Existence of secondary markets

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Reference no: EM13847979

many investments such as stock have common characteristics including:

1) existence of secondary markets

2) risk

3) potential for capital gains

a. 1 and 2

b. 1 and 3

c. 2 and 3

d. All of the above

QUESTION 2

Financial investments are made in efficient markets.  The existence of these markets suggests that __________.

a. bearing additional risk will not increase return

b. investors cannot earn superior returns

c. investors cannot expect to outperform the market consistently

d. security prices are random

QUESTION 3

Reasons for saving and investing include:

1) need for funds to meet emergencies

2) retirement income

3) desire to leave an estate for children

a. 1 and 2

b. 1 and 3

c. 2 and 3

d. All of the above

QUESTION 4

The weak form of the efficient marrket hypothesis implies __________.

a. security prices are randomly determined

b. studying past price behavior will lead to inferior investment decisions

c. studying past price behavior does not lead to superior investment decisions

d. past securities prices predict future prices

QUESTION 5

The  strong form of the efficient market hypothesis suggests:

1.  inside information will not lead to superior investment results

2.  inside information will lead to superior investment results

3.  studying financial statements will not lead to superior investment results

4.  studying financial statements will lead to superior investment results

a. 1 and 3

b. 1 and 4

c. 2 and 3

d. 2 and 4

QUESTION 6

If the financial markets were not efficient, __________.

a. prices indicate the proper valuation of securities

b. prices would adjust rapidly

c. all investors would always profit

d. an investor may consistently outperform the market

QUESTION 7

An active portfolio strategy is premised on __________.

a. the portfolio manager's access to corporate management

b. the stock market being inefficient

c. the investor's being able to obtain public information

d.the stock market being efficient

QUESTION 8

If financial markets are efficient, that suggests that __________.

a. bearing additional risk will not increase return

b. investors cannot earn superior returns

c. security prices are random

d. investors cannot expect to outperform the market consistently

QUESTION 9

Diversification reduces __________.

a. market risk

b. purchasing power risk

c. unsystematic risk

d. systematic risk

QUESTION 10

The process of financial planning requires the individual to:

1.  establish financial goals

2.  identify and quantify the value of his/her assets

3.  hire professional financial advisors

a. 1 and 3

b. 1 and 2

c. 2 and 3

d. all of the above

Reference no: EM13847979

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