Which is correct about financial securities?a. Financial securities guarantees return to investors.b. Financial securities eliminate risk that most financialmanagers are facing.c. Diversification spreads risk and improves expected totalreturn.d. Financial securities protect investors against risk shocksbrought by social, economic, and political events.e. All of the abovef. None of the aboveWhich is correct about debt securities?a. Debt securities make the holders owners and give them theright to vote in all matters of the firm.b. Debt securities give the holders the right to receive interestand dividends.c. Debt securities give the holders the right to be elected asboard of directors or to vote them.d. Debt securities give the holders the right to convert theminto stocks if the indenture states.e. All of the abovef. None of the above.

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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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Why do at least some investors like to invest in asset-backed securities? Check all that apply: ABS are less risky than bonds with the same rating. It lowers their capital requirements. It gives them control over more assets. ABS often pay higher interest rates than bonds with the same rating.
Which of the following fixed income securities has the highest level of risk? Which one has the highest level of liquidity? a. treasury bonds b. agency bonds c. corporate bonds d. municipal bonds
1) Please indicate whether the following statements are true or false. In case of a false statement, briefly specify why the statement is false. 1. A real asset is different from a financial asset because a real asset must take a physical form. 2. In the financial market, an investor buys financial securities from dealers at the ask price and sells financial securities to dealers at the bid price. 3. Mankowitz portfolio theory assumes average investors have a utility function as an increasing and concave function of future portfolio return. 4. According to CAPM, all well-diversified portfolios on the capital market line have the same Sharpe ratio. 5. The Markowitz portfolio theory assumes that investors hold homogenous expectations about risk and returns of financial securities.
The so-called ``flight to quality'', which happens during a financial crisis, causes the risk premium between risky and risk-free securities to be Question 6 options: eliminated. reduced. unchanged (there is no effect). increased.
The risk premium for an investment: Answer a. Is negative for U.S. Treasury Securities b. Is zero (0) for risk-averse investors c. Increases with risk d. Is a fixed amount added to the risk-free return, regardless of the level of risk
1.What is the relationship between an investment’s risk and its return? Please provide examples if possible. 2. Difference between Institutional Investors and Individual Investors.
One of the basic promises of security analysis, and in particular fundamental analysis is that A- a stock's price is based on the cash flows it has generated in the past B- market sectors and industries do not move in concert with business cycle C- all securities have an intrinsic value that their market value will approach over time D- a security's risk has relatively litthe effect on the security's return
Your investment client asks for information concerning the benefits of active portfolio management. She is particularly interested in the question of whether active managers can be expected to consistently exploit inefficiencies in the capital markets to produce above-average returns without assuming higher risk.The semistrong form of the efficient market hypothesis asserts that all publicly available information is rapidly and correctly reflected in securities prices. This implies that investors cannot expect to derive above-average profits from purchases made after information has become public because security prices already reflect the information’s full effects.a. Identify and explain two examples of empirical evidence that tend to support the EMH implication stated above.b. Identify and explain two examples of empirical evidence that tend to refute the EMH implication stated above.c. Discuss reasons why an investor might choose not to index even if the markets were, in fact,…
Which one of the following expressions about risk and returns is wrong? A. In general, one reason why a stock is riskier than a bond is that because cash flows from a bond are known and promised, whereas cash flows from a stock are neither known nor promised. B. According to CAPM model, a well-diversified portfolio will have a beta which equals to 0. C. Risk premium is the extra return provided on risky assets to compensate for risk. The difference between risky return and the risk-free return. D. Unexpected return happened because new information came to light which caused our expectations about prices and returns to change.
Portfolio expected return and risk A collection of financial assets and securities is referred to as a portfolio. Most individuals and institutions invest in a portfolio, making portfolio risk analysis an integral part of the field of finance. Just like stand-alone assets and securities, portfolios are also exposed to risk. Portfolio risk refers to the possibility that an investment portfolio will not generate the investor’s expected rate of return. Analyzing portfolio risk and return involves the understanding of expected returns from a portfolio. Consider the following case: Andre is an amateur investor who holds a small portfolio consisting of only four stocks. The stock holdings in his portfolio are shown in the following table: Stock Percentage of Portfolio Expected Return Standard Deviation Artemis Inc. 20% 6.00% 31.00% Babish & Co. 30% 14.00% 35.00% Cornell Industries 35% 11.00% 38.00% Danforth Motors 15% 3.00% 40.00% What is the expected…
Describe clearly how theories from behavioural finance can justify the following abnormal phenomena of investment: (1) Investors exhibit tendency to overpay for assets with poor average return but a potential to deliver a huge payoff, such as penny stocks or corporate bonds of financially distressed companies. (2) Investors exhibit tendency to sell winning stocks too early but hold losing stocks for too long

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