Question 1

To diversify, an engineer working in an electric power-generating plant should invest in:

Accepted Answer

A)  stocks of wind power-generating companies. 
B)  stocks of his own company. 
C)  a mutual fund that consists of only electric power-generating companies. 
D)  nothing. 
A)  stocks of wind power-generating companies. 
B)  stocks of his own company. 
C)  a mutual fund that consists of only electric power-generating companies. 
D)  nothing.

Question 2

Consider the market for ABC Company's stock. What should happen to the stock for this company if there is a rumor that the company is set to merge with another very profitable company?

Accepted Answer

A)  The demand for the stock would shift to the left. 
B)  The demand for the stock would shift to the right. 
C)  The supply of the stock would shift to the left. 
D)  The supply of the stock would shift to the right. 
A)  The demand for the stock would shift to the left. 
B)  The demand for the stock would shift to the right. 
C)  The supply of the stock would shift to the left. 
D)  The supply of the stock would shift to the right.

Question 3

The field of technical analysis:

Accepted Answer

A)  has been able to beat the market in the long run if enough data is analyzed. 
B)  has been unable to consistently beat the market. 
C)  is also known as active investing. 
D)  is difficult since stock market data is hard to come by. 
A)  has been able to beat the market in the long run if enough data is analyzed. 
B)  has been unable to consistently beat the market. 
C)  is also known as active investing. 
D)  is difficult since stock market data is hard to come by.

Question 4

To say that a stock price is a signal means that:

Accepted Answer

A)  society can determine the value of a firm. 
B)  people transfer firm ownership via the signals. 
C)  lower stock prices imply better value. 
D)  speculative bubbles can be avoided. 
A)  society can determine the value of a firm. 
B)  people transfer firm ownership via the signals. 
C)  lower stock prices imply better value. 
D)  speculative bubbles can be avoided.

Question 5

According to the efficient markets hypothesis, stock prices:

Accepted Answer

A)  reflect all publicly available information about the stock market. 
B)  reflect all private company information that is known only to company insiders. 
C)  contain both public and private information that is helpful for some investors to outperform other investors. 
D)  contain no useful information. 
A)  reflect all publicly available information about the stock market. 
B)  reflect all private company information that is known only to company insiders. 
C)  contain both public and private information that is helpful for some investors to outperform other investors. 
D)  contain no useful information.

Question 6

Discuss the different ways that a person can diversify.

Accepted Answer

A person can diversify in many ways. For

Question 7

What rule of thumb generates the number of periods required for an investment to double at a given interest rate?

Accepted Answer

A)  simple growth 
B)  rule of 70 
C)  rule of 100 
D)  linear growth 
A)  simple growth 
B)  rule of 70 
C)  rule of 100 
D)  linear growth

Question 8

The S&P 500 Index fund performs ______ active funds.

Accepted Answer

A)  worse than most 
B)  worse than all 
C)  better than most 
D)  better than all 
A)  worse than most 
B)  worse than all 
C)  better than most 
D)  better than all

Question 9

Bursting stock market bubbles create labor adjustment costs.

Accepted Answer

A) True 
 B)False

Question 10

The investment approach of one of TIAA-CREF's mutual funds is: "[This fund]. . .seeks a favorable long-term rate of return from a diversified portfolio selected to track the overall market for common stocks publicly traded in the United States, as represented by a broad stock market index." This fund is a(n):

Accepted Answer

A)  active fund. 
B)  passive fund. 
C)  asset fund. 
D)  market fund. 
A)  active fund. 
B)  passive fund. 
C)  asset fund. 
D)  market fund.

Question 11

For a person holding a mutual fund, compounding the returns on the fund leads to a higher total return in the future than without compounding.

Accepted Answer

A) True 
 B)False

Question 12

As a result of the disaster at Chernobyl, related stock prices changed within:

Accepted Answer

A)  months. 
B)  days. 
C)  hours. 
D)  minutes. 
A)  months. 
B)  days. 
C)  hours. 
D)  minutes.

Question 13

Table: Mutual Funds
 
Refer to the table. Which mutual fund would be best for a retirement savings plan?

