Question

Higher portfolio turnoverI. results in greater tax liability for investorsII. results in greater trading costs for the fund, which investors have to pay forIII. is a characteristic of asset allocation fundsA. I onlyB. II onlyC. I and II onlyD. I, II and III

Answer 1

The correct answer is letter "D": I, II and III.

Step-by-step explanation:

Portfolios are investment instruments that allow investors to access a diversified pool of assets reducing the risk inherent. Portfolios are mostly managed by professionals who charge a high fee of investors' profit for the services rendered. Portfolio turnover refers to the ability of managers in selling the assets in the portfolio quickly.

The higher the portfolio turnover, the higher the fees investors will have to pay to managers and for trading the assets. At the same time, the higher the portfolio turnover the higher the tax liability for the investor.

Answer 2

D. I, II and III.

Explanation:The portfolio turnover ratio is a number used to signify the amount or volume of a mutual fund's portfolio that has changed within a given year, a high portfolio turnover rate usually increases the cost of managing the portfolio.

A PORTFOLIO TURNOVER OF HUNDRED PERCENT MEANS THAT the PORTFOLIO EXCHANGES ALL OF ITS PORTFOLIO HOLDINGS THROUGH OUT THE YEAR. Aggressively managed funds usually have a higher portfolio turnover rate in the long run than conservative funds.