The Fixed-Weightings Approach to Asset Allocation

question 111

Multiple Choice

The fixed-weightings approach to asset allocation

• A) is based on an allocation of an equal percentage of the portfolio to each separate asset category.
• B) requires periodic rebalancing of the portfolio to maintain the desired weights.
• C) is based on periodic adjustments to category weights in response to market changes.
• D) uses stock-index futures and bond futures in a market timing strategy.

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Definitions:

Production Possibilities Frontier

Curve showing the combinations of two goods that can be produced with fixed quantities of inputs.

Pareto Optimal

A state of allocation of resources from which it is impossible to reallocate so as to make any one individual or preference criterion better off without making at least one individual or preference criterion worse off.

Marginal Rate

The rate at which one variable changes with respect to a minute change in another variable.

Cheese Doodles

A popular snack food made from cornmeal, cheese coating, and often baked or fried.