Question 1

Stocks are better than bonds:

Accepted Answer

A)  in the short run. 
B)  because stocks have guaranteed returns. 
C)  in the long run. 
D)  because bonds are issued only by companies in financial distress. 
A)  in the short run. 
B)  because stocks have guaranteed returns. 
C)  in the long run. 
D)  because bonds are issued only by companies in financial distress.

Question 2

If the efficient markets hypothesis is valid, then a person should:
I. buy mutual funds.
II. diversify.
III. follow a buy-and-hold strategy.

Accepted Answer

A)  I and II only 
B)  I and III only 
C)  II and III only 
D)  I, II, and III 
A)  I and II only 
B)  I and III only 
C)  II and III only 
D)  I, II, and III

Question 3

Which of the following are advantages of saving your money in a mutual fund?
I. You have professional fund management.
II. Mutual funds have always outperformed the S&P 500.
III. People with smaller amounts of money can diversify risk.

Accepted Answer

A)  I only 
B)  I and II only 
C)  I and III only 
D)  I, II, and III 
A)  I only 
B)  I and II only 
C)  I and III only 
D)  I, II, and III

Question 4

The efficient markets hypothesis suggests that it is no better to invest in a mutual fund that has performed well for 5 years in a row than one that has performed poorly for 5 years in a row.

Accepted Answer

A) True 
 B)False

Question 5

John Stossel's dart-throwing experiment showed that:

Accepted Answer

A)  picking stocks at random can outperform the stock picks of major Wall Street experts. 
B)  Wall Street experts have inside information, which makes beating their stock picks difficult. 
C)  companies with longer names are likely to outperform market averages. 
D)  economic theory regarding the stock market is flawed. 
A)  picking stocks at random can outperform the stock picks of major Wall Street experts. 
B)  Wall Street experts have inside information, which makes beating their stock picks difficult. 
C)  companies with longer names are likely to outperform market averages. 
D)  economic theory regarding the stock market is flawed.

Question 6

After adjusting for risk, the expected return on different assets should be:

Accepted Answer

A)  higher for stocks than bonds. 
B)  higher for actively managed assets than for passively managed assets. 
C)  zero. 
D)  equal. 
A)  higher for stocks than bonds. 
B)  higher for actively managed assets than for passively managed assets. 
C)  zero. 
D)  equal.

Question 7

You cannot get rich, on average, by buying and selling on public information.

Accepted Answer

A) True 
 B)False

Question 8

If a person follows a buy-and-hold strategy, she will initially hold stocks:

Accepted Answer

A)  until the stock prices rise. 
B)  until the stock prices fall. 
C)  until the stock prices stabilize. 
D)  whether or not stock prices rise or fall. 
A)  until the stock prices rise. 
B)  until the stock prices fall. 
C)  until the stock prices stabilize. 
D)  whether or not stock prices rise or fall.

Question 9

Table: Investment
 
Refer to the table. Rank the investments in order from the least risky to the most risky.

Accepted Answer

A) 	A, B, C, D 
B) 	C, B, A, D 
C) 	B, A, D, C 
D) 	C, D, A, B 
A) 	A, B, C, D 
B) 	C, B, A, D 
C) 	B, A, D, C 
D) 	C, D, A, B

Question 10

Why does it make sense to avoid paying high fees when investing with mutual funds or stock brokers?

Accepted Answer

A)  The funds with high fees are too expensive. 
B)  The funds with high fees likely hire managers who are not experts. 
C)  The funds with high fees do not perform any better than other funds. 
D)  It does make sense, since you should pay high fees to get access to experts. 
A)  The funds with high fees are too expensive. 
B)  The funds with high fees likely hire managers who are not experts. 
C)  The funds with high fees do not perform any better than other funds. 
D)  It does make sense, since you should pay high fees to get access to experts.

Question 11

Popular U.S. stock indexes include:
I. FDIC
II. Dow Jones Industrial Average
III. NASDAQ

Accepted Answer

A)  I and II only 
B)  I and III only 
C)  II and III only 
D)  I, II, and III 
A)  I and II only 
B)  I and III only 
C)  II and III only 
D)  I, II, and III

Stocks are better than bonds:

If the efficient markets hypothesis is valid, then a person should: I. buy mutual funds. II. diversify. III. follow a buy-and-hold strategy.

Which of the following are advantages of saving your money in a mutual fund? I. You have professional fund management. II. Mutual funds have always outperformed the S&P 500. III. People with smaller amounts of money can diversify risk.

The efficient markets hypothesis suggests that it is no better to invest in a mutual fund that has performed well for 5 years in a row than one that has performed poorly for 5 years in a row.

John Stossel's dart-throwing experiment showed that:

After adjusting for risk, the expected return on different assets should be:

You cannot get rich, on average, by buying and selling on public information.

If a person follows a buy-and-hold strategy, she will initially hold stocks:

Table: Investment Refer to the table. Rank the investments in order from the least risky to the most risky.

Why does it make sense to avoid paying high fees when investing with mutual funds or stock brokers?

Popular U.S. stock indexes include: I. FDIC II. Dow Jones Industrial Average III. NASDAQ

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

Exam 23: Stock Markets and Personal Finance

Stocks are better than bonds:

If the efficient markets hypothesis is valid, then a person should: I. buy mutual funds. II. diversify. III. follow a buy-and-hold strategy.

Which of the following are advantages of saving your money in a mutual fund? I. You have professional fund management. II. Mutual funds have always outperformed the S&P 500. III. People with smaller amounts of money can diversify risk.

The efficient markets hypothesis suggests that it is no better to invest in a mutual fund that has performed well for 5 years in a row than one that has performed poorly for 5 years in a row.

John Stossel's dart-throwing experiment showed that:

After adjusting for risk, the expected return on different assets should be:

You cannot get rich, on average, by buying and selling on public information.

If a person follows a buy-and-hold strategy, she will initially hold stocks:

Table: Investment Refer to the table. Rank the investments in order from the least risky to the most risky.

Why does it make sense to avoid paying high fees when investing with mutual funds or stock brokers?

Popular U.S. stock indexes include: I. FDIC II. Dow Jones Industrial Average III. NASDAQ

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