Accepted Answer

A)  Mutual Fund A 
B)  Mutual Fund B 
C)  Mutual Fund C 
D)  Mutual Fund D 
A)  Mutual Fund A 
B)  Mutual Fund B 
C)  Mutual Fund C 
D)  Mutual Fund D

Question 14

A speculative bubble is when:

Accepted Answer

A)  assets are priced much higher than is warranted by the profitability of the assets. 
B)  assets are priced much lower than is warranted by the profitability of the assets. 
C)  assets prices are high and profits are even higher. 
D)  market manipulation by dominant hedge funds bids up the market prices of assets. 
A)  assets are priced much higher than is warranted by the profitability of the assets. 
B)  assets are priced much lower than is warranted by the profitability of the assets. 
C)  assets prices are high and profits are even higher. 
D)  market manipulation by dominant hedge funds bids up the market prices of assets.

Question 15

A diversified portfolio reduces risk.

Accepted Answer

A) True 
 B)False

Question 16

According to the efficient markets hypothesis, the prices of traded assets, such as stocks and bonds, reflect all publicly traded information.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following investment instruments would a risk-averse individual choose?

Accepted Answer

A)  stocks that are negatively correlated with the rest of one's portfolio 
B)  agricultural stocks in a foreign agricultural economy 
C)  oil stocks 
D)  technology stocks 
A)  stocks that are negatively correlated with the rest of one's portfolio 
B)  agricultural stocks in a foreign agricultural economy 
C)  oil stocks 
D)  technology stocks

Question 18

If each of the approximately 320,000 securities and financial service agents in the United States bet on whether the market would go up or down for each of the next 10 years by flipping a coin, we would expect that approximately 312 agents would have been right 10 years in a row. This example suggests that:

Accepted Answer

A)  it is easy to beat the market averages. 
B)  famous investors like Warren Buffett may have merely been lucky. 
C)  there are above-normal profit opportunities in the stock market. 
D)  All of the answers are correct. 
A)  it is easy to beat the market averages. 
B)  famous investors like Warren Buffett may have merely been lucky. 
C)  there are above-normal profit opportunities in the stock market. 
D)  All of the answers are correct.

Question 19

Because stock indexes offer higher returns than bonds historically, the rule of 70 implies that we should invest:

Accepted Answer

A)  in bonds. 
B)  in stock indexes. 
C)  half in stock indexes and half in bonds. 
D)  in neither stocks nor bonds. 
A)  in bonds. 
B)  in stock indexes. 
C)  half in stock indexes and half in bonds. 
D)  in neither stocks nor bonds.

Question 20

Paying an expert to help pick stocks will likely yield better returns than most alternative strategies for stock selection.

Accepted Answer

A) True 
 B)False

Exam 23: Stock Markets and Personal Finance

To diversify, an engineer working in an electric power-generating plant should invest in:

Consider the market for ABC Company's stock. What should happen to the stock for this company if there is a rumor that the company is set to merge with another very profitable company?

The field of technical analysis:

To say that a stock price is a signal means that:

According to the efficient markets hypothesis, stock prices:

Discuss the different ways that a person can diversify.

What rule of thumb generates the number of periods required for an investment to double at a given interest rate?

The S&P 500 Index fund performs ______ active funds.

Bursting stock market bubbles create labor adjustment costs.

For a person holding a mutual fund, compounding the returns on the fund leads to a higher total return in the future than without compounding.

As a result of the disaster at Chernobyl, related stock prices changed within:

Table: Mutual Funds Refer to the table. Which mutual fund would be best for a retirement savings plan?

A speculative bubble is when:

A diversified portfolio reduces risk.

According to the efficient markets hypothesis, the prices of traded assets, such as stocks and bonds, reflect all publicly traded information.

Which of the following investment instruments would a risk-averse individual choose?

Because stock indexes offer higher returns than bonds historically, the rule of 70 implies that we should invest:

Paying an expert to help pick stocks will likely yield better returns than most alternative strategies for stock selection.

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Price Discrimination

Consumer Choice

Filters