An Index Fund Limits Its Portfolio to

question 40

Multiple Choice

An index fund limits its portfolio to

• A)high quality securities
• B)stocks that respond to changes in the consumer prices (i.e., Consumer Price Index)
• C)stocks included in an aggregate measure of stock prices
• D)stocks of firms in a particular industry

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Definitions:

Standard Deviations

A measure of the dispersion of a set of data from its mean, often used in finance to quantify the volatility of returns.

Perfectly Negatively Correlated

A relationship between two variables where one variable increases as the other decreases with a correlation coefficient of -1.

Global Minimum Variance Portfolio

A portfolio construction strategy aimed at minimizing the volatility of returns by selecting a combination of investments that as a whole have the lowest possible risk.

Standard Deviation

A statistical measure of the dispersion or variability of a set of values, often used to quantify the risk associated with a particular investment or portfolio.