A) stock prices follow a random walk.
B) the stock market is informationally efficient.
C) it is better to own stock in 20 companies than it is to own stock in 2 companies.
D) All of the above are correct.
F) B) and D)
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A) the risk associated with selecting stocks in only a few specific companies
B) the risk that a person will become overconfident in his ability to select stocks
C) a high-risk person being more likely to apply for insurance
D) after obtaining insurance a person having less incentive to be careful
F) A) and B)
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A) Diversification does reduce risk and mutual funds typically outperform the market.
B) Diversification does reduce risk, but mutual funds do not typically outperform the market.
C) Diversification does not reduce risk but mutual funds typically outperform the market.
D) Diversification does not reduce risk and mutual funds do not typically outperform the market.
F) A) and D)
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A) $240 paid in three years
B) $225 paid in two years
C) $210 paid in one year
D) $200 today
F) A) and D)
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The evidence indicates that stock prices...View Answer
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A) The utility function shown here is upward-sloping, whereas in the usual case the utility function is downward-sloping.
B) The utility function shown here is bowed downward (convex) , whereas in the usual case the utility function is bowed upward (concave) .
C) On the graph shown here, wealth is measured along the horizontal axis, whereas in the usual case saving is measured along the horizontal axis.
D) On the graph shown here, utility is measured along the vertical axis, whereas in the usual case satisfaction is measured along the vertical axis.
F) C) and D)
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A) life is full of all sorts of risks.
B) after people buy insurance, they have less incentive to be careful about their risky behavior.
C) a high-risk person is more likely to apply for insurance than is a low-risk person.
D) insurance companies go to great effort to avoid paying claims to their policy holders.
F) B) and D)
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A) $215 to be received a year from today has a present value of over $200; $420 a year from now has a present value over $400.
B) $215 to be received a year from today has a present value of over $200; $420 a year from now has a present value under $400.
C) $215 to be received a year from today has a present value of under $200; $420 a year from now has a present value over $400.
D) $215 to be received a year from today has a present value of under $200; $420 a year from now has a present value under $400.
F) A) and D)
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A) $200
B) $210
C) $220
D) $230
F) A) and D)
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A) $415,000 if the interest rate is 5%
B) $419,000 if the interest rate is 4%
C) K-Nine would buy the equipment in both cases.
D) K-Nine would not buy the equipment in either case.
F) A) and D)
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A) can be reduced by placing a large number of small bets rather than a small number of large bets.
B) can be reduced by increasing the number of stocks in a portfolio.
C) Both A and B are correct.
D) Neither A nor B are correct.
F) A) and B)
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A) This means its present value is less than its price. You should consider adding the stock to your portfolio.
B) This means its present value is less than its price. You shouldn't consider adding the stock to your portfolio.
C) This means its present value is more than its price. You should consider adding the stock to your portfolio.
D) This means its present value is more than its price. You shouldn't consider adding the stock to your portfolio.
F) C) and D)
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A) market risk by more than an increase from 110 to 120.
B) market risk by less than an increase from 110 to 120.
C) firm-specific risk by more than an increase from 110 to 120.
D) firm-specific risk by less than an increase from 110 to 120.
F) B) and D)
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A) 8
B) 10
C) 12
D) 14
F) A) and C)
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B) False
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A) only individual investors can make money in the stock market.
B) it should be easy to find stocks whose price differs from their fundamental value.
C) stock prices follow a random walk.
D) All of the above are correct.
F) A) and B)
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Once people have ins...View Answer
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A) $9,090.91
B) $10,000.00
C) $8,264.46
D) $9,523.81
F) All of the above
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A) Broker A: "There are risks in holding stocks, even in a highly diversified portfolio."
B) Broker B: "Portfolios with smaller standard deviations have lower risk."
C) Broker C: "Stocks with greater risks offer lower average returns."
D) They all gave her correct advice.
F) None of the above
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