Unit 6

What is one of the advantages for the investor who invests in mutual funds that include foreign securities in the funds portfolio?

increased diversification

Holding a callable bond with call protection is least impactful for the investor when

interest rates are rising

A luxury tax that consumers must pay that is levied on nonessential items of a certain value or more is an example of

legislative risk

Which of the following has the most liquidity risk?

limited partnerships

If the stock market were to fall substantially in a single day, a portfolio of common and preferred stock would be most subject to

market risk

inflation risk

the effect of continually rising retail prices on the investment returns of ones portfolio

Legislative risk

for investors, changes made to the tax code by the IRS

Which types of investments are most susceptible to interest rate risks?

bonds

When interest rates are falling, which bonds are most likely to expose holders to call risk?

callable bonds with higher coupons

Which type of securities are most susceptible to business risk

common stock

Call risk is most associated with

reinvestment risk

Nonsystematic risk

risks that are unique to a specific industry, business type, or investment type are known as

Currency Risk

when investing in overseas markets in foreign securities, investors should be aware and understand