Question 1

Stocks from outside the United States have about the same volatility as those from U.S. markets.

Accepted Answer

A) True 
 B)False

Question 2

Diversifying your investments could protect you to some degree from the problems associated with misleading financial statements from some companies.

Accepted Answer

A) True 
 B)False

Question 3

If you are willing to accept only a moderate level of risk, you should invest in

Accepted Answer

A)  savings accounts. 
B)  small-cap technology stocks. 
C)  a stock mutual funds. 
D)  Treasury bills. 
A)  savings accounts. 
B)  small-cap technology stocks. 
C)  a stock mutual funds. 
D)  Treasury bills.

Question 4

The first step in applying asset allocation to your personal financial plan is to ensure adequate liquidity.

Accepted Answer

A) True 
 B)False

Question 5

In compiling a portfolio, which of the following should you not consider?

Accepted Answer

A)  Investments that exhibit a high positive correlation 
B)  Investments whose values are influenced by similar conditions 
C)  Negatively correlated investments 
D)  A and B are correct 
A)  Investments that exhibit a high positive correlation 
B)  Investments whose values are influenced by similar conditions 
C)  Negatively correlated investments 
D)  A and B are correct

Question 6

The right to sell 100 shares of a specified stock at a specified price by a specified expiration date is called a

Accepted Answer

A)  call option. 
B)  put option. 
C)  divestment option. 
D)  sell option. 
A)  call option. 
B)  put option. 
C)  divestment option. 
D)  sell option.

Question 7

An alternative to purchasing real estate directly and finding renters is investing in a

Accepted Answer

A)  management rental company. 
B)  real estate investment trust. 
C)  condominium. 
D)  townhouse. 
A)  management rental company. 
B)  real estate investment trust. 
C)  condominium. 
D)  townhouse.

Question 8

REITs are classified according to how they invest their money. They include

Accepted Answer

A)  equity REITs. 
B)  mortgage REITs. 
C)  mutual fund REITs. 
D)  Both A and B are correct. 
A)  equity REITs. 
B)  mortgage REITs. 
C)  mutual fund REITs. 
D)  Both A and B are correct.

Question 9

During the financial crisis in 2008-2009, investors who were diversified across industries

Accepted Answer

A)  experienced no losses. 
B)  experienced large gains. 
C)  experienced significant losses because most industries were suffering from weak economic conditions. 
D)  experienced losses in financial services companies but not in other industries. 
A)  experienced no losses. 
B)  experienced large gains. 
C)  experienced significant losses because most industries were suffering from weak economic conditions. 
D)  experienced losses in financial services companies but not in other industries.

Question 10

An investor purchases a call option in a stock that is currently selling for $50 per share on January 3, 2016. He pays $6 per share for the option with an exercise price of $57 and an expiration date of April 17, 2016. On April 16, 2016 the stock is selling for $58 and the investor exercises the option and immediately sells the stock. How much total gain or loss did the investor realize?

Accepted Answer

A)  - $500 
B)  $100 
C)  Breakeven 
D)  $700 
A)  - $500 
B)  $100 
C)  Breakeven 
D)  $700

Question 11

Diversification is especially beneficial during periods where the stock market conditions are generally poor.

Accepted Answer

A) True 
 B)False

Question 12

A portfolio's risk is measured by its degree of volatility because the ________ volatile the returns, the ________ uncertain the future return on the portfolio.

Accepted Answer

A)  more; more 
B)  more; less 
C)  less; more 
D)  None of the above. 
A)  more; more 
B)  more; less 
C)  less; more 
D)  None of the above.

Question 13

The main benefit of diversification is that it reduces the exposure of your investments to the adverse effects of any individual stock.

Accepted Answer

A) True 
 B)False

Question 14

Investors in the early stages of their career path with the need for safety and liquidity should consider money market investments.

Accepted Answer

A) True 
 B)False

Question 15

The price you pay when purchasing an option is referred to as an advance.

Accepted Answer

A) True 
 B)False

Question 16

The primary benefit of diversification is that it

Accepted Answer

A)  is convenient. 
B)  is cheap. 
C)  reduces the exposure of your investments to adverse effects of any individual investment. 
D)  increases stock volatility. 
A)  is convenient. 
B)  is cheap. 
C)  reduces the exposure of your investments to adverse effects of any individual investment. 
D)  increases stock volatility.

Question 17

One advantage of investing in REITs is that

Accepted Answer

A)  shares can be purchased directly from the company. 
B)  the shareholders decide which properties to buy and sell. 
C)  the managers take care of maintenance. 
D)  the income is nontaxable. 
A)  shares can be purchased directly from the company. 
B)  the shareholders decide which properties to buy and sell. 
C)  the managers take care of maintenance. 
D)  the income is nontaxable.

Question 18

As you near retirement, you should allocate a substantial portion of your portfolio to ________ to reduce volatility.

