The Graziadio Business Report Online Quiz How knowledgeable are you on Investment Planning? This quiz was developed by Professor Darrol J. Stanley. Good luck! 1. A well-diversified portfolio:   a) Eliminates both market and random risk. b) Eliminates random, but not market risk. c) Eliminates neither market nor random risk. 2. Which pair below is inappropriate for an investor?   a) Business cycle peak – purchase or hold treasury notes. b) Business cycle trough – purchase or hold corporate bonds. c) Business cycle expansion – purchase or hold common stocks. 3. Which form of investment analysis for both long-term and short-term investing relies more on interpreting price and/or volume trends than on economic and political factors?   a) Fundamental analysis. b) Technical analysis. c) Both rely on trend analysis as a basic component of the approach. d) Neither uses trend analysis. 4. A median price/earnings ratio of 22 for the S&P 500 would indicate that the stock is:   a) Overvalued. b) Fairly valued. c) Undervalued. 5. Common stock is said to have residual claims. This means stockholders:   a) Are entitled to have a base amount for their shares if their shares are sold back to the corporation. b) Have claims against earnings and asset distributions that come after those of the bondholders and preferred shareholders. c) Have special voting rights to elect directors. 6. If you believe that long-term interest rates are going to fall sharply, which bond would you buy to maximize your returns?   a) A bond with a two-year duration. b) A bond with a 15-year duration. c) A bond with a 30-year duration. 7. What percentage of investment advisors/mutual funds outperform the appropriate market index on a risk-adjusted basis?   a) Under 20% b) 20-50% c) 51-80% d) Over 80% 8. If the US dollar strengthens against a foreign currency, a US dollar-based investor would find foreign mutual funds he or she holds that are denominated in that currency:   a) More attractive. b) Less attractive. c) About the same. 9. Based on historical performances and a buy-and-hold strategy, during any ten-year period common stocks have what probability of outperforming other financial assets?   a) Under 20% b) 20-50% c) 51-80% d) Over 80% 10. Over the retirement timeframe of 40 years, a one percent per year additional yield and a one percent per year additional contribution to a retirement fund creates:   a) A minor increase in end value of approximately 10%. b) A good increase in end value of around 50%. c) A very significant increase in end value of more than 100%.

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