Financial Management - Study Mode

[#651] Asset allocation affects the investor's return by______________.
Correct Answer

(B) weighting the portfolio return by the allocation

Explanation

Solution: Asset allocation affects the investor's return by weighting the portfolio return by the allocation. Asset allocation is an investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon.

[#652] Which of the following characteristics are true, with reference to preference capital?
Correct Answer

(D) All of the above

Explanation

Solution: Preference dividend is not tax deductible, The claim of preference shareholders is prior to the claim of equity shareholders and Preference shareholders are not the owners of the concern characteristics are true, with reference to preference capital.

[#653] Diversification reduces _________.
Correct Answer

(C) Unique risk

Explanation

Solution: Diversification reduces Unique risk. Diversification is a technique that reduces risk by allocating investments among various financial instruments, industries, and other categories.

[#654] What are the factors which make debentures attractive to investors?
Correct Answer

(D) All of the above

Explanation

Solution: They enjoy a high order of priority in the event of liquidation, Stable rate of return and No risk are the factors which make debentures attractive to investors.

[#655] Dollar return is divided by invested amount which is used for calculating the
Correct Answer

(A) rate of return

Explanation

Solution: Dollar return is divided by invested amount which is used for calculating the rate of return. A rate of return (RoR) is the net gain or loss on an investment over a specified time period, expressed as a percentage of the investment's initial cost. Gains on investments are defined as income received plus any capital gains realized on the sale of the investment.