The Constant- Ratio Plan

question 20

Multiple Choice

The constant- ratio plan

• A) requires the establishment of trigger points for portfolio rebalancing.
• B) utilises a predetermined ratio between desired current yield and expected capital gains.
• C) is an attempt to time the cyclical movements of the market.
• D) strictly adheres to a buy- and- hold strategy.

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Definitions:

Interest

The amount paid by a borrower to a lender over a period of time for the use of money, expressed as a percentage of the principal.

Months

Units of time in calendars that approximately correspond to the period of the Earth moving in its orbit around the Sun, usually divided into 12 periods in a year.

Deposit

Money placed into a financial institution for safekeeping, which can earn interest depending on the account type.

Simple Interest Rate

The percentage of an amount of money which is paid as interest for a certain period of time, without compounding.