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1.
Emerging-market stocks live up to their promise.
False. Although these stocks can be considered aggressive, often the emerging nations behind them have a lot of challenges to overcome. It remains to be seen just how promising they are.
2.
According to many financial professionals, what contributes the most to your portfolio's return and volatility?
Your blend of investments. In other words, your asset allocation is what matters more than anything else.
3.
Which type of bond is most like a stock?
Convertible bond. Convertible bonds can be, as their name suggests, converted into stocks. Because of this conversion feature, convertibles behave very much like stocks. They are generally less volatile than stocks, though, because they pay a fixed coupon (or yield).
4.
Why may tilting your portfolio toward growth stocks theoretically alter its performance?
Because companies that are growing at a decent rate should outperform companies growing at a slower rate. Over time, a stock's price follows its earnings. As a result, companies that are growing at a decent rate should outperform those companies growing at a slower rate.
5.
Which of the following groups of stocks provides the most opportunity for growth?
Small-company stocks. As a general rule, smaller companies are growing faster than medium or large companies.
