Investing in a Mutual Fund Made Up of Hundreds of Stocks

question 4

Multiple Choice

Investing in a mutual fund made up of hundreds of stocks of different companies is an example of all of the following except:

• A) spreading risk.
• B) diversifying.
• C) risk reduction.
• D) increasing the variance of a portfolio.

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Definitions:

Net Income After Taxes

The profit a company retains after all operating expenses, interest, taxes, and preferred stock dividends have been deducted from total revenue.

Operating Costs

Operating costs are expenses associated with the maintenance and administration of a business on a day-to-day basis.

Depreciation Expense

The allocated portion of the cost of a fixed asset, written off each year over the asset's useful life for accounting and tax purposes.

Scarcity

Occurs when the amount people desire exceeds the amount available at a zero price.