Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
1.
A fund's turnover rate tells you how frequently the manager trades the portfolio.
True. Buy-and-hold managers will have lower turnover rates than managers who buy and sell stocks on short-term factors.
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.
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.
4.
Which stock fund is likely the most volatile?
A fund with a P/E of 35, 25 holdings, and a 200% turnover rate. The last fund is taking on more price risk (its P/E is higher than the other funds' P/E) and per-issue risk than the others (its number of holdings is smaller), and it is trading more aggressively.
5.
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.
