round.
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