6. What is the difference between a growth stock and a value stock? a) Growth stocks are more likely to pay dividends, while value stocks typically reinvest profits into the company b) Growth stocks are companies with high earnings growth potential, while value stocks are companies that are currently undervalued by the market c) Growth stocks have a lower P/E ratio, while value stocks have a higher P/E ratio d) Growth stocks are typically larger, well-established companies, while value stocks are smaller, newer companies with more potential for growth 7. What is the Sharpe ratio? a) A measure of a portfolio's risk-adjusted return b) The ratio of a company's debt to equity c) The difference between a security's market price and its intrinsic value d) The amount by which a security's price exceeds its face value 8. What is asset allocation? a) The process of dividing investments among different asset classes b) The process of buying and selling securities in a portfolio c) The process of selecting individual securities for a portfolio d) The process of hedging against market risk

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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6. What is the difference between a growth stock and a
a) Growth stocks are more likely to pay dividends, while value stocks typically reinvest profits into the
company
a value stock?
b) Growth stocks are companies with high earnings growth potential, while value stocks are companies
that are currently undervalued by the market
c) Growth stocks have a lower P/E ratio, while value stocks have a higher P/E ratio
d) Growth stocks are typically larger, well-established companies, while value stocks are smaller, newer
companies with more potential for growth
7. What is the Sharpe ratio?
a) A measure of a portfolio's risk-adjusted return
b) The ratio of a company's debt to equity
c) The difference between a security's market price and its intrinsic value
d) The amount by which a security's price exceeds its face value
8. What is asset allocation?
a) The process of dividing investments among different asset classes
b) The process of buying and selling securities in a portfolio
c) The process of selecting individual securities for a portfolio
d) The process of hedging against market risk
2
9. What is the difference between active and passive investing?
a) Active investing involves selecting individual securities based on market analysis, while passive
investing involves buying a diversified portfolio that tracks a market index
b) Active investing involves buying and holding a diversified portfolio, while passive investing involves
actively trading individual securities
c) Active investing involves investing in high-risk assets, while passive investing involves investing in low-
risk assets
d) Active investing involves investing in alternative assets, while passive investing involves investing in
traditional assets
c) A measure of a stock's dividend yield
d) A measure of a stock's price-to-earnings ratio
10. What is a beta coefficient?
a) A measure of a stock's volatility relative to the market
b) The difference between a stock's market price and its intrinsic value
Transcribed Image Text:6. What is the difference between a growth stock and a a) Growth stocks are more likely to pay dividends, while value stocks typically reinvest profits into the company a value stock? b) Growth stocks are companies with high earnings growth potential, while value stocks are companies that are currently undervalued by the market c) Growth stocks have a lower P/E ratio, while value stocks have a higher P/E ratio d) Growth stocks are typically larger, well-established companies, while value stocks are smaller, newer companies with more potential for growth 7. What is the Sharpe ratio? a) A measure of a portfolio's risk-adjusted return b) The ratio of a company's debt to equity c) The difference between a security's market price and its intrinsic value d) The amount by which a security's price exceeds its face value 8. What is asset allocation? a) The process of dividing investments among different asset classes b) The process of buying and selling securities in a portfolio c) The process of selecting individual securities for a portfolio d) The process of hedging against market risk 2 9. What is the difference between active and passive investing? a) Active investing involves selecting individual securities based on market analysis, while passive investing involves buying a diversified portfolio that tracks a market index b) Active investing involves buying and holding a diversified portfolio, while passive investing involves actively trading individual securities c) Active investing involves investing in high-risk assets, while passive investing involves investing in low- risk assets d) Active investing involves investing in alternative assets, while passive investing involves investing in traditional assets c) A measure of a stock's dividend yield d) A measure of a stock's price-to-earnings ratio 10. What is a beta coefficient? a) A measure of a stock's volatility relative to the market b) The difference between a stock's market price and its intrinsic value
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