A) the bank reduces the risk it faces from falling house prices in its region and falling prices in all regions.
B) the bank reduces the risk it faces of falling house prices in its region but not from falling prices in all regions.
C) the bank reduces the risk it faces of falling house prices in all regions, but not the risk it faces from falling house prices in its regions.
D) the bank reduces neither the risk it faces from falling house prices in its region nor falling prices in all regions.
F) B) and C)
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A) benefit from fundamental analysis, since the mutual fund requires its shareholders to perform fundamental analysis on their own.
B) benefit from fundamental analysis, since the mutual fund hires one or more individuals to perform fundamental analysis for the fund.
C) eliminate market risk.
D) reduce the standard deviation of his or her portfolio to zero.
F) B) and D)
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A) 5 percent
B) 7 percent
C) 10 percent
D) 14 percent
F) B) and C)
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A) A high-risk person is more likely to apply for insurance than a low-risk person because a high-risk person would benefit more from insurance protection.
B) A low-risk person is more likely to apply for insurance than a high-risk person because a low-risk person would benefit more from insurance protection.
C) Insurance companies can fully guard against the problem of adverse selection, but they cannot fully guard against the problem of moral hazard.
D) Insurance companies can fully guard against the problem of moral hazard, but they cannot fully guard against the problem of adverse selection.
F) A) and C)
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A) Should Jane put $1,000 today into a 5-year certificate of deposit that pays 4 percent annual interest?
B) Should ABC Corporation buy a factory today for $2 million, knowing that the factory will yield the corporation $3 million after 5 years?
C) If Jill puts $5,000 today into a bank account that pays 3 percent interest, then how much will she have in the account after 2 years?
D) You would find it necessary to calculate a present value in order to answer all of these questions.
F) C) and D)
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A) changes in the prices of stocks are predictable. Evidence shows that managed funds typically do better than indexed funds.
B) changes in the prices of stocks are predictable. Evidence shows that indexed funds typically do better than managed funds.
C) changes in the prices of stocks are not predictable. Evidence shows that managed funds typically do better than indexed funds.
D) changes in the prices of stocks are not predictable. Evidence shows that indexed funds typically do better than managed funds.
F) A) and B)
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A) the two-year account at 9 percent
B) the three-year account at 6 percent
C) the six-year account at 3 percent
D) The accounts are all worth the same.
F) A) and B)
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B) False
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A) $2,300.00.
B) $2,450.00.
C) $2,500.00.
D) $2,525.50.
F) A) and C)
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B) False
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A) his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000. Matt is risk averse.
B) his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000. Matt is not risk averse.
C) his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000. Matt is risk averse.
D) his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000. Matt is not risk averse.
F) A) and D)
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A) every risk-averse person will earn a higher rate of return than every non-risk-averse person.
B) every risk-averse person will earn a lower rate of return than every non-risk-averse person.
C) the average risk-averse person will earn a higher rate of return than the average non-risk-averse person.
D) the average risk-averse person will earn a lower rate of return than the average non-risk-averse person.
F) B) and C)
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A) all of a person's savings are allocated to a class of safe assets.
B) the person knows with certainty that his or her return will be 3 percent.
C) the standard deviation of the person's portfolio is zero.
D) All of the above are correct.
F) B) and C)
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A) 4 percent
B) 5 percent
C) 6 percent
D) 7 percent
F) C) and D)
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A) risk averse people may be willing to hold it as part of a diversified portfolio.
B) risk averse people may be willing to hold it if the expected return is high enough.
C) both A and B are correct.
D) risk averse people will not hold it.
F) A) and C)
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A) $575.00
B) $578.81
C) $579.64
D) None of the above is correct.
F) A) and B)
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A) chance of winning $120 in two years and the interest rate was 11%.
B) chance of winning $114 in two years and the interest rate was 7%.
C) chance of winning $110 in two years and the interest rate was 3%.
D) None of the above are correct; a risk averse person would not accept any of the above bets.
F) B) and C)
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A) increases as the number of stocks in the portfolio increases.
B) is usually measured using a statistic called the standard diversification.
C) is positively related to the average return of the portfolio.
D) bears no relationship to the average return of the portfolio.
F) All of the above
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Once people have ins...View Answer
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Market risk refers to economy wide risk ...View Answer
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