After Considering Current Market Conditions, an Investor Decides to Place

question 74

Multiple Choice

After considering current market conditions, an investor decides to place 60% of her funds in equities and the rest in bonds. This is an example of ________.

• A) asset allocation
• B) security analysis
• C) top-down portfolio management
• D) passive management

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Definitions:

Income Effect

The change in an individual’s or economy’s income and how that change will affect the quantity demanded of a good or service.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to replace more expensive items with less expensive ones.

Interest-Rate Increase

A rise in the cost of borrowing money, reflected in a higher percentage charged on loans and credits.

Consumer Optimum

A state where a consumer has allocated their resources in such a way that maximizes their utility, given their budget constraint.