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1.
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.
2.
Which of the following questions is the best indicator of your risk tolerance?
Can you afford to lose your money? The financial consequences of poorly performing investments are the biggest determinants of your risk tolerance.
3.
A 32-year-old investing for retirement is likely to have _______.
Aggressive risk tolerance. A 32-year-old investing for retirement has a long time to hold investments; that time will allow long-term growth trends to overcome short-term price fluctuations, giving our investor an aggressive risk tolerance.
4.
The risk-return tradeoff concept states that _______.
The riskier an investment is, the greater its potential return should be. The risk-return tradeoff also states that safe investments usually yield low returns, and vice versa.
5.
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.