Investment Strategy, Risk, and Behavioral Finance — Quiz

Question 1

What is diversification?

Revolt · Accepted Answer

Spreading investments across assets.

Question 2

What is a return?

Revolt · Accepted Answer

gain or loss over time

Question 3

An investor sells after a loss despite choosing a high-risk investment. What does this suggest?

Revolt · Accepted Answer

The investor misjudged their risk tolerance.

Question 4

Which situation would most likely increase a person’s risk tolerance?

Revolt · Accepted Answer

Having stable income and long-term goals.

Question 5

What is asset allocation?

Revolt · Accepted Answer

division among assets

Question 6

Why do higher-return investments usually involve more risk?

Revolt · Accepted Answer

They involve greater uncertainty.

Question 7

Which investment is generally the most stable?

Revolt · Accepted Answer

bonds

Question 8

What is risk tolerance?

Revolt · Accepted Answer

The level of uncertainty a person is willing to accept.

Question 9

Which investor is most likely to choose bonds?

Revolt · Accepted Answer

avoiding volatility

Question 10

Which characteristic best identifies a speculative investment?

Revolt · Accepted Answer

high volatility and uncertain value

Investment Strategy, Risk, and Behavioral Finance — Quiz Answers