Exam 10: Stock Markets and Personal Finance

A speculative bubble is:

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.

A comparison of historical performance of mutual funds and the S&P 500 suggests that:

The BEST trading strategy is to:

The benefit of a stock market to the economy is that it makes some people rich without making other people poor.

The efficient markets hypothesis implies that in the stock market:

Which statement is TRUE?

Which statement is TRUE?

Because baby boomers are retiring,investing in firms that produce goods and services for senior citizens is definitely a sure road to riches.

The expected return on different assets,after adjusting for risk,will be equal to zero.

A buy-and-hold strategy only works for stocks that are very volatile.

When a stock index rises,it means that:

Which of the following statements is TRUE? I.Stock prices provide signals on how well a company is performing. II.The stock market is a mechanism that firms use to raise money to buy capital. III.The stock market provides a mechanism for poorly managed companies to be taken over by more competent managers.

The efficient markets hypothesis says that the stock's price reflects all available public information making it difficult for active investors to beat market averages.

The investment approach of one of T.Rowe Price's mutual funds is: "Reflecting a value approach to investing,the fund will seek the stocks of companies whose current stock prices do not appear to adequately reflect their underlying value as measured by assets,earnings,cash flow,or business franchises." This fund is a(n):

Investing in antique guitars:

According to the evidence,very few mutual fund managers can beat the market averages.

People who accept the efficient markets hypothesis should:

Suppose you have two individuals,one of whom is very risk-averse and the other loves risk.What kind of financial instruments would you advise these individuals to purchase based solely on their risk tolerance levels?

You are starting your first job after college and are looking for a mutual fund in which to invest some of your retirement savings.You research a number of mutual funds and find that fund A has generated above-normal returns for the past 2 years and has a highly respected fund manager.You also find that fund B has earned slightly below-average returns for the past 2 years,is being advertised as a good buy,and is expected to break through and earn high returns in the upcoming year.Based on the efficient markets hypothesis,which fund should you choose? Explain.