Investment (Investor's Knowledge) 5

Question 1

What is a 'bear market'?

Accepted Answer

A decline of 20% or more from recent highs

Answer

A bear market is commonly defined as a drop of 20% or more from recent peaks.

Question 2

Rebalancing a portfolio means:

Accepted Answer

Adjusting holdings back to target allocations

Answer

Rebalancing restores a portfolio to its intended asset allocation after market drift.

Question 3

An employer 401(k) match is best described as:

Accepted Answer

Free money added to your contributions

Answer

An employer match adds money to your retirement account based on what you contribute.

Question 4

Which statement about stocks vs. bonds is generally true?

Accepted Answer

Stocks offer higher potential returns with higher risk

Answer

Stocks historically offer higher returns but with greater volatility than bonds.

Question 5

A mutual fund's expense ratio represents:

Accepted Answer

Annual operating costs as a percentage of assets

Answer

The expense ratio is the yearly cost of owning a fund, expressed as a percent of assets.

Investment Practice Test