SIE Exam Question 1049: Answer and Explanation

Question: 1049

Which of the following is correct regarding defensive stocks?

• A. They are stocks that invest in the defense sector of the U.S. economy.
• B. They are stocks that are unaffected by general fluctuations in the economy.
• C. They are stocks that are tax efficient and therefore "defensive" for tax purposes.
• D. They are stocks that are unaffected by changes in interest rates.

Correct Answer: B

Explanation:

Defensive stocks are unaffected by general fluctuations in the economy. They include food, tobacco, and oil stocks.