Multiple choice, Identification, True or false

• The Investment Process:

  • Is a set of guidelines required to create the portfolio and sequence of actions involved, from defining risk parameters to asset allocations
  • Provides structure to the investor to implement a strategy customized as per goals, objectives, risk tolerance, and values to manage risk
• Two Types of Portfolio Strategy:

  • Passive Management Process aims to generate returns equal to that of the market
  • Active Management Process aims to outperform the market return compared to a specific benchmark by buying undervalued securities or short selling overvalued ones
• Financial Market Participants and their roles:

  • Financial Markets are marketplaces for the sale and purchase of assets like bonds, stocks, foreign exchange, and derivatives
  • Importance of Financial Markets:
  • Offer fair and proper treatment, allowing big companies and regular folks to invest and borrow money
  • Help lower the unemployment rate by enabling businesses to expand and create more jobs
  • Provide access to capital, acting as a lending library where money can be borrowed to build businesses
• Main Participants and Their Roles in Financial Markets:

  • Investors purchase shares of a company for the long term with the belief in strong future prospects
  • Brokers intermediate between buyers and sellers of securities on the stock exchange
  • Financial Institutions raise money by issuing long-term bonds and lend to key sectors like agriculture, small industries, and housing development
  • Regulators oversee financial markets to ensure fairness and stability, enforcing rules to protect investors and maintain market integrity
  • Government, the largest borrower, collects taxes and borrows by issuing bonds to fund development and infrastructure projects