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.Management Sciences
Category: Risks And Diversification & Efficient Market Hypothesis
The study of a company’s accounting statements and future prospects to determine its value is known as ?
A. information analysis
B. risk management
C. fundamental analysis
D. diversification
Which of the following is an example of moral hazard ?
A. After Gull buys fire insurance, he begins to smoke cigarettes in bed.
B. None of these answers demonstrate moral hazard
C. Mahmood has been feeling poorly lately so he seeks health insurance
D. All of these answers demonstrate moral hazard
Which of the following reduces risk in a portfolio the greatest ?
A. Increasing the number of shares from 10 to 20
B. All of these answers provide the same amount of risk reduction
C. Increasing the number of shares in the portfolio from 1 to 10
D. Increasing the number of shares from 20 to 30
Which of the following does not help reduce the risk that people face ?
A. increasing the rate of return within their portfolio
B. diversifying their portfolio
C. All of these answers help reduce risk
D. buying insurance
Compared to a portfolio composed entirely of shares a portfolio that is 50 percent government bonds and 50 percent shares will have a ?
A. lower return and a lower level or risk
B. lower return and a higher level of risk
C. higher return and a lower level or risk
D. higher return and a higher level of risk
JCB (Which makes agricultural and construction equipment) has the opportunity to purchase a new factory today that will provide them with a Rs50 million return four years from now If prevailing interest rates are 6 percent, what is the maximum that the project can cost for JCB to be willing to undertake the project ?
A. Rs 43,456,838
B. Rs 53,406,002
C. Rs 34,538,902
D. Rs 39,604,682
If a depositor puts Rs100 in a bank amount that earns 4 percent interest compounded annually, how much will be in the account after five years ?
A. Rs400.00
B. Rs 104.00
C. Rs 121.67
D. Rs 123.98
Idiosyncratic risk is the ?
A. uncertainty associated with the entire economy
B. uncertainty associated with specific companies
C. risk associated with adverse selection
D. risk associated with moral hazard
If two countries start with the same real GDP/person and one country grows at 2 percent while the other grows at 4 percent ?
A. one country will always have 2 percent more real GDP/person than the other
B. the standard of living in the country growing at 4 percent will start to accelerate away from the slower growing country due to compound growth
C. the standard of living in the two countries will converge
D. Next year the country growing at 4 percent will have twice the GDP/person as the country growing at 2 percent
If the efficient markets hypothesis is true, then ?
A. shares tend to be overvalued
B. the stock market is informationally efficient so share prices should follow a random walk
C. All of these answers
D. fundamental analysis is a valuable tool for increasing one’s returns from investing in shares
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