An Investor Who Follows a Fully Active Strategy Will

question 24

Multiple Choice

An investor who follows a fully active strategy will:

• A)move money between asset classes as well as try to select the best performers in each class.
• B)move money between asset classes but will not be concerned about which individual securities are owned.
• C)focus on picking individual stocks only.
• D)maintain a relatively constant mix of asset classes while continually buying and selling individual securities.
• E)concentrate solely on asset allocation to maximize potential returns.

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Definitions:

Income Tax Rate

The percentage of income that is paid to the government as tax.

After-Tax Discount Rate

This is the discount rate that has been adjusted for taxes, used to evaluate the net present value of an investment after taking into account the tax implications.

Straight-Line Depreciation

A method of calculating the depreciation of an asset which assumes the asset loses an equal amount of value each year over its useful life.

Initial Investments

The upfront costs required to start a new project, business venture, or investment, including equipment, inventory, and property.