QUESTION 1 An investor who follows a fully active strategy will: move money betw
ID: 2731093 • Letter: Q
Question
QUESTION 1
An investor who follows a fully active strategy will:
move money between asset classes as well as try to select the best performers in each class.
move money between asset classes but will not be concerned about which individual securities are owned.
focus on picking individual stocks only.
maintain a relatively constant mix of asset classes while continually buying and selling individual securities.
concentrate solely on asset allocation to maximize potential returns.
0.5 points
QUESTION 2
Brooke has decided to invest 55 percent of her money in large company stocks, 40 percent in small company stocks, and 5 percent in cash. This is a(n) _____ decision.
market timing
security selection
tax-advantaged
active strategy
asset allocation
0.5 points
QUESTION 3
Which one of the following best describes the term "initial margin"?
Amount of money that must be deposited to open a margin account with a broker
Amount of cash that must be paid to purchase a security on margin
Amount of cash that must be paid when a broker issues a margin call
Amount of money borrowed when a security is purchased
Total loan amount offered to a customer by a brokerage firm to cover future purchases
0.5 points
QUESTION 4
You currently have $5,000 in cash in your brokerage account. You decide to spend $8,000 to purchase shares of stock and borrow $3,000 from your broker to do so. Which type of brokerage account do you have?
Cash
Wrap
Margin
Short
Asset allocation
0.5 points
QUESTION 5
If you opt to purchase shares of stock on margin rather than with cash, you will:
decrease your maximum potential rate of return.
increase your maximum potential rate of return.
guarantee yourself a profit.
eliminate any potential profit.
have equal rates of return regardless of how the purchase is made.
0.5 points
QUESTION 6
The short interest on Blue Water Cruisers stock was 351,900 when the market opened this morning. During the day, 288,500 shares were covered and 151,600 shares were sold short. What was the short interest on this stock at the end of the trading day?
203,100 shares
215,000 shares
233,100 shares
308,100 shares
447,900 shares
move money between asset classes as well as try to select the best performers in each class.
move money between asset classes but will not be concerned about which individual securities are owned.
focus on picking individual stocks only.
maintain a relatively constant mix of asset classes while continually buying and selling individual securities.
concentrate solely on asset allocation to maximize potential returns.
Explanation / Answer
QUESTION 1
An investor who follows a fully active strategy will:
Answer:
move money between asset classes as well as try to select the best performers in eachclass.
QUESTION 2
Brooke has decided to invest 55 percent of her money in large company stocks, 40 percent in small company stocks, and 5 percent in cash. This is a(n) _____ decision.
Answer: asset allocation
QUESTION 3
Which one of the following best describes the term "initial margin"?
Answer
Amount of cash that must be paid to purchase a security on margin
QUESTION 4
You currently have $5,000 in cash in your brokerage account. You decide to spend $8,000 to purchase shares of stock and borrow $3,000 from your broker to do so. Which type of brokerage account do you have?
Answer: Margin
QUESTION 5
If you opt to purchase shares of stock on margin rather than with cash, you will:
Answer: increase your maximum potential rate of return.
QUESTION 6
The short interest on Blue Water Cruisers stock was 351,900 when the market opened this morning. During the day, 288,500 shares were covered and 151,600 shares were sold short. What was the short interest on this stock at the end of the trading day
Answer: 215,000 shares
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