Exam 18: Asset Allocation

Because foreign stocks can produce such high returns, many investment advisers recommend that you invest about 45% of your portfolio in these stocks.

Which of the following do not belong in a well-diversified portfolio?

Which of the following would not be a good method of asset allocation?

Use the following two columns of items to answer the matching questions below: -market risk A)stock's susceptibility to poor performance due to weak stock market conditions B)REITs that invest money directly in properties C)an option to purchase or sell stocks under specified conditions D)debt securities E)right to purchase 100 shares of a specific stock at a specific price by a specific date

Proper risk-return management for a firm means that

As you allocate more of your investment portfolio to bonds, you reduce your exposure to interest rate risk, but increase your exposure to market risk.

If you are unwilling to take much risk, you should focus on a(n) ________ investment strategy.

Asset allocation is

Which of the following statements regarding put options is not true?

When you compile a portfolio of stocks, you should avoid including stocks that exhibit

Bond

As an investor nears retirement, they should begin rotating out of ________ stocks and rotating into ________ stocks, ________ stocks, and ________.

In order to add real estate to your investment portfolio, you may buy houses or other real estate directly or you may purchase real estate investment trusts (REITs).

________ risk is the risk that a stock is susceptible to poor performance due to weak stock market conditions.

A trust that invests in loans to help finance the development of properties is called a(n)

Asset allocation is the process of allocating money across financial assets, such as stocks, bonds, and mutual funds, with the objective of eliminating risk altogether.

The more similar the returns of individual investments in a portfolio, the more volatile the returns are over time.

The returns from investing in stocks and from investing in bonds are not highly correlated.

In reality, many stocks are influenced by the same conditions as the stock market overall, so diversification by investing only in stocks is partially limited.

The purchasing of stocks in different industries, bonds, and several mutual funds would be a way to ________ your portfolio.