Question 1

How should you approach broker fees and why?

Accepted Answer

A)  Seek high ones,because it signals a better investment product 
B)  Seek high ones,because money managers will have a stronger incentive to make you more money 
C)  Seek low ones,because only top investors need to pay the higher price 
D)  Seek low ones,because no money manager could be worth a premium price 
A)  Seek high ones,because it signals a better investment product 
B)  Seek high ones,because money managers will have a stronger incentive to make you more money 
C)  Seek low ones,because only top investors need to pay the higher price 
D)  Seek low ones,because no money manager could be worth a premium price

Question 2

The Dow Jones Industrial Average is the most famous stock price index.

Accepted Answer

A) True 
 B)False

Question 3

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 4

To diversify,a person who already holds stocks that move in the opposite direction of the stock market as a whole should:

Accepted Answer

A)  always buy more of the same stocks. 
B)  buy stocks that move in the same direction of the stock market as a whole. 
C)  buy stocks that have about the same expected returns as the stocks she already holds. 
D)  sell all her stocks immediately. 
A)  always buy more of the same stocks. 
B)  buy stocks that move in the same direction of the stock market as a whole. 
C)  buy stocks that have about the same expected returns as the stocks she already holds. 
D)  sell all her stocks immediately.

Question 5

Diversification:

Accepted Answer

A)  reduces risk but also reduces expected returns. 
B)  increases risk but also increases your expected returns. 
C)  reduces risk but does not reduce your expected returns. 
D)  reduces risk and increases your expected returns. 
A)  reduces risk but also reduces expected returns. 
B)  increases risk but also increases your expected returns. 
C)  reduces risk but does not reduce your expected returns. 
D)  reduces risk and increases your expected returns.

Question 6

Which of the following statements is TRUE? I.For every transaction in the stock market there is a buyer and a seller.
II.At any point in time,the price of a stock tends to reflect all available public information about the company's future prospects.
III.A revolutionary cancer treatment pill will be released next year.An investor will get rich by buying stock in that company now.

Accepted Answer

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

Question 7

Investors should avoid buying mutual funds with high fees because mutual funds with high fees:

Accepted Answer

A)  do not systemically outperform other funds. 
B)  are difficult to redeem. 
C)  do not diversify enough. 
D)  are always risky. 
A)  do not systemically outperform other funds. 
B)  are difficult to redeem. 
C)  do not diversify enough. 
D)  are always risky.

Question 8

Active mutual funds historically outperform passive mutual funds.

Accepted Answer

A) True 
 B)False

Question 9

A mutual fund manager must demonstrate high ability to beat the market over a 10-year span.

Accepted Answer

A) True 
 B)False

Question 10

The Dow is a better indicator of the market as a whole than the S&P 500.

Accepted Answer

A) True 
 B)False

Question 11

A buy-and-hold strategy would work best for which of the following people? Someone who:

Accepted Answer

A)  will retire in three years 
B)  is 25 years old and just started a good job 
C)  lives hand-to-mouth 
D)  lives on Social Security checks 
A)  will retire in three years 
B)  is 25 years old and just started a good job 
C)  lives hand-to-mouth 
D)  lives on Social Security checks

Question 12

How fast will a $10,000 portfolio double if it is earning 10% annual returns?

Accepted Answer

A)  every 10 years 
B)  every 7 years 
C)  every 5 years 
D)  every 14 years 
A)  every 10 years 
B)  every 7 years 
C)  every 5 years 
D)  every 14 years

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Mutual funds primarily offer the service of diversification of investments.

Accepted Answer

A) True 
 B)False

Question 15

Suppose 1,000 experts flip a coin once each year and half say the market will go up while the other half say the market will go down.After 6 years how many experts would have been correct every year?

