A Good Rule of Thumb Is to Limit Installment Payments

question 27

Multiple Choice

A good rule of thumb is to limit installment payments to ____________ percent of your net monthly income.

• A)8
• B)20
• C)25
• D)10
• E)30

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Definitions:

Portfolio Performance

The assessment of how an investment portfolio has done in terms of returns for the risk taken, often compared against benchmarks or goals.

Treynor-Black Model

A special case of the Markowitz model of efficient diversification, derived by assuming returns are generated by the index model.

Residual Variance

The variance of the error terms in a regression model, representing the amount of variation that cannot be explained by the model's inputs.

Alpha/Beta

Measures in finance; Alpha represents the strategy's returns above the benchmark, whereas Beta indicates the volatility relative to the market.