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Answer: legal and regulatory constraint.
The correct answer is **B** because the restriction described is a **legal and regulatory constraint**. Such constraints are imposed by governing bodies to ensure compliance with laws and regulations, particularly for institutional investors like pension funds. These restrictions may include limits on asset types (e.g., equities) or geographic allocations (e.g., overseas investments). - **A** is incorrect because liquidity constraints pertain to the ability to withdraw funds from the portfolio, not the composition of assets. - **C** is incorrect because time horizon constraints relate to the duration over which investments are held, not the regulatory limits on asset types.
Author: LeetQuiz Editorial Team
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In the investment policy statement of a pension fund, a nationwide restriction on the proportion of high-risk assets permissible in long-term pension portfolios is most likely classified as a:
A
liquidity constraint.
B
legal and regulatory constraint.
C
time horizon constraint.
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