Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

What is one reason an investor might consider adding high-grade bond funds to their portfolio?

To maximize short-term capital gains

To gain exposure to highly volatile assets

To avoid earning any interest income

To reduce overall portfolio risk through diversification

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Verified step by step guidance

Understand the concept of portfolio diversification: Diversification involves spreading investments across different asset classes to reduce overall risk. High-grade bond funds are considered less risky compared to stocks or other volatile assets.

Recognize the characteristics of high-grade bond funds: These funds invest in bonds with high credit ratings, which are less likely to default and typically provide stable interest income.

Analyze the role of high-grade bond funds in a portfolio: Adding these funds can balance the risk associated with more volatile investments, such as stocks, thereby reducing the overall portfolio risk.

Evaluate the incorrect options: High-grade bond funds are not typically used to maximize short-term capital gains or gain exposure to highly volatile assets. They also do not avoid earning interest income; instead, they provide steady interest income.

Conclude why the correct answer is diversification: By including high-grade bond funds, an investor can achieve a more balanced portfolio, reducing risk and ensuring stability, which aligns with the principle of diversification.