Accepted Answer

A)  stocks 
B)  bonds 
C)  real estate 
D)  gold 
A)  stocks 
B)  bonds 
C)  real estate 
D)  gold

Question 19

The objective of asset allocation is to

Accepted Answer

A)  make investment decisions easier. 
B)  ensure the returns of the individual investments within a portfolio. 
C)  achieve a desired return on investment and eliminate the adverse risk of investing. 
D)  achieve a desired return on investment and maintain a tolerable risk level. 
A)  make investment decisions easier. 
B)  ensure the returns of the individual investments within a portfolio. 
C)  achieve a desired return on investment and eliminate the adverse risk of investing. 
D)  achieve a desired return on investment and maintain a tolerable risk level.

Question 20

Stocks in developing countries are generally ________ stocks in developed countries.

Accepted Answer

A)  as volatile as 
B)  more volatile than 
C)  less volatile than 
D)  more stable than 
A)  as volatile as 
B)  more volatile than 
C)  less volatile than 
D)  more stable than

Stocks from outside the United States have about the same volatility as those from U.S. markets.

Diversifying your investments could protect you to some degree from the problems associated with misleading financial statements from some companies.

If you are willing to accept only a moderate level of risk, you should invest in

The first step in applying asset allocation to your personal financial plan is to ensure adequate liquidity.

In compiling a portfolio, which of the following should you not consider?

The right to sell 100 shares of a specified stock at a specified price by a specified expiration date is called a

An alternative to purchasing real estate directly and finding renters is investing in a

REITs are classified according to how they invest their money. They include

During the financial crisis in 2008-2009, investors who were diversified across industries

Diversification is especially beneficial during periods where the stock market conditions are generally poor.

A portfolio's risk is measured by its degree of volatility because the volatile the returns, the uncertain the future return on the portfolio.

The main benefit of diversification is that it reduces the exposure of your investments to the adverse effects of any individual stock.

Investors in the early stages of their career path with the need for safety and liquidity should consider money market investments.

The price you pay when purchasing an option is referred to as an advance.

The primary benefit of diversification is that it

One advantage of investing in REITs is that

As you near retirement, you should allocate a substantial portion of your portfolio to ________ to reduce volatility.

The objective of asset allocation is to

Stocks in developing countries are generally ________ stocks in developed countries.

Overview of a Financial Plan

Planning With Personal Financial Statements

Applying Time Value Concepts

Using Tax Concepts for Planning

Banking and Interest Rates

Managing Your Money

Assessing and Securing Your Credit

Managing Your Credit

Personal Loans

Purchasing and Financing a Home

Auto and Homeowners Insurance

Health and Disability Insurance

Life Insurance

Investing Fundamentals

Investing in Stocks

Investing in Bonds

Investing in Mutual Funds

Retirement Planning

Estate Planning

Integrating the Components of a Financial Plan

Filters

Exam 18: Asset Allocation

Stocks from outside the United States have about the same volatility as those from U.S. markets.

Diversifying your investments could protect you to some degree from the problems associated with misleading financial statements from some companies.

If you are willing to accept only a moderate level of risk, you should invest in

The first step in applying asset allocation to your personal financial plan is to ensure adequate liquidity.

In compiling a portfolio, which of the following should you not consider?

The right to sell 100 shares of a specified stock at a specified price by a specified expiration date is called a

An alternative to purchasing real estate directly and finding renters is investing in a

REITs are classified according to how they invest their money. They include

During the financial crisis in 2008-2009, investors who were diversified across industries

Diversification is especially beneficial during periods where the stock market conditions are generally poor.

A portfolio's risk is measured by its degree of volatility because the ________ volatile the returns, the ________ uncertain the future return on the portfolio.

The main benefit of diversification is that it reduces the exposure of your investments to the adverse effects of any individual stock.

Investors in the early stages of their career path with the need for safety and liquidity should consider money market investments.

The price you pay when purchasing an option is referred to as an advance.

The primary benefit of diversification is that it

One advantage of investing in REITs is that

As you near retirement, you should allocate a substantial portion of your portfolio to ________ to reduce volatility.

The objective of asset allocation is to

Stocks in developing countries are generally ________ stocks in developed countries.

Overview of a Financial Plan

Planning With Personal Financial Statements

Applying Time Value Concepts

Using Tax Concepts for Planning

Banking and Interest Rates

Managing Your Money

Assessing and Securing Your Credit

Managing Your Credit

Personal Loans

Purchasing and Financing a Home

Auto and Homeowners Insurance

Health and Disability Insurance

Life Insurance

Investing Fundamentals

Investing in Stocks

Investing in Bonds

Investing in Mutual Funds

Retirement Planning

Estate Planning

Integrating the Components of a Financial Plan

Filters

A portfolio's risk is measured by its degree of volatility because the volatile the returns, the uncertain the future return on the portfolio.