) TO MEET THE OBJECTIVES OF THE HAYES UNIVERSITY ENDOWMENT, THE MOST APPROPRIATE INVESTMENT APPROACH IS AN

1.) To meet the objectives of the Hayes University Endowment, the most appropriate

investment approach is an:

A.

index approach using stratified sampling.

B.

enhanced index approach.

C.

active market–oriented approach.

Answer = B

The Hayes University Endowment seeks to maximize the information ratio while

controlling tracking error. The appropriate investment approach is semiactive

management or enhanced indexing. Because of the strict control of tracking error,

enhanced indexing tends to have the highest information ratio compared with indexing

and active investment management.

“Equity Portfolio Management,” by Gary L. Gastineau, Andrew R. Olma, and Robert G.

Zielinski