Choose wisely. There is only one correct answer to each question.
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1.
Which type of fund is likely to be the most volatile?
A small-cap growth fund. Funds that own expensive (growth) small companies are bound to be more volatile than those that own large, inexpensive (value) stocks or middle-of-the-road (blend) fare are.
2.
According to the Morningstar style box, a blended fund will include elements of _______.
Both. A blended fund will include both.
3.
The stock of which type of company is likely to be the least volatile?
A large size company. Larger companies are often more established and tend to be more predictable than smaller companies; therefore, their stock prices tend to be steadier.
4.
According to the Morningstar style box, a value orientation means the manager buys stocks that are cheap.
True. Though the stocks are cheap, they could eventually see their worth recognized by the market.
5.
In gauging the value of a stock, examine its _______.
Price/book ratio. Both price/book and price/earnings ratios tell you how expensive a stock is based on some value--either the value of the company if it were sold and paid off its debts (P/B) or the value of a company based on its earnings (P/E). These factors are employed by Morningstar in measuring the "value" aspects of a stock for placement in the style box.
