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1.
Price risk is the risk that securities will cost too much.
Choose wisely. There is only one correct answer.
False. Price risk is the risk that securities will be overvalued by the market.
2.
A fund's turnover rate tells you how frequently the manager trades the portfolio.
Choose wisely. There is only one correct answer.
True. Buy-and-hold managers will have lower turnover rates than managers who buy and sell stocks on short-term factors.
3.
In the Morningstar style box, all the small-cap funds are the same size.
Choose wisely. There is only one correct answer.
False. The funds vary dramatically in market capitalization; therefore, you should examine the size of each.
4.
Sector weightings in a fund tell you what?
Choose wisely. There is only one correct answer.
What industries your manager favors. If a fund has 50% of its portfolio in the technology sector, for example, half of its performance will be determined by the strength or weakness of that one sector.
5.
A fund's number of holdings tells you how much sector risk a fund is taking on.
Choose wisely. There is only one correct answer.
False. The number of holdings tells you how much per-issue risk a fund is taking on.