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Investment Strategies - Review Questions 1 - 5

  1. All of the following statements concerning short sales are true, EXCEPT:
    1. Short selling must occur in a margin account.
    2. The short sale may be executed on a down tick.
    3. The potential loss on a short sale is unlimited.
    4. The maximum possible gain would occur if the share price fell to zero less any commissions paid on the transaction.
  2. Which of the following investments would be most suitable for a tax-advantaged account?
    1. Municipal bonds.
    2. Zero coupon bonds.
    3. Investment grade corporate bonds.
    4. Stocks listed in the pink sheets.
  3. The features of a dividend reinvestment plan (DRIP) that rebound to the benefit of the investor include all of the following, EXCEPT:
    1. Cost effective investing.
    2. Professional management.
    3. Ease of implementation.
    4. Opportunity to diversify.
  4. Advantages of leverage include which of the following:
    1. Magnification of potential loss.
    2. Increased gain with a lower outlay.
    3. Borrowing costs.
    4. Low risk strategy.
  5. One may best characterize passive investing as follows :
    1. It is a cost efficient means of adding alpha.
    2. It is inexpensive.
    3. Professional management benefits the investor.
    4. It can be easily replicated.
Review Questions 6 - 11
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