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1.
The primary advantage of the single-fund approach to asset allocation is ________.
Cost. There are only a few costs involved.
2.
The three general levels of risk are conservative, moderate, and growth.
True. The three general levels of risk are conservative, moderate, and growth (a close relative of which is aggressive-growth).
3.
An asset allocation mutual fund spreads its portfolio among only a handful of investments.
False. An asset allocation mutual fund spreads its portfolio among a wide variety of investments, including domestic and foreign stocks and bonds, government securities, cash, gold, and real estate stocks.
4.
Which of the following is not one of the basic instruments of asset allocation?
Annuities. Through a combination of cash, bonds, and common stocks, mutual funds afford an investor diversification and professional management.
5.
Which of the following is not considered when deciding whether or not to reallocate assets using active allocation?
The Dow Jones Industrial Average. While the Dow can influence investor decisions, its daily performance is too universal to have any meaningful effect on an individual portfolio. Instead, investors should look to such benchmarks as the price, volatility, and performance of their portfolios, as well as interest rates and changes in management of their funds.