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C) The ability to balance both risk and return in achieving your financial goals. D) All of the above. 2. As you approach your investment goal, which of the following statements is generally most appropriate? A) You should be willing to assume more risk with your investments. B) You should be willing to assume less risk with your investments. C) You can stop monitoring your investments. 3. The process of deciding how your investment dollars will be split among various classes of financial asset such as stocks, bonds, and cash reserves is best described as: a) Dollar-cost averaging. b) Asset allocation. c) Standard deviation. d) Investing. 4. Generally, during retirement, investors should have a portion of their portfolio in stock mutual funds because: a) They always provide excellent dividend income. B) Their returns usually outpace inflation over time. C) Historical returns show that stocks outperform bonds over the long term. D) Both b and c. 5. Which of the following usually increase the overall risk level in your portfolio? A) Shifting your asset mix from bonds to stocks. B) Shifting your asset mix from stocks to bonds. C) Shifting your asset mix from stocks to money markets. D) None of the above. 6. Which of the following types of funds would probably hold the largest proportion of U.S. Treasury bills? A) Long term bond fund. B) Ginnie Mae fund. C) Growth and income fund. D) Money market fund. 7. Which of type of investment has historically provided the best protection against inflation? Stocks Bonds Cash reserves None of the above 8. Generally, a portfolio that has 80% of its stocks invested in growth stocks would be best suited for A college fund for a 15-Year old. An individual retirement account for a 35 year-old. An income producing account for an 86 year-old. None of the above. 9. In general, which one of the following types of mutual funds is likely to decline the most when the overall stock market falls? Aggressive growth fund. Growth and income fund. Bond fund. Money market fund. 10. УEmerging marketФ is the term used to describe each yearТs best performing foreign stock market. True. False. 11. If the interest rates decline, the price of a bond would: Increase. Decrease. Stay about the same. It is impossible to predict. 12. Compared to the price of a short-term bond, the price of a long-term bond: Will fluctuate more in response to changes in interest rates. Will fluctuate less in response to changes in interest rates. Will not react at all to changes in interest rates. 13. All else being equal, the lower a bond fundТs credit quality, the higher its yield. True False. 14. If two mutual funds hold the same securities, but one has the higher operating expenses than the other, which of the following statements is true? The fund with higher operating expenses will have a higher return. The fund with lower operating expenses will have a higher return. You canТt say which fund would have the higher return , because expenses have no effect. 15. If an investor is in the 31% or higher federal tax bracket, which of the following types of funds usually provide the most after-tax income? Treasury bond funds Money market funds. Municipal bond funds. 16. Index (or passively managed) funds) Seek to match the returns of a specified stock or bond benchmark. Try to beat the returns of a specified stock or bond benchmark. Limit themselves to stocks in the Standard & PoorТs 500 Stock Index. 17. If I want to change the mix of stocks, bonds, and cash reserves in my portfolio, I can do this by: Changing how I direct future investments. Transferring assets between funds in my portfolio. Both of the above. None of the above. 18. A fundТs after tax return may be influenced by The fundТs pretax return. Turnover of a fundТs holdings. The distribution of capital gains. All of the above. 19. In general, for long-term investors, once you select your asset allocation, you should stick with it unless your risk tolerance, investing time horizon, or financial situation has changed. True. False. 20. A market index is a Gauge that measures potential fluctuation in your stock fund account. Representative group of securities that serves as a barometer for market activity. Stock fund management style that selects stocks based on an analysis of markets and individual companies. Money Magazine, March , 1998. Pp. 37-38. 1555 randomly selected mutual fund investors at shopping malls across America during last week, 1997. Mean score 51%. 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