Exam 10: Stock Markets and Personal Finance

A risky portfolio is one that: I.is poorly diversified. II.has a volatile stock in a basket of 200 stocks. III.has a positive correlation between most of its stock prices.

Which refers to a mutual fund for which its manager buys and sells stocks regularly in order to maximize the fund's returns?

About the only way to beat a well-functioning market and make money in the short run is: I.through the efficient markets hypothesis. II.if one has insider information. III.through extreme speed and foresight.

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

The S&P 500:

To follow the buy and hold strategy,an investor must buy stocks when they are at low prices and hold them only when the prices are rising.

John Stossel's dart-throwing experiment showed that:

If a stock market bubble bursts:

Diversification is an investment strategy to:

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

The rule of 70 explains:

An active fund is a fund that:

What does the efficient markets hypothesis tell us about the movement in a stock price?

According to the efficient markets hypothesis,stock prices:

The risk-return trade-off means that a stock with a high risk tends to have a lower return.

Which statement is TRUE of speculative bubbles in stock prices?

Passive investing is buying the stocks that make up a broad market index;there is no attempt to figure out which stocks will perform better than others.

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

Someone who is using information outside the efficient markets hypothesis:

Warren Buffett will likely continue to beat the market,as he has done for the past few decades.