Accepted Answer

A)  15 
B)  62 
C)  8 
D)  31 
A)  15 
B)  62 
C)  8 
D)  31

Question 16

A passive fund is a fund that:

Accepted Answer

A)  uses dividend reinvestment strategies to seek long-term capital appreciation. 
B)  tries to time the market when buying and selling stocks. 
C)  uses technical analysis to pick winning stocks. 
D)  invests in the companies that constitute a broad market index. 
A)  uses dividend reinvestment strategies to seek long-term capital appreciation. 
B)  tries to time the market when buying and selling stocks. 
C)  uses technical analysis to pick winning stocks. 
D)  invests in the companies that constitute a broad market index.

Question 17

The disaster at Chernobyl caused the price of potatoes to:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  change in an indeterminate direction. 
A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  change in an indeterminate direction.

Question 18

If stock prices rise at a very fast rate,this may be indicative of:

Accepted Answer

A)  a speculative bubble. 
B)  low covariance with the market. 
C)  moderate profitability forecasts. 
D)  All of the answers are correct. 
A)  a speculative bubble. 
B)  low covariance with the market. 
C)  moderate profitability forecasts. 
D)  All of the answers are correct.

Question 19

Since for every buyer of a stock there is a seller of that stock,someone can likely become very rich acting on public information.

Accepted Answer

A) True 
 B)False

Question 20

An investor who already has a stock portfolio can best diversify further investment by:

Accepted Answer

A)  keeping all the money as cash. 
B)  holding assets that are negatively correlated with the existing portfolio. 
C)  buying stocks with no risk. 
D)  depositing the money in a bank. 
A)  keeping all the money as cash. 
B)  holding assets that are negatively correlated with the existing portfolio. 
C)  buying stocks with no risk. 
D)  depositing the money in a bank.

How should you approach broker fees and why?

The Dow Jones Industrial Average is the most famous stock price index.

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

To diversify,a person who already holds stocks that move in the opposite direction of the stock market as a whole should:

Diversification:

Investors should avoid buying mutual funds with high fees because mutual funds with high fees:

Active mutual funds historically outperform passive mutual funds.

A mutual fund manager must demonstrate high ability to beat the market over a 10-year span.

The Dow is a better indicator of the market as a whole than the S&P 500.

A buy-and-hold strategy would work best for which of the following people? Someone who:

How fast will a $10,000 portfolio double if it is earning 10% annual returns?

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

Mutual funds primarily offer the service of diversification of investments.

Suppose 1,000 experts flip a coin once each year and half say the market will go up while the other half say the market will go down.After 6 years how many experts would have been correct every year?

A passive fund is a fund that:

The disaster at Chernobyl caused the price of potatoes to:

If stock prices rise at a very fast rate,this may be indicative of:

Since for every buyer of a stock there is a seller of that stock,someone can likely become very rich acting on public information.

An investor who already has a stock portfolio can best diversify further investment by:

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

How should you approach broker fees and why?

The Dow Jones Industrial Average is the most famous stock price index.

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

To diversify,a person who already holds stocks that move in the opposite direction of the stock market as a whole should:

Diversification:

Investors should avoid buying mutual funds with high fees because mutual funds with high fees:

Active mutual funds historically outperform passive mutual funds.

A mutual fund manager must demonstrate high ability to beat the market over a 10-year span.

The Dow is a better indicator of the market as a whole than the S&P 500.

A buy-and-hold strategy would work best for which of the following people? Someone who:

How fast will a $10,000 portfolio double if it is earning 10% annual returns?

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

Mutual funds primarily offer the service of diversification of investments.

Suppose 1,000 experts flip a coin once each year and half say the market will go up while the other half say the market will go down.After 6 years how many experts would have been correct every year?

A passive fund is a fund that:

The disaster at Chernobyl caused the price of potatoes to:

If stock prices rise at a very fast rate,this may be indicative of:

Since for every buyer of a stock there is a seller of that stock,someone can likely become very rich acting on public information.

An investor who already has a stock portfolio can best diversify further investment by:

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