Investment Strategies - Review Questions 6 - 11
- With respect to market timing,
- The potential for gain is unlimited.
- It is the single greatest determinant of a portfolio's performance.
- It is possibly quite expensive.
- Some have dubbed it 'closet rebalancing' of a portfolio.
- Possible disadvantages of a buy and hold strategy include:
- It is expensive.
- It subjects the portfolio to the risk of a single asset class, inadvertently driving that portfolio's risk and return.
- Implementation is complicated.
- The strategy is dynamic.
- An investor looking to hedge downside risk and preserve gain in a long stock position whilst minimizing transaction cost would pursue which of the following strategies:
- A debit spread.
- A strap.
- A zero-cost collar.
- A short straddle.
- In a long margin account, the investor's initial margin is:
- The debit balance/.75
- None of the foregoing.
- In a rising market, a short seller's loss is limited to:
- the amount borrowed.
- the decline in price.
- none of the above.
- DRIP plans entail which of the following risks:
- transaction costs could erode returns significantly.
- the investor may not be able to identify stocks with a history of significant dividend payouts.
- the strategy is complex.
- there are tax implications.
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