Exam 18: Asset Allocation

In general,the larger the proportion of your portfolio that is allocated to bonds,the lower will be your portfolio's overall risk.

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

With the price of the stock at $60 per share,a put option is purchased with an exercise price of $58 per share.The option is exercised after the stock is purchased at $52 per share and results in a gain of 50 percent.What was the price of the option? Ignore taxes and brokerage commissions. (a)$400 (b)$600 (c)$300 (d)$200

Stock purchased by an investor for $20 per share has now risen in price to $44 per share.To cover potential losses,the investor purchases a put option for a premium of $300 with an exercise price of $42 per share.The stock falls to $28 per share and the investor exercises the option and sells the shares at $42 per share.Ignoring brokerage commissions and taxes,what would be the investor's return from the stock? (a)120 percent (b)110 percent (c)95 percent (d)70 percent

In general,the ________ the proportion of your portfolio that is allocated to bonds,the ________ will be your portfolio's overall risk.

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

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).

Stocks from outside the United States are just about as volatile as those from U.S.markets.

A portfolio can be less risky when its investments move in perfect tandem.

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

A(n)________ allows an investor to invest in real estate without owning individual property.

Trading on information not yet publicly announced can

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

To reduce your risk,you should select stocks whose returns exhibit a ________ positive correlation rather than a ________ positive correlation.

Your asset allocation should not be influenced by

A closed-end mutual fund that invests in loans to help finance the development of properties is called a(n)

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

If your portfolio currently consists of common stock in three companies,you could increase your diversification by all of the following except

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

Diversification among stocks in different industries will usually stabilize fluctuations due to general economic conditions.