13 Fin 301 Review Ulearn - Review Put Your Stock in Gold...

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1 Review 2 Put Your Stock in Gold? Your neighbour just found out that you’re taking a Finance class at University and comes over to ask your advice. He tells you his investment advisor says only to expect 8% return on his gold investments. He thinks this is crazy since gold has a standard deviation twice as high as the TSE 300 and he’s earned 15% investing in the TSE 300 through an index fund. Why would the expected return be so low on riskier gold? What do you say in response? 3 Choix Multiple If the semi-strong form of the efficient market hypothesis holds, then A. future stock prices can be predicted based on past prices. B. investors should not invest in index funds. C. stock prices reflect all publicly available information. D. stock prices reflect all relevant information whether public or private. E. investors could do well by carefully studying firms’ financial statements.
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2 4 De Múltiple Opción Which of the following is true about a security that plots below the security market line? A. The security’s return is lower than what it should be based on its risk. B. The security is under-valued. C. The security’s return is higher than what it should be based on its risk. D. A) and B) only. E. B) and C) only. 5 Multiple Choice The benefits from diversification are the greatest when the returns on two assets A. are independent. B. are perfectly positively correlated. C. have a negative correlation coefficient. D. have a small positive correlation coefficient. E. have a correlation coefficient of zero. Aurum Inc. Aurum Inc. is a gold mining firm located in Northern Canada. The correlation between the returns on the market portfolio and Aurum stock is i,m = 0 (zero). Aurum stock returns have a standard deviation of i = 0.35 (i.e. 35%) while the variance of the return on
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13 Fin 301 Review Ulearn - Review Put Your Stock in Gold...

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