Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Stock prices are influenced the most by

Accepted Answer

A)  general market conditions. 
B)  the price of bonds. 
C)  interest rates. 
D)  inflation. 
A)  general market conditions. 
B)  the price of bonds. 
C)  interest rates. 
D)  inflation.

Question 3

Asset allocation should be restricted to stocks because they have the highest potential returns.

Accepted Answer

A) True 
 B)False

Question 4

An investor purchases a call option for $5 per share in a stock currently selling for $24 per share.The exercise price is $30 per share.On the day the option expires,the stock is selling for $29 per share.What will the investor do? What is the investor's total gain or loss?

Accepted Answer

A)  Exercise the option; total gain $500 
B)  Allow the option to expire; total gain $500 
C)  Allow the option to expire; total loss $500 
D)  Exercise the option; total loss $100 
A)  Exercise the option; total gain $500 
B)  Allow the option to expire; total gain $500 
C)  Allow the option to expire; total loss $500 
D)  Exercise the option; total loss $100

Question 5

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 6

A call option on 100 shares of stock is purchased for a premium of $400.The current price of the stock is $42 per share,and the exercise price is $44 per share.The option is exercised when the stock is selling for $50 per share.What would be your return on the option if after exercising it,you immediately sold the stock at the market price of $50 per share? Ignore taxes and brokerage commissions.

Accepted Answer

A)  8% 
B)  12% 
C)  50% 
D)  200% 
A)  8% 
B)  12% 
C)  50% 
D)  200%

Question 7

Diversification among stocks in different industries will usually avoid fluctuations in stock values due to general economic conditions.

Accepted Answer

A) True 
 B)False

Question 8

Proper asset allocation can

Accepted Answer

A)  increase your wealth. 
B)  decrease your assets. 
C)  increase your dividend income and decrease your interest income. 
D)  increase your expenses. 
A)  increase your wealth. 
B)  decrease your assets. 
C)  increase your dividend income and decrease your interest income. 
D)  increase your expenses.

Question 9

The objective of diversification in an investment portfolio is

Accepted Answer

A)  to make sure you do not have all your eggs in one basket. 
B)  to eliminate non-systematic or company specific risk. 
C)  to eliminate systematic portfolio risk. 
D)  to hold a lot of strong growth stocks. 
A)  to make sure you do not have all your eggs in one basket. 
B)  to eliminate non-systematic or company specific risk. 
C)  to eliminate systematic portfolio risk. 
D)  to hold a lot of strong growth stocks.

Question 10

If you are trying to adequately diversify your portfolio,you would want to avoid investing in stocks that were

Accepted Answer

A)  highly negatively correlated. 
B)  not at all correlated. 
C)  highly positively correlated. 
D)  in different regions of the world. 
A)  highly negatively correlated. 
B)  not at all correlated. 
C)  highly positively correlated. 
D)  in different regions of the world.

Question 11

Common stock diversification strategies include diversifying among stocks across industries and among stocks across countries.

Accepted Answer

A) True 
 B)False

Question 12

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 13

Stock options

Accepted Answer

A)  are traded on exchanges. 
B)  are relatively simple. 
C)  are less risky than stocks. 
D)  pay dividends. 
A)  are traded on exchanges. 
B)  are relatively simple. 
C)  are less risky than stocks. 
D)  pay dividends.

Question 14

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

Accepted Answer

A)  equity REIT. 
B)  real estate REIT 
C)  mortgage REIT. 
D)  option REIT. 
A)  equity REIT. 
B)  real estate REIT 
C)  mortgage REIT. 
D)  option REIT.

Question 15

In a portfolio,stocks and bonds are

Accepted Answer

A)  different in risk and return. 
B)  not highly correlated. 
C)  highly correlated. 
D)  Both A and B are correct 
A)  different in risk and return. 
B)  not highly correlated. 
C)  highly correlated. 
D)  Both A and B are correct

Question 16

Your asset allocation decision should not consider

Accepted Answer

A)  your stage in life. 
B)  your degree of risk tolerance. 
C)  your expectations of economic conditions. 
D)  past economic conditions. 
A)  your stage in life. 
B)  your degree of risk tolerance. 
C)  your expectations of economic conditions. 
D)  past economic conditions.

Question 17

Asset allocation is

Accepted Answer

A)  a personal and a financial decision. 
B)  objective. 
C)  the same for most people. 
D)  an easy and inexpensive thing to do. 
A)  a personal and a financial decision. 
B)  objective. 
C)  the same for most people. 
D)  an easy and inexpensive thing to do.

Question 18

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

Accepted Answer

A)  selling one of the companies and putting the money in a bond. 
B)  selling one of the companies and putting the money in a REIT. 
C)  buying another stock. 
D)  selling one of the companies and putting the money in the other two. 
A)  selling one of the companies and putting the money in a bond. 
B)  selling one of the companies and putting the money in a REIT. 
C)  buying another stock. 
D)  selling one of the companies and putting the money in the other two.

Question 19

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

Accepted Answer

A)  aggressive 
B)  potentially high-return 
C)  moderate 
D)  conservative 
A)  aggressive 
B)  potentially high-return 
C)  moderate 
D)  conservative

Question 20

To which of the following markets would an investment adviser recommend you allocate approximately 80% of your money if you wanted to maintain a relatively low degree of risk?

Accepted Answer

A)  European stocks 
B)  Asian stocks 
C)  U.S. stocks 
D)  Latin American stocks 
A)  European stocks 
B)  Asian stocks 
C)  U.S. stocks 
D)  Latin American stocks

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

Stock prices are influenced the most by

Asset allocation should be restricted to stocks because they have the highest potential returns.

An investor purchases a call option for $5 per share in a stock currently selling for $24 per share.The exercise price is $30 per share.On the day the option expires,the stock is selling for $29 per share.What will the investor do? What is the investor's total gain or loss?

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

Diversification among stocks in different industries will usually avoid fluctuations in stock values due to general economic conditions.

Proper asset allocation can

The objective of diversification in an investment portfolio is

If you are trying to adequately diversify your portfolio,you would want to avoid investing in stocks that were

Common stock diversification strategies include diversifying among stocks across industries and among stocks across countries.

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

Stock options

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

In a portfolio,stocks and bonds are

Your asset allocation decision should not consider

Asset allocation is

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

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

To which of the following markets would an investment adviser recommend you allocate approximately 80% of your money if you wanted to maintain a relatively low degree of risk?

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

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

Stock prices are influenced the most by

Asset allocation should be restricted to stocks because they have the highest potential returns.

An investor purchases a call option for $5 per share in a stock currently selling for $24 per share.The exercise price is $30 per share.On the day the option expires,the stock is selling for $29 per share.What will the investor do? What is the investor's total gain or loss?

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

Diversification among stocks in different industries will usually avoid fluctuations in stock values due to general economic conditions.

Proper asset allocation can

The objective of diversification in an investment portfolio is

If you are trying to adequately diversify your portfolio,you would want to avoid investing in stocks that were

Common stock diversification strategies include diversifying among stocks across industries and among stocks across countries.

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

Stock options

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

In a portfolio,stocks and bonds are

Your asset allocation decision should not consider

Asset allocation is

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

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

To which of the following markets would an investment adviser recommend you allocate approximately 80% of your money if you wanted to maintain a relatively low degree of risk?

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