Exam 18: Asset Allocation

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

Which of the following is a true statement about diversification?

If your portfolio consists of 100 shares of Facebook,100 shares of Twitter,and 100 shares of Google,which of the following statements would be true of your portfolio?

Name two ways to diversify common stock.

During the financial crisis in 2008-2009,General Electric's share price dropped significantly.This was because of the

The price at which an option allows you to purchase or sell shares of stock is the ________ price.

Investors who are 30 to 50 years old tend to focus their allocation on ________ because they can afford the risk.

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

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

An investor purchases 100 shares of stock for $20 per share. The stock 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?

REITs are

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

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

If stock prices overall decline in a given month,a well-diversified portfolio will likely experience

List two considerations that affect your asset allocation decision.

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

Diversifying among stocks based in countries outside the United States

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.

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?

Use the following two columns of items to answer the matching questions below: -positive correlation