1. What is the correlation with the greatest potential for diversification? A: -

Question

1. What is the correlation with the greatest potential for diversification? A: -1.0 B: -0.5 C: 0.0 D: +1.0 E: +2.0

2. Regular, periodic investments in a security without regard to price is
A: income averaging. B: dollar cost averaging. C: dividend reinvesting. D: fundamental investing. E: time investing.   

3. Hedging strategies are   
A: designed to limit investment losses. B: a form of investment insurance. C: transfers risk from one entity to another. D: all of these statements are true. E: statements A and C are true, but B is not.

4. Investors should consider using financial leverage when they
A: feel confident that the investment itself can generate sufficient cash flow to cover debt service. B: expect high inflation. C: do not have the available cash to finance the purchase of a particular asset. D: can borrow money at a rate lower than the expected return on an investment. E: all of these choices are true.

Explanation / Answer

1. Answer :C: When the correlation of two assets is '0, they are greatest potential for diversification.

2. Anwer B: In Dollar cost averaging (DCA), a fixed amount is invested regularly in dollar cost averaging. DCA is a technique of buying a fixed dolar amount on a particular investment without regard to price

3. Anwer D: Hedging is a strategy designed to get saved from future price fluctuations, so that we might be saved from rice hike

4. Answer D: Investors consdir using financial leverage when they borrow money at a rate lowr tha expected return onan invstmetn. when this ocndition is satisfied, shaeholders are benefitted through borrowing money for their financial purpose.

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