1. An ALM framework for asset allocation becomes more important:

a. If one focuses mostly on the asset returns

b. When the penalty for not meeting liabilities is low

c. When you have above-average risk tolerance

d. When investment portfolio risk limits the ability to take risk elsewhere

2. Assume the information below represents corner portfolios. Determine the weight in asset B that is necessary to earn a portfolio return of 7.0%

Corner Portfolio	Asset Weight (A)	Asset Wight (B)	Asset Weight (C)	Asset Weight (D)	Asset Return (A)	Asset Return (B)	Asset Return (C)	Asset Return (D)
A	100%	0.0%	0.0%	0.0%	5.0%	10.0%	7.0%	12.0%
B	80%	0.0%	0.0%	20.0%	5.0%	10.0%	7.0%	12.0%
C	50%	30.0%	0.0%	20.0%	5.0%	10.0%	7.0%	12.0%
D	20%	40.0%	30.0%	10.0%	5.0%	10.0%	7.0%	12.0%

a. 0%

b. 10%

c. 12%

d. 15%

e. 18%

f. 30%