The Key Idea Behind Constructing an Index Fund Is to Choose

question 31

Multiple Choice

The key idea behind constructing an index fund is to choose a portfolio of securities that

• A)is a mix of growth- and income-oriented stocks.
• B)minimizes risk without sacrificing liquidity.
• C)mimics the performance of a broad market index.
• D)balances short- and long-term investments.

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Definitions:

Comparative Reasoning

The process of making decisions or drawing conclusions based on the comparison of different data sets or scenarios.

Theoretical Model

A conceptual framework that represents and explains relationships among various phenomena or variables based on underlying theories.

Empirical

Based on observation or experience rather than theory or pure logic, often involving data collection and experimentation.

Income Tax

A tax that governments impose on income generated by businesses and individuals within their jurisdiction.