The Fixed-Weightings Approach to Asset Allocation

question 111

Multiple Choice

The fixed-weightings approach to asset allocation

• A) is based on an allocation of an equal percentage of the portfolio to each separate asset category.
• B) requires periodic rebalancing of the portfolio to maintain the desired weights.
• C) is based on periodic adjustments to category weights in response to market changes.
• D) uses stock-index futures and bond futures in a market timing strategy.

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Definitions:

Depreciation

A method of accounting that distributes the expense of a physical asset across its lifespan.

Fixed Asset

Long-term tangible property that a firm owns and uses in producing its income and is not expected to be consumed or converted into cash in short-term.

Market Value

Market value is the current price at which an asset or service can be bought or sold in the open market.

Prepaid Expense

An expense paid in advance of its due date, recorded as an asset on the balance sheet until the benefits are realized or the service period expires.