Business Finance Mod 2
What is one way to minimize investment risk?
- a) Diversification
- b) Concentration
- c) Speculation
A
Which factor helps in reducing investment risk by spreading investments across different asset classes?
- a) Inflation
- b) Market timing
- c) Asset allocation
C
How does dollar-cost averaging contribute to risk reduction in investing?
- a) By timing the market
- b) By investing a fixed amount regularly
- c) By avoiding diversification
B
What is a key strategy to minimize company-specific risk in a stock portfolio?
- a) Focusing on a single industry
- b) Investing in individual stocks only
- c) Diversifying across various sectors
C
Which financial instrument is known for its safety and often used to reduce risk in an investment portfolio?
- a) Options
- b) Stocks
- c) Government bonds
C
How can staying informed about economic conditions contribute to risk management in investing?
- a) By ignoring market trends
- b) By making impulsive decisions
- c) By making informed investment choices
C
Which risk reduction strategy involves setting predetermined exit points for investments?
- a) Holding indefinitely
- b) Stop-loss orders
- c) Day trading
B
What role does emergency fund play in minimizing personal financial risks?
- a) Increases risk
- b) Provides a financial safety net
- c) Encourages high-risk investments
B
How does thorough research contribute to risk reduction when selecting investments?
- a) By relying on rumors
- b) By making impulsive decisions
- c) By making well-informed choices
C
What is a common strategy to reduce risk in real estate investments?
- a) Investing in a single property
- b) Ignoring market trends
- c) Diversifying across properties and
C