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Exam 13: Investment Fundamentals

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Question 51

Multiple Choice

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The ____ strategy avoids the risks and responsibilities of investment timing because the stock purchases are made regularly regardless of the price.

A) dollar-cost averaging
B) asset allocation
C) modern portfolio theory
D) portfolio diversification

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Question 52

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The largest transaction cost in investments usually is commissions.

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Question 53

Multiple Choice

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In an average year,the price of a typical stock fluctuates up and down by about ____ percent.

Typically the lowest commissions are charged on investments in

____ income is not an example of current income from an investment.

Which of the following is the most diversified investment portfolio?

Aggressive investors must be willing to suffer substantial short-term financial losses.

The average share cost is a simple calculation of the amount paid for the investment made by dividing the share price total by the number of investment periods.

It is recommended that you invest no more than ____ percent of your portfolio in any single stock.

Ultraconservative investors should invest in instruments such as insured certificates of deposits and Series EE savings bonds.

Bert has invested all of his savings in a choice piece of downtown Midland real estate.Recently he has had a personal emergency and needs money.Bert can't sell the property because of the state of Midland's economy.His problem is an example of ____ risk.

The real rate of return on a taxable investment yielding 12 percent annually would be ____ percent if the investor were in the 25 percent marginal tax bracket and inflation were 3 percent.

Long-term investors are usually willing to give up current income in favor of earning substantial future capital gains.

Dollar-cost averaging forces an investor to buy more shares when the price per share is low and fewer shares when the price per share is high.

Research indicates that an investor can cut random risk in half by diversifying in as few as five stocks and bonds.

Houses,real estate,and other ownership investments are subject to the inflation rate risk in that the general price level in the economy might drop,thereby reducing the investment's value.

Tammy and Richard have $100 a month automatically transferred from their checking account to their mutual fund account.This is an example of

Aggressive-growth mutual funds are at the very top of the investment risk pyramid.

Generally speaking,there is a trade-off between risk and rewards on investments.

Patricia borrowed $20,000 to make a $50,000 real estate investment.She later sold the real estate making a $4,000 profit.What was Patricia's total return on this investment?