Portfolio Management MCQ - Portfolio Management Section 2

31 Business and investing are about allocating resources and capital to chosen:

Business and investing are about allocating resources and capital to the chosen risks.

32 Which of the following may be controlled by an investor?

Many decision makers focus on return, which is not something that is easily controlled, as opposed to risk, or exposure to risk, which may actually be managed or controlled.

33 Risk is best described as the exposure to:

Risk is the exposure to uncertainty.

34 Analyst 1: Risk management is the process by which an organization or individual defines the level of risk to be taken, measures the level of risk being taken, and adjusts the latter toward the former, with the goal of maximizing the company’s or portfolio’s value or the individual’s overall satisfaction, or utility.
Analyst 2: Risk management is the process where a risk manager not only understands the effect of environmental circumstances on the business, but also knows that he cannot do anything about it. Which analyst’s statement is most likely correct?

Analyst A is correct because risk management covers understanding the level of bearable risk, measure the risk taken, adjust the bearable risk with the level of risk taken, while keeping in view the value maximization and utility of the company portfolio.

35 The “Doctrine of No Surprises” states that:

The “Doctrine of No Surprises” states that the effect of the outcome of a predictable or an unpredictable event would not surprise the risk manager and the effect would have been quantified and considered in advance.