Do foreign markets tend to be riskier or not as risky than the US market?
tend to be riskier
What does speculation offer?
Greater risk but
... [Show More] potentially higher returns
What did the Securities Act of 1933 require?
Full disclosure of information about new security issues
Who sets the minimum margin requirement for margin trading?
The Federal Reserve
Suzie wants to buy 100 shares of ABC immediately. She should place a ____________
Market Order
T/F: Short selling can only be used with convertible securities
F
Why was the Investment Advisers Act of 1940 passed?
To help protect investors against fraudulent and unethical practices by investment advisers
When the cost of an investment exceeds the present value of its benefits, the investor would be earning a rate of return :
less than the discount rate
The higher the risk premium:
the greater the required rate of return
Liquidity risk is defined as the risk of:
not being able to sell an investment conveniently and at a reasonable price
When two series of numbers generally move in opposite directions, the series are:
negatively correlated
To obtain the most reduction in risk, an investor should combine assets that are:
negatively correlated
In designing a portfolio, the only relevant risk is:
nondiversifiable risk
International diversification can be effectively achieved with low cost by purchasing:
shares in a foreign mutual fund managed by a United States fun family
Assume the XYY Corporation's stock has a beta of +0.80. If the market is expected to experience a 20 percent decline, then an investor could anticipate that the XYY stock will experience:
a decline of 16 percent
The capital asset pricing model (CAPM) is a mathematical model that depicts:
the positive relationship between risk and return
Would you want a beta of +1.23, +0.98, +1.0, or +0.87 if the stock market is expected to decline in value?
+0.87, the lower the beta the better
What does the efficient frontier represent?
the best attainable tradeoff between risk and return
The primary emphasis of asset allocation is the:
preservation of capital
Marti is 31 years old and is saving for retirement? What would a good potential portfolio be if she was willing to accept a fair amount of risk in exchange for long-term capital appreciation
5 percent money funds, 10 percent bonds, and 85 percent growth stocks
Fred and Martha are in their seventies and retired. What would a good portfolio for their situation look like in terms of beta and dividend yield?
Beta of .83 and dividend yield of 6.3 percent (smallest beta and greatest percent yield)
In monitoring investment performance, an investor should compare his or her returns with an appropriate market-based measure. If an investor's portfolio is composed of a broad range of common stocks, the best measure would be
the New York Stock Exchange composite index (NYSE)
The Sharpe's measure for Jane Smith's investment portfolio is .40, while the Sharpe's measure for the market is .30. This information suggests that Smith's portfolio:
exhibits superior performance because its risk premium per unit of risk is above that of the market
(T/F) An example of a direct investment is the purchase of mutual fund shares
F
(T/F) Diversification in a portfolio increases risks
F
(T/F) In general, older investors tend to prefer more aggressive investments
F [Show Less]