Ch.10 · Benchmarks and Performance Evaluation · easy
Which of the following mutual fund categories carries the HIGHEST risk on the risk-return spectrum?
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EXPLANATION
Small cap funds invest in companies ranked 251st and below by market capitalisation. These are less established companies with lower liquidity, higher earnings volatility, and greater sensitivity to economic cycles. They carry the highest risk on the mutual fund risk spectrum but also the highest long-term return potential.
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