Canadian Securities Course (CSC) Level 2 Practice Exam

What is a key consideration in determining investment objectives according to the portfolio management process?

1. Growth prospects only

2. Liquidity constraints only

3. Income generation

4. Security complexity

The correct answer is: Income generation

In determining investment objectives according to the portfolio management process, one key consideration is income generation. While growth prospects and security complexity can also be important factors to consider when setting investment objectives, income generation is particularly crucial as it reflects the investor's need for immediate income or cash flow from their investments. Liquidity constraints, on the other hand, focus on the investor’s ability to quickly convert assets into cash without significantly impacting the asset's price, which is also an important consideration but not the primary factor when determining investment objectives.