Part A: True or False (20%) Please conclude weather the following statement are true or false and give me your reasons (You can explain by using knowledges learned from the class or textbooks or any other empirical facts in the financial market. Don't use your personal examples which is not representative enough.). 1. The true Market Portfolio is represented by the Standard & Poor's 500 Stock Index so it is perfectly correlated with the Standard & Poor's 500 Stock Index. 2 Since we know CAPM does not hold in the real financial market, it is useless to investors. 3. Investors usually prefer purchasing in-the-money options since in-the-money options are much cheaper than out-of-money options. 4. In a bankruptcy, bond investors have priority over shareholders in claims on the company's asset so bond holders are less vulnerable. However, buying corporate bonds is not a kind of riskless investment.
Part A: True or False (20%) Please conclude weather the following statement are true or false and give me your reasons (You can explain by using knowledges learned from the class or textbooks or any other empirical facts in the financial market. Don't use your personal examples which is not representative enough.). 1. The true Market Portfolio is represented by the Standard & Poor's 500 Stock Index so it is perfectly correlated with the Standard & Poor's 500 Stock Index. 2 Since we know CAPM does not hold in the real financial market, it is useless to investors. 3. Investors usually prefer purchasing in-the-money options since in-the-money options are much cheaper than out-of-money options. 4. In a bankruptcy, bond investors have priority over shareholders in claims on the company's asset so bond holders are less vulnerable. However, buying corporate bonds is not a kind of riskless investment.
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
Problem 1PS
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Transcribed Image Text:Part A: True or False (20%)
Please conclude weather the following statement are true or false and give me your
reasons (You can explain by using knowledges learned from the class or
textbooks or any other empirical facts in the financial market. Don't use your
personal examples which is not representative enough.).
1. The true Market Portfolio is represented by the Standard & Poor's 500 Stock Index so
it is perfectly correlated with the Standard & Poor's 500 Stock Index.
2 Since we know CAPM does not hold in the real financial market, it is useless to
investors.
3. Investors usually prefer purchasing in-the-money options since in-the-money options
are much cheaper than out-of-money options.
4. In a bankruptcy, bond investors have priority over shareholders in claims on the
company's asset so bond holders are less vulnerable. However, buying corporate
bonds is not a kind of riskless investment.
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