Portfolio planning can be defined as a program developed in advance of constructing a portfolio that is expected to define the client’s investment objectives. The written document governing this process is the investment policy statement (IPS). The main elements of an IPS can be classified into objectives and constraints. Mark the correct sentence in relation to objectives and constraints of a default IPS?

• a) Objectives are usually specified in terms of risk and return, while constraints are specified in terms of liquidity, time horizon, tax concerns, legal and regulatory factors, and unique circumstances.

• b) Objectives are usually specified in terms of risk and diversification, while constraints are specified in terms of liquidity, profitability, legal and regulatory factors, and unique circumstances.

• c) Objectives are usually specified in terms of risk and return, while constraints are specified in terms of liquidity, time horizon, diversification, legal and regulatory factors, and risk management.