The Key Idea Behind Constructing an Index Fund Is to Choose

question 21

Multiple Choice

The key idea behind constructing an index fund is to choose a portfolio of securities that

• A) is a mix of growth-oriented and income-oriented stocks.
• B) minimizes risk without sacrificing liquidity.
• C) mimics the performance of a broad market index.
• D) balances short-term and long-term investments.

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Definitions:

Output

The amount of something produced by a person, machine, or industry.

Average Cost

The total cost divided by the quantity produced, measuring how much on average each unit of output costs to produce.

Average Fixed Cost

The total fixed costs of production divided by the quantity of output produced; it decreases as production increases.

Average Variable Cost

The total variable cost divided by the quantity of output produced, indicating the variable cost of producing each unit of output.