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1.
Price risk is the risk that securities will cost too much.
False. Price risk is the risk that securities will be overvalued by the market.
2.
A fund's number of holdings tells you how much per-issue risk a fund is taking on.
True. Funds with fewer holdings are more vulnerable to troubles in one or two stocks than funds with more holdings are. Sector weightings reveal a fund's sector risk, while P/E and P/B ratios relative to a fund's peers reflect price risk.
3.
Sector weightings in a fund tell you how much price risk a fund is taking on.
False. Sector weightings tell you the industries your manager favors.
4.
In the Morningstar style box, all the small-cap funds are the same size.
False. The funds vary dramatically in market capitalization; therefore, you should examine the size of each.
5.
A fund's turnover rate is usually calculated _______.
Once a year. As a rule, turnover rates are calculated yearly.
