How Do Index Funds Keep Their Expense Ratios Low

question 43

Multiple Choice

How do index funds keep their expense ratios low?

• A)They trade stocks,often for maximum gains.
• B)They maintain their holdings in the same proportion as well-known indexes.
• C)They have a team of professionals watch for the best options so as to continually tune the fund's performance.
• D)They hold less than 20 companies in the fund.

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Definitions:

Ordinal Level

A measurement scale that categorizes data into ordered categories where the order of the values is significant, but the differences between the values are not quantitatively meaningful.

Ratio Level

A scale of measurement where there is a true zero point, allowing for the comparison of absolute magnitudes and the calculation of ratios.

Measurement Precision

The degree to which repeated measurements under unchanged conditions show the same results.

Nominal Levels

The simplest form of categorization of data without any order or rank among the categories, where numbers serve merely as labels.