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) B) and C)
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A) the announcement and the rise in interest rates
B) the announcement but not the rise in interest rates
C) the rise in interest rates,but not the announcement
D) neither the announcement nor the rise in interest rates
F) C) and D)
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A) stock prices are driven by investors' "animal spirits."
B) the random-walk theory of stock prices is incorrect.
C) the efficient markets hypothesis is correct.
D) actively managed mutual funds always outperform index funds.
F) C) and D)
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A) buying stocks whose prices have been falling for several days.
B) buying stocks whose prices have been rising for several days.
C) performing fundamental analysis of stocks using data contained in annual reports.
D) using inside information.
F) A) and B)
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A) Bubbles could arise,in part,because the price that people pay for stock depends on what they think someone else will pay for it in the future.
B) Economists almost all agree that the evidence for stock market irrationality is convincing and the departures from rational pricing are important.
C) Some evidence for the existence of market irrationality is that informed and presumably rational managers of mutual funds generally beat the market.
D) All of the above are correct.
F) A) and C)
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A) present values of the dividend stream and final price.As a result,the value of a stock rises when interest rates rise.
B) present values of the dividend stream and final price.As a result,the value of a stock falls when interest rates rise.
C) future values of the dividend stream and final price.As a result,the value of a stock rises when interest rates rises.
D) future values of the dividend stream and final price.As a result,the value of a stock falls when interest rates rise.
F) A) and B)
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A) Stock market prices tend to rise today if they rose yesterday.
B) As judged by the typical person in the market,all stocks are fairly valued all the time.
C) At the market price,the number of shares being offered for sale matches the number of shares people want to buy.
D) All of the above statements are incorrect.
F) All of the above
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A) the number of shares of stock offered for sale exceeds the number of shares of stock that people want to buy.
B) the stock market is informationally efficient.
C) stock prices never follow a random walk.
D) All of the above are correct.
F) All of the above
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A) Simpson announces,just as everyone had expected,that it has hired a new highly respected CEO.
B) Simpson announces that its profits were low,but not as low as the market had expected.
C) Analysis by a column in a business weekly indicates that Simpson is overvalued.
D) All of the above would increase the price.
F) None of the above
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A) index funds should typically beat managed funds,and usually do.
B) index fund should typically beat managed funds,but usually do not.
C) mutual funds should typically beat index funds,and usually do.
D) mutual funds should typically beat index funds,but usually do not.
F) A) and B)
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A
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A) surplus,so its price will rise.
B) surplus,so its price will fall.
C) shortage,so its price will rise.
D) shortage,so its price will fall.
F) All of the above
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A) the price of the asset rises above what appears to be its fundamental value.
B) the price of the asset appears to follow a random walk.
C) the market cannot establish an equilibrium price for the asset.
D) the asset is a natural resource and its supply is manipulated by foreign nations and foreign firms.
F) A) and C)
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A) It only reduces firm-specific risk,but most of the reduction comes from increasing the number of stocks in a portfolio to well above 30.
B) It only reduces firm-specific risk;much of the reduction comes from increasing the number of stocks in a portfolio from 1 to 30.
C) It only reduces market risk,but most of the reduction comes from increasing the number of stocks in a portfolio to well above 30.
D) None of the above is correct.
F) B) and C)
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B
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A) the study of the relation between risk and return of stock portfolios.
B) the determination of the allocation of savings between stocks and bonds based on a person's degree of risk aversion.
C) the study of a company's accounting statements and future prospects to determine its value.
D) a method used to determine how adding stocks to a portfolio will change the risk of the portfolio.
F) A) and D)
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A) do not believe that there is positive relationship between risk and return.
B) do not believe that stock prices reflect all available information.
C) believe in the validity of the efficient markets hypothesis.
D) believe that it is a good idea to engage in fundamental analysis.
F) All of the above
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A) Stock prices should follow a random walk.
B) Index funds should typically outperform highly managed funds.
C) News has no effect on stock prices.
D) There is little point in spending many hours studying the business pages looking for undervalued stocks.
F) B) and D)
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A) that all stocks are fairly valued all the time and that no stock is a better buy than any other.
B) that all stocks are fairly valued all the time,but that some stocks may be better buys than other.
C) that some stocks may be better buys than others and stock experts can determine which ones.
D) that no stock is efficiently valued.
F) A) and C)
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A) changes in the prices of stocks are predictable.Evidence shows that managed funds typically do better than indexed funds.
B) changes in the prices of stocks are predictable.Evidence shows that indexed funds typically do better than managed funds.
C) changes in the prices of stocks are not predictable.Evidence shows that managed funds typically do better than indexed funds.
D) changes in the prices of stocks are not predictable.Evidence shows that indexed funds typically do better than managed funds.
F) A) and C)
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A) This stock is overvalued;you should consider adding it to your portfolio.
B) This stock is overvalued;you shouldn't consider adding it to your portfolio.
C) This stock is undervalued;you should consider adding it to your portfolio.
D) This stock is undervalued;you shouldn't consider adding it to your portfolio.
F) A) and C)
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A) This stock is overvalued;you should consider adding it to your portfolio.
B) This stock is overvalued;you shouldn't consider adding it to your portfolio.
C) This stock is undervalued;you should consider adding it to your portfolio.
D) This stock is undervalued;you shouldn't consider adding it to your portfolio.
F) All of the above
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D
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