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Exam 18: Asset Allocation

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Question 51

Multiple Choice

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Proper asset allocation can

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

E) A) and C)
F) None of the above

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Question 52

Multiple Choice

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Asset allocation is

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

E) B) and D)
F) A) and B)

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Question 53

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

Stock options

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

Stock prices are influenced the most by

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?

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

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

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.

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

Your asset allocation decision should not consider

In a portfolio,stocks and bonds are

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

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

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?

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

The objective of diversification in an investment portfolio is

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

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