3 The principle of compounding implies thar A) we should diversify enough so tha

Question

3 The principle of compounding implies thar A) we should diversify enough so that the revns on diferieie ae at some time in the future B) any difference in the rate of investment returns will r C) a small difference in the rate of investment returns mae soiee eer m D) a small difference in the rate of investiment returns can have gs iff period a long period. 4determine(s) whether buyers or sellers ultimastely bear die maionity of S burden A) The amount of the tax B) Who the tax is originally imposed on C) Whether the tax is a commodity tae D) The relative elasticities of demand and supply 5. Diversification A) reduces risk but also reduces expected retums B) increases risk but also increases your expected returns C) reduces risk but does not reduce your expected returns D) reduces risk and increases your expected returns 6 An increase in the price of a good leads to A) B) an increase in the marginal utility per dollar ofthat pod.anda- C) a decrease in the marginal utility per dollar of that good, and an incnse n die D) a decrease in the marginal utility per dollar of that good and thus a decrease a ie an increase in the marginal utility per dollar of the quantity purchased quantity purchased quantity purchased. quantity purchased. pod and usminmui 7. The rule of 70 explains A) how many stocks you need to completely diversify your portistin B) how much money you nced to invest monthly in order o etie cont C) how long it takes an investment to double in value. D) how long it takes for an investment to achieve the officient martiat ypution

Explanation / Answer

3. Right answer: a small difference in the rate of investment returns can have a large difference over a long period.

Explanation: In compounding, interest is charged on the interest amount. Therefore, a small difference in the rate of investment can have a large difference over a long period.

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