You Determine That the Appropriate Balance for Your Investment-Risk Tolerance

question 43

Multiple Choice

You determine that the appropriate balance for your investment-risk tolerance is a 70-20-10 proportion (stocks,bonds,and cash) .After the first year,your $10,000 investment has doubled in value to $20,000,with $16,000 in stocks,$2,750 in bonds,and $1,250 in cash.How should your assets be allocated to retain your risk proportions?

• A)Sell $2,000 in stocks,buy $1,250 in bonds,and add $750 in cash
• B)Sell $1,000 in stocks,buy $2,250 in bonds,and add $750 in cash
• C)Buy $1,000 in stock,sell $2,250 in bonds,and reduce cash by $750
• D)Buy $2,000 in stock,sell $1,250 in bonds,and reduce cash by $750

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Definitions:

Comparability

A quality of accounting information that allows users to analyze and compare financial data from different periods and entities in order to make informed decisions.

Capital Raised

The total amount of funds collected by a company from investors or financial markets, often used for business operations, expansion, or paying off debt.

Stock Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a stock at a predetermined price within a specified time frame.

Diluted Earnings

Earnings per share calculated under the assumption that all convertible securities have been converted into common stock, providing a "worst case" scenario perspective on earnings per share.