Quiz 7

The disposition effect:   a. Is the tendency of stock investors to sell their winning stocks and hold onto their losing stocks   b. Is consistent with regret avoidance behaviour   c. Is a consequence of investors’ preference for lottery-type stocks   d. (a) & (b)   e. (a), (b) & (c)

True or false question with a brief explanation

Explain why the risk premium of a stock does not depend on its diversifiable risk.       Question content area bottom Part 1 ​(Select the best choice​ below.)     A. Investors​ don't care about diversifiable risk and so​ don't hold any.   B. Investors care about diversifiable​ risk, but hedge their positions so they​ don't demand a risk premium.   C. Although investors must hold diversifiable​ risk, they​ don't care about​ it, so there is no risk premium.   D. Investors can remove diversifiable risk from their portfolio by diversifying. They therefore do not demand a risk premium for it.

What impact do flotation costs have on the cost of common equity?   Question 8 options:   None. The cost of retained earnings and new stock must be the same since they both represent the same claim by shareholders.   It makes new stock less expensive compared to retained earnings.   It makes new stock more expensive compared to retained earnings.

Why is preferred stock referred to as a hybrid security? It is often said to combine the worst features of common stock and bonds. What is meant by this statement? How does a common stockholder receive two types of returns?

Short selling  How can investors sell stocks they do not own?  How is a short position closed?

Question 1 All else held constant, which of the following would make the put option on the common stock more valuable? A lower exercise price Stock price drops Stock price volatility reduces

Please provide answer of question no. 3

Which of the following is true concerning short sales of exchange-listed stocks?   Question 6 options:   You are likely to get a margin call when the stock price drops   The potential loss from short selling is limited to the proceeds from the short sale   Proceeds from the short sale must be kept on deposit with the broker until you close the position   Short-sellers do not need to post margin

Which of the following is FALSE about preferred stock? Select one: a. the value of a preferred stock can be calculated with the perpetuity formula b. preferred stock are expected to pay the same dividend forever c. preferred stocks are more risky than common stocks d. preferred stocks do not mature

If an investor believes that the expected return is lower than the required rate of the return, the stock should be and he should                  . Group of answer choices overvalued, buy the stock. undervalued, not buy the stock overvalued, not buy the stock undervalued, buy the stock.

Q1.  Why is some risk diversifiable and other risk is not (non-diversifiable)?   Q2.   Yes or no, are industries that have a high standard deviations (wide fluctuation of the price of the stock) not useful as investments?  Beyond answering Yes or no, state the reason behind your choice.

All else equal, a higher required rate of return would reduce the price of: I. Corporate bondsII. Preferred stockIII. Common stock Select one: A. I only B. I and II only C. I and III only D. I, II, and III

1. Which form of market efficiency is the best among weak, semi strong and strong? 2. Is stock market efficient? Give logic in favour of your answer

Passive investors believe that: a. You can't beat the market so you should buy it b. They do not have time to pick stocks c. It is worth it to pay someone else to manage their investments 2. Which of the following describes a difference between the Nasdaq and the S&P500?        They are weighted differently        All stocks in the Nasdaq are traded on the same exchange        The Nasdaq has fewer stocks

D4)    Real options make up a lower proportion of the total value of ”value stocks” than “growth stocks”   True False   2.In general, an option is more valuable when it is not available to anyone. True False

Which of the following is TRUE? O An American call option on a stock should never be exercised early O An American call option on a stock should be exercised early when dividends are expected O It can sometimes be optimal to exercise early an American call option on a stock even when no dividends are expected and there is no liquidity or portfolio rebalancing need. O An American call option on a stock should never be exercised early when no dividends are expected << Previous Next ▸