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1.
Which of the following is a way to diversify investments?
All of the above. These are all ways to diversify your portfolio and limit your risk.
2.
If you buy a six-month future to buy oil at today's prices and then oil prices fall, you _______.
Take a loss. If the oil prices fall, you take a loss.
3.
The process of insuring an investment against risk is called _______.
Hedging. Hedging uses specific techniques to ensure that an investment does not suffer from risk.
4.
An investor straddles because he or she believes _______.
The security price will change, but its direction is unknown. The investor is attempting to profit from the change in price no matter which way it goes.
5.
If your margin account drops below its original margin amount, you must immediately pay back the difference.
False. If your margin account drops below a minimum maintenance requirement (e.g., 25 percent of current market value), you will be required to deposit additional collateral into the margin account.
6.
A put option gives you the right to sell a security at a fixed price.
True. With a put option, the price is fixed, and you can sell the security at that price.
7.
If share prices rise when you sell short, you make a profit.
False. If share prices fall when you sell short, you make a profit.
8.
Which type of limit order does not have an expiration date?
Good-'til-canceled. A good-'til-canceled order is good until the customer cancels it.