Buying More of a Stock That Has Just Plummeted in Value

question 10

Multiple Choice

Buying more of a stock that has just plummeted in value is an example of

• A)averaging your cost base down.
• B)purchasing stocks on sale.
• C)dollar cost averaging.
• D)taking excessive risk to recover from a losing position.

Apply the multiplication principle to calculate the total number of possible outcomes in a given scenario.

Calculate probabilities of specific outcomes or events happening in a given scenario.

Distinguish between dependent and independent events and calculate their probabilities accordingly.

Identify scenarios where permutations, combinations, and fundamental counting principles are applied and choose the correct method for calculation.

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Definitions:

Arbitrage

The simultaneous purchase and sale of the same assets or commodities in different markets to take advantage of differing prices for the same asset.

Interest Rate Risk

The potential for an investment's value to change due to fluctuations in the general level of interest rates.

T-Bond Futures

Financial contracts used to speculate on or hedge against the future price movements of U.S. Treasury bonds.

Fixed-Rate Mortgages

A type of mortgage where the borrower pays the same interest rate for the entire term of the loan, making consistent payment amounts throughout.