FIN 301 Online Assignments 2-10
According to the efficient market hypothesis, using technical analysis to forecast future stock prices is -
(correct Answer) - Useless
Believers of behavioral finance principles do believe that - (correct Answer) - Markets are not always
efficient
According to the Principles of Finance, risk aversion means: - (correct Answer) - Investors takes small
risks, but do not avoid risk at all cost
True or False: According to the principles of finance, investors prefer more risk to less risk. - (correct
Answer) - False
When Professor X started investing with a mutual fund, he had to pay a front-end load of 5% of the
money he was investing. What is this front-end load of 5% an example of? - (correct Answer) -
Transaction Costs
According to frank Russell's model of investor emotion through market cycles, investor emotion in 2007
before the financial crisis would be best described as: - (correct Answer) - Euphoria
True or False: In order to achieve the highest level of return for the amount of risk we can take on, it is
very important to not diversify our investments into different asset classes, and to only invest in small-
cap bio-tech stocks. - (correct Answer) - False
Beta is used in the capital asset model primarily as a measure of - (correct Answer) - Risk
What is the correlation between the risk of an investment and its expected return? - (correct Answer) -
Positive
Given the following information, which stock has the highest return?
Stock A: Current Price: $100 - Purchase Price: $85 - Dividends Paid: $3
Stock B: Current Price: $630 - Purchase Price: $545 - Dividends Paid: $20 - (correct Answer) - Stock A
Alcoa announced in a press release that it will acquire Kaiser Aluminum for $90 per share. If the theory
of efficient capital markets is correct, what happens to Kaiser Aluminum's stock? - (correct Answer) -
Immediately trades up to $90
According to the principals of finance, in the long-run stock prices are driven by - (correct Answer) -
Corporate earnings
All else equal, which of the following stocks should have the highest expected return?
According to the efficient market hypothesis, using technical analysis to forecast future stock prices is -
(correct Answer) - Useless
Believers of behavioral finance principles do believe that - (correct Answer) - Markets are not always
efficient
According to the Principles of Finance, risk aversion means: - (correct Answer) - Investors takes small
risks, but do not avoid risk at all cost
True or False: According to the principles of finance, investors prefer more risk to less risk. - (correct
Answer) - False
When Professor X started investing with a mutual fund, he had to pay a front-end load of 5% of the
money he was investing. What is this front-end load of 5% an example of? - (correct Answer) -
Transaction Costs
According to frank Russell's model of investor emotion through market cycles, investor emotion in 2007
before the financial crisis would be best described as: - (correct Answer) - Euphoria
True or False: In order to achieve the highest level of return for the amount of risk we can take on, it is
very important to not diversify our investments into different asset classes, and to only invest in small-
cap bio-tech stocks. - (correct Answer) - False
Beta is used in the capital asset model primarily as a measure of - (correct Answer) - Risk
What is the correlation between the risk of an investment and its expected return? - (correct Answer) -
Positive
Given the following information, which stock has the highest return?
Stock A: Current Price: $100 - Purchase Price: $85 - Dividends Paid: $3
Stock B: Current Price: $630 - Purchase Price: $545 - Dividends Paid: $20 - (correct Answer) - Stock A
Alcoa announced in a press release that it will acquire Kaiser Aluminum for $90 per share. If the theory
of efficient capital markets is correct, what happens to Kaiser Aluminum's stock? - (correct Answer) -
Immediately trades up to $90
According to the principals of finance, in the long-run stock prices are driven by - (correct Answer) -
Corporate earnings
All else equal, which of the following stocks should have the highest expected return?
