The Composition of an Asset Allocation Fund

question 78

Multiple Choice

The composition of an asset allocation fund

• A)includes nontraditional assets such as derivative securities and global real estate.
• B)is fixed and does not change with market conditions.
• C)is designed to automatically change as the investor ages.
• D)is adjusted by the fund's managers in response to expectations and economic conditions.

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Definitions:

Variable Rate

An interest rate that fluctuates over time with market conditions, often applied to loans and credit.

Prime Rate

The prime rate is the interest rate that commercial banks charge their most creditworthy customers, often used as a benchmark for various loan products.

Bond Indenture

A legal contract between a bond issuer and the bondholders, outlining the terms, conditions, and covenants of the bond issue.

Floating-Rate Payments

Refers to interest or dividend payments that adjust periodically based on a reference rate, like LIBOR or the Prime Rate.