282 When a person engages in detailed analysis of a company to determine its

282 when a person engages in detailed analysis of a

This preview shows page 12 - 14 out of 19 pages.

282. When a person engages in detailed analysis of a company to determine its value, he or she is engaging in a. fundamental analysis. 283. Most financial decisions involve two related elements: a. Time and risk 284. Stock market fluctuations a. often go hand in hand with fluctuations in the economy more broadly. 285. The field of finance primarily studies a. the implications of time and risk for allocating resources over time. 286. By purchasing shares in a mutual fund that holds a portfolio of stocks, a person can a. benefit from fundamental analysis, since the mutual fund hires one or more individuals to perform fundamental analysis for the fund. 287. Risk aversion helps to explain various things we observe in the economy, including a. All of the above are correct. 288. If the efficient markets hypothesis is correct, then a. the stock market is informationally efficient. 289. The financial system a. All of the above are correct. 290. If you believe that stock prices follow a random walk, then probably you a. believe in the validity of the efficient markets hypothesis. 291. If Joanna is risk averse, then a. she dislikes bad things more than she likes comparable good things. 292. For a risk averse person, a. the pain of losing $1,000 on a bet exceeds the pleasure of winning $1,000 on a bet. 293. The performance of index funds a. provides evidence in support of the efficient markets hypothesis. 294. Which of the following is correct concerning diversification? a. It only reduces firm-specific risk; much of the reduction comes from increasing the number of stocks in a portfolio from 1 to 30. 295. Dividends a. are cash payments that companies make to shareholders.
Image of page 12
296. Cash payments that companies make to shareholders are called a. Dividends 297. A high-ranking corporate official of a well-known company is unexpectedly sentenced to prison for criminal activity in trading stocks. This should a. lower the price and lower the present value of the corporation's stock. 298. Fundamental analysis is a. the study of a company's accounting statements and future prospects to determine its value. 299. According to fundamental analysis, a saver should prefer to buy stocks that are a. undervalued. This means the price of the stock is low given the value of the corporation. 300. Suppose that fundamental analysis indicates a particular company's stock is overvalued. a. This means its present value is less than its price. You shouldn't consider adding the stock to your portfolio. 301. Suppose fundamental analysis indicates that XYZ Corporation's stock is undervalued. a. This means its present value is more than its price. You should consider adding the stock to your portfolio. 302. Compounding refers directly to a. interest being earned on previously-earned interest. 303. Fundamental analysis shows that stock in Garske Software Corporation has a present value that is higher than its price.
Image of page 13
Image of page 14

You've reached the end of your free preview.

Want to read all 19 pages?

  • Fall '15
  • Hunt
  • Inflation, gross domestic product, Consumer price index

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes