Question 1

One of the exceptions to the efficient markets hypothesis is that experts can get better returns than others.

Accepted Answer

A) True 
 B)False  False

Question 2

Compare a fund that charges a 0.25% annual fee with a fund that charges a 1.25% annual fee.If an investment of $5,000 earns an average return of 8% over the course of 5 years,approximately how much more will fees over those 5 years be for the higher-fee fund?

Accepted Answer

A)  $4 
B)  $20 
C)  $330 
D)  $2,000 
A)  $4 
B)  $20 
C)  $330 
D)  $2,000 C

Question 3

Which statement is consistent with the strategy of diversification in stock investment?

Accepted Answer

A)  Buy all stocks in the stock market. 
B)  Pick stocks that you believe are undervalued. 
C)  Buy a mutual fund of a broad stock market index. 
D)  Buy and sell a stock at the same time. 
A)  Buy all stocks in the stock market. 
B)  Pick stocks that you believe are undervalued. 
C)  Buy a mutual fund of a broad stock market index. 
D)  Buy and sell a stock at the same time. C

Question 4

Compared to stocks,art investments have _____ monetary returns because they offer ______ nonpecuniary returns.

Accepted Answer

A)  lower;lower 
B)  higher;higher 
C)  lower;higher 
D)  higher;lower 
A)  lower;lower 
B)  higher;higher 
C)  lower;higher 
D)  higher;lower

Question 5

Asset price bubbles are:

Accepted Answer

A)  avoidable. 
B)  possibly solved through greater transparency in assessing company values. 
C)  inevitable. 
D)  a recent phenomenon. 
A)  avoidable. 
B)  possibly solved through greater transparency in assessing company values. 
C)  inevitable. 
D)  a recent phenomenon.

Question 6

The efficient markets hypothesis suggests that reading the Wall Street Journal will help you pick top-performing stocks.

Accepted Answer

A) True 
 B)False

Question 7

Which statement is TRUE?

Accepted Answer

A)  In the long run,stock returns are higher than bond returns. 
B)  Passive investments underperform active investments. 
C)  One can earn higher returns by investing in funds with high loading costs. 
D)  The efficient markets hypothesis only holds in the short run. 
A)  In the long run,stock returns are higher than bond returns. 
B)  Passive investments underperform active investments. 
C)  One can earn higher returns by investing in funds with high loading costs. 
D)  The efficient markets hypothesis only holds in the short run.

Question 8

Over time,______ to beat the market.

Accepted Answer

A)  all forms of technical analysis are shown 
B)  some forms of technical analysis are shown 
C)  no forms of technical analysis are shown 
D)  technical analysis has been abandoned as a means 
A)  all forms of technical analysis are shown 
B)  some forms of technical analysis are shown 
C)  no forms of technical analysis are shown 
D)  technical analysis has been abandoned as a means

Question 9

Between the years 1993 to 1998,U.S.Senators' stock portfolio outperformed the market by an average of 12% a year.Does this overturn the efficient markets hypothesis?

Accepted Answer

A)  Yes,because all the relevant information is clearly not embodied in the price. 
B)  Yes,because it is inefficient to channel money this way. 
C)  No,because Senators are probably trading using nonpublic information. 
D)  No,because Senators are unusually smart people. 
A)  Yes,because all the relevant information is clearly not embodied in the price. 
B)  Yes,because it is inefficient to channel money this way. 
C)  No,because Senators are probably trading using nonpublic information. 
D)  No,because Senators are unusually smart people.

Question 10

How long will it take an investment of $10,000 in a mutual fund that consistently earns an annual rate of return of 5% to double in value?

Accepted Answer

A)  5 years 
B)  14 years 
C)  70 years 
D)  350 years 
A)  5 years 
B)  14 years 
C)  70 years 
D)  350 years

Question 11

Which of the following statements is TRUE? I.A mutual fund pools money from many different investors and uses that money to invest in many different firms.
II.Mutual funds that are run by managers who try to pick the best performing stocks usually outperform the S&P 500.
III.Passive mutual funds do not try to select winning stocks;they mimic broader markets like the S&P 500.

Accepted Answer

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

Question 12

The S&P 500 Index fund is a(n)______ fund.

Accepted Answer

A)  active 
B)  passive 
C)  dormant 
D)  moving 
A)  active 
B)  passive 
C)  dormant 
D)  moving

Question 13

When Chernobyl melted down in the Soviet Union,the:

Accepted Answer

A)  price of U.S.basketballs increased. 
B)  prices of assets reacted slowly to the information. 
C)  price of U.S.potatoes increased. 
D)  stock prices of U.S.nuclear plants increased. 
A)  price of U.S.basketballs increased. 
B)  prices of assets reacted slowly to the information. 
C)  price of U.S.potatoes increased. 
D)  stock prices of U.S.nuclear plants increased.

Question 14

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 15

"A Random Walk Down Wall Street" claimed that the money and fame that went to stock-picking gurus were a sham and a waste.

Accepted Answer

A) True 
 B)False

Question 16

Passively investing in the S&P 500 Index:

Accepted Answer

A)  provides rates of return that are approximately 5% higher than the Dow Jones Industrial Average Index. 
B)  beats the rate of returns of the majority of all mutual funds in a typical year. 
C)  is a strategy that is less profitable over the long-term than investing in actively managed funds. 
D)  provides rates of return that are about 20% lower than the Dow Jones Industrial Average Index. 
A)  provides rates of return that are approximately 5% higher than the Dow Jones Industrial Average Index. 
B)  beats the rate of returns of the majority of all mutual funds in a typical year. 
C)  is a strategy that is less profitable over the long-term than investing in actively managed funds. 
D)  provides rates of return that are about 20% lower than the Dow Jones Industrial Average Index.

Question 17

Which principle explains why it is hard to beat the market?

Accepted Answer

A)  technical investing principle 
B)  efficient markets hypothesis 
C)  systematic risk evaluation principle 
D)  buy and hold principle 
A)  technical investing principle 
B)  efficient markets hypothesis 
C)  systematic risk evaluation principle 
D)  buy and hold principle

Question 18

Stock markets are a way of:

Accepted Answer

A)  making everyone rich. 
B)  raising capital for new investments. 
C)  equalizing the distribution of wealth. 
D)  securing long-term savings. 
A)  making everyone rich. 
B)  raising capital for new investments. 
C)  equalizing the distribution of wealth. 
D)  securing long-term savings.

Question 19

Which investment strategy is typically more profitable over a long period of time?

Accepted Answer

A)  active 
B)  passive 
C)  introversive 
D)  subversive 
A)  active 
B)  passive 
C)  introversive 
D)  subversive

Question 20

While luck is certainly useful in picking stocks,there are some strategies for good investing.List these strategies.

Accepted Answer

These strategies are

One of the exceptions to the efficient markets hypothesis is that experts can get better returns than others.

Compare a fund that charges a 0.25% annual fee with a fund that charges a 1.25% annual fee.If an investment of $5,000 earns an average return of 8% over the course of 5 years,approximately how much more will fees over those 5 years be for the higher-fee fund?

Which statement is consistent with the strategy of diversification in stock investment?

Compared to stocks,art investments have _ monetary returns because they offer __ nonpecuniary returns.

Asset price bubbles are:

The efficient markets hypothesis suggests that reading the Wall Street Journal will help you pick top-performing stocks.

Which statement is TRUE?

Over time,______ to beat the market.

Between the years 1993 to 1998,U.S.Senators' stock portfolio outperformed the market by an average of 12% a year.Does this overturn the efficient markets hypothesis?

How long will it take an investment of $10,000 in a mutual fund that consistently earns an annual rate of return of 5% to double in value?

The S&P 500 Index fund is a(n)______ fund.

When Chernobyl melted down in the Soviet Union,the:

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

"A Random Walk Down Wall Street" claimed that the money and fame that went to stock-picking gurus were a sham and a waste.

Passively investing in the S&P 500 Index:

Which principle explains why it is hard to beat the market?

Stock markets are a way of:

Which investment strategy is typically more profitable over a long period of time?

While luck is certainly useful in picking stocks,there are some strategies for good investing.List these strategies.

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

Exam 10: Stock Markets and Personal Finance

One of the exceptions to the efficient markets hypothesis is that experts can get better returns than others.

Compare a fund that charges a 0.25% annual fee with a fund that charges a 1.25% annual fee.If an investment of $5,000 earns an average return of 8% over the course of 5 years,approximately how much more will fees over those 5 years be for the higher-fee fund?

Which statement is consistent with the strategy of diversification in stock investment?

Compared to stocks,art investments have _____ monetary returns because they offer ______ nonpecuniary returns.

Asset price bubbles are:

The efficient markets hypothesis suggests that reading the Wall Street Journal will help you pick top-performing stocks.

Which statement is TRUE?

Over time,______ to beat the market.

Between the years 1993 to 1998,U.S.Senators' stock portfolio outperformed the market by an average of 12% a year.Does this overturn the efficient markets hypothesis?

How long will it take an investment of $10,000 in a mutual fund that consistently earns an annual rate of return of 5% to double in value?

The S&P 500 Index fund is a(n)______ fund.

When Chernobyl melted down in the Soviet Union,the:

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

"A Random Walk Down Wall Street" claimed that the money and fame that went to stock-picking gurus were a sham and a waste.

Passively investing in the S&P 500 Index:

Which principle explains why it is hard to beat the market?

Stock markets are a way of:

Which investment strategy is typically more profitable over a long period of time?

While luck is certainly useful in picking stocks,there are some strategies for good investing.List these strategies.

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

Compared to stocks,art investments have _ monetary returns because they offer __ nonpecuniary returns.