A Purely Passive Strategy Is Defined as

question 27

Multiple Choice

A purely passive strategy is defined as

• A)one that uses only index funds.
• B)one that allocates assets in fixed proportions that do not vary with market conditions.
• C)one that is mean-variance efficient.
• D)both A and B.
• E)all of the above.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the available short-term assets to cover short-term debts.

Book Value

The value of an asset as recorded on the balance sheet, calculated as the cost of an asset minus accumulated depreciation.

Acid-test Ratio

Acid-test ratio is a financial metric that measures a company's ability to pay off its short-term liabilities with its quick assets (cash, marketable securities, and current receivables) without selling any inventory.

Debt-to-equity Ratio

A ratio illustrating the proportional use of shareholder equity and debt in the acquisition of a company's assets.