practice problems for exam_4_5_6_7_8 (1)

practice problems for exam_4_5_6_7_8 (1) - EXAM 2 Practice...

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EXAM 2 Practice Questions for Chapter 4, 5, 6, 7, and 8 1 . These feature debt securities or instruments with maturities of one year or less. a. money markets b. primary markets c. secondary markets d. over-the-counter stocks 2. When you buy a share from IPO, it is a primary market transaction. a. True b. False 3. According to ----------- insiders cannot make abnormal return. a. Semi-strong form of efficiency b. Strong form of efficiency c. Weak form of efficiency. 4. If a market is semi-strong form efficient, it is also weak form efficient. a. True b. False 5. ------------- is the best measure of risk in a portfolio context. 6. Which of the following measures market risk? 7. Which of the following measures risk per unit of return? 8. In general investors are risk averse. a. True b. False 9. If two stocks are perfectly correlated, a portfolio of those two stocks can eliminate risk significantly. 10. Investors can eliminate market risk by making portfolios. 11. Beta measures diversifiable risk. a. True b. False 12. If a stock has a beta of 1.5, it is more volatile than the market. 13. According to CAPM, investors are rewarded for taking diversifiable risk. a. True b. False c. Sometimes 14. A portfolio consisting of all the stocks in the market is called 1
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15. Low correlation between stocks is the reason for diversification benefits. 16. The asset pricing theory based on a beta, a measure of market risk is known as 17. The New York Stock Exchange is primarily a. A secondary market. b. A physical location auction market. c. An over-the-counter market. d. Statements a and b are correct. e. Statements b and c are correct. 18. Which of the following is an example of a capital market instrument? 19. Your uncle would like to limit his interest rate risk and his default risk, but he would still like to invest in corporate bonds. Which of the possible bonds listed below best satisfies your uncle’s criteria?
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