Question 1

If you have a(n) ____ investment philosophy, you accept very little risk and are generally rewarded with relatively low rates of return.

	A.	ultraconservative
	B.	moderate
	C.	conservative
	D.	aggressive

Question 2

With a(n) ____ investment, the borrower agrees to pay the investor a specific rate of return for use of the principal.

	A.	fixed income
	B.	equity
	C.	fixed maturity
	D.	debt

Question 3

Which of the following is the most diversified investment portfolio?

	A.	Equal amounts of stock in IBM, Intel, and Microsoft
	B.	100 shares of Wal-Mart stock, an IBM bond, and a two-year certificate of deposit
	C.	Municipal bonds issued by New York, Houston, and Chicago
	D.	One-year, five-year, and ten-year certificates of deposit

Question 4

Investors who need a moderate amount of current income from their investments while also seeking preservation of capital are said to be risk.

	A.	seekers.
	B.	averse.
	C.	followers.
	D.	neutral.

Question 5

Tammy and Richard have $100 a month automatically transferred from their checking account to their mutual fund account. This is an example of

	A.	dollar-cost averaging.
	B.	scrimping each month.
	C.	making installment payments.
	D.	saving windfalls.

Question 6

Attempting to invest based on predictions of short-term fluctuations in an investment market is called

	A.	market timing.
	B.	passive investing.
	C.	buy-and-hold investing.
	D.	market seeking.

Question 7

Since 1927 the worst 20-year performance for stocks was a ____ of ____ percent.

	A.	gain; 1
	B.	loss; 43
	C.	loss; 66
	D.	gain; 3

Question 8

Which investment would not be an appropriate choice for a conservative investor?

	A.	Aggressive-growth stocks
	B.	Treasury bills
	C.	High-quality corporate bonds
	D.	Municipal bonds

Question 9

Portfolio diversification ____ volatility while ____ return.

	A.	increases; averaging out
	B.	reduces; increases
	C.	increases; reduces
	D.	reduces; averaging out

Question 10

Bear markets on average last about

	A.	24 months.
	B.	18 months.
	C.	9 months.
	D.	14 months.

Question 11

The ____ strategy avoids the risks and responsibilities of investment timing because the stock purchases are made regularly regardless of the price.

	A.	asset allocation
	B.	modern portfolio theory
	C.	dollar-cost averaging
	D.	portfolio diversification

Question 12

People seeking aggressive returns should consider investing in

	A.	stock-index and commodity futures.
	B.	high-yielding junk bonds.
	C.	all of these.
	D.	fast-growing companies.