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.Management Sciences
Category: Risks And Diversification & Efficient Market Hypothesis
The amount today that would be needed, at prevailing interest rates, to produce a particular sum in the future is known as ?
A. future value
B. fair value
C. present value
D. compound value
E. beginning value
An increase in the prevailing interest rate ?
A. increases the present value of future returns from investment and increases investment
B. decreases the present value of future return from investment and decreases investment
C. decreases the present value of future returns from investment and increase investment
D. increases the present value of future returns from investment and decreases investment
Diversification of portfolio can ?
A. reduce aggregate risk
B. eliminate all risk
C. increase the standard deviation of the portfolio’s return
D. reduce idiosyncratic risk
Which of the following should cause the price of a share of stock to rise ?
A. None of these answers
B. An increase in expected dividends
C. A reduction in aggregate risk
D. A reduction in the interest rate
E. All of these answers
It is difficult for an actively managed investment fund to outperform an index fund because ?
A. stock markets tend to be inefficient
B. all of these answers
C. index funds are able to buy undervalued stocks
D. actively managed funds trade more often and charge fees for their alleged expertise
Speculative bubbles may occur in the shares market ?
A. during periods of extreme pessimism because so many stocks become undervalued
B. only when people are irrational
C. when stocks are fairly valued
D. because rational people may buy an overvalued share if they think they can sell it to someone for even more at a later date
Share prices will follow a random walk if ?
A. shares are overvalued
B. people behave irrationally when choosing shares
C. markets reflect all available information in a rational way
D. shares are undervalued
If people are risk averse, then ?
A. None of these answers are true
B. All of these answers are true
C. They dislike bad things more than the like comparable good things
D. The utility they would lose from losing a Rs50 bet would exceed the utility they would gain from winning a Rs 50 bet
Their utility function exhibit the property of diminishing marginal utility of wealth
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