Chapter 5

Portfolio Management

THE MATHEMATICS OF INVESTING

Multiple-Choice Questions

1. Which of the following are considered the components of the portfolio management process?

I. Construction of the portfolio

II. Macroeconomic analysis

III. Ongoing management of the portfolio

A. I and II

B. I and III

C. II and III

D. I, II, and III

2. Which of the following are important portfolio management constructs practiced by Warren Buffett?

I. His method for building a portfolio for long-term growth

II. His alternative measuring stick for judging the progress of a portfolio

III. His method of coping with the emotional roller coaster that accompanies portfolio management

A. I and II

B. I and III

C. II and III

D. I, II, and III

3. What time frame of performance measurement is most applicable to Warren Buffett’s approach to managing money?

A. Weeks

B. Months

C. Quarters

D. Years

4. Which statement is true regarding the current state of portfolio management?

A. It is a tug-of-war between concentrated holdings and index investing.

B. It is a tug-of-war between short-term and long-term trading.

C. It is a tug-of-war between active portfolio management and index investing.

D. It is a tug-of-war between concentrated holdings and long-term trading.

5. Which of the following is a characteristic of index investing?

A. High portfolio turnover

B. Buy-and-hold approach

C. High management expenses

D. Emphasis on stock valuations

6. Which of the following statements is true?

A. Active portfolio management ...

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