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1.
"Getting the most return for a given risk, and taking on the least risk for a given return" is a simple statement of _______.
Modern Portfolio Theory. This is the theory that portfolios should and can be managed to provide the most return for a given level of risk, and should take on the least possible risk to achieve a given return.
2.
A risk-averse investor _______.
Takes on only as much risk as necessary. The risk-averse does this to achieve the level of return he or she seeks. Risk-averse investors also wish to maximize the returns they get for the level of risk they take on.
3.
All of the following are elements of risk tolerance except _______.
None of the above. All of these are elements of an investor's risk tolerance.
4.
Managing risk can help you take advantage of risk without conflicting with your risk tolerance.
True. Diversification and maximizing your investment time horizon can minimize the negative impact of risk on your investments, allowing you to take on more risk in segments of your investment portfolio.
5.
Investing in a mixed portfolio of stocks, bonds, and cash-equivalent instruments is an example of _______.
Asset allocation. This is the practice of apportioning investment capital among different asset classes, such as stocks, bonds, and cash-equivalent instruments.