Which of the following statements are NOT problems a typical large investor faces? In order to complete large transactions, they may need to accept higher transaction costs or slower time until completion. If large investors want to trade large amounts of stock without affecting the stock price and while remaining anonymous, they may use a dark pool. If they make a large transaction, they may not receive the best price for those financial securities. Large investors trades are usually executed significantly slower than small investors trades.

Which of the following statements are NOT problems a typical large investor faces? In order to complete large transactions, they may need to accept higher transaction costs or slower time until completion. If large investors want to trade large amounts of stock without affecting the stock price and while remaining anonymous, they may use a dark pool. If they make a large transaction, they may not receive the best price for those financial securities. Large investors trades are usually executed significantly slower than small investors trades.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 3MCQ

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The efficient market hypothesis says that Multiple Choice market prices reflect underlying asset values. individual investors should not participate in the financial markets. investors should expect to earn abnormal profits. financial managers can accurately time stock and bond sales. creative accounting can be used to inflate stock prices.
Which of the following statements is FALSE? When a buyer seeks to buy a stock, the willingness of other parties to sell the same stock suggests that they value the stock differently. O When private information is relegated to the hands of a relatively small number of investors, these investors may be able to profit by trading on their information. Since stock markets aggregate the information and views of many different investors, we expect the stock price to react quickly to new publicly available information as the investors continue to trade until a consensus is reached as to the new value of the stock. If the profit opportunities from having private expertise are large, other individuals will attempt to gain the expertise and devote at least as large amount of resources needed to acquire it.
An investment banker most commonly makes money from Group of answer choices A. commissions from buyers. B. artificially supporting the stock price during and after the offering. C. fees from other investment bankers in the syndicate. D. the spread between the issue price and proceeds to the issuer.
One drawback of ETFs is that investors: a) are forced to pay higher cost and fee as compared to mutual funds. b) are not able to diversify their investments. C) must pay commission when making a purchase. d) can only buy or sell shares after the major stock exchanges are closed.
Asymmetric information makes it hard for investors to sell securities. Banks, meaning both investment and commercial, specialize in reducing asymmetric information. What methods do they have for reducing information asymmetries? Be sure to specify if the methods are designed to reduce the problems of adverse selection or moral hazard.
Which of the following statements is correct? A. Investors appreciate illiquid assets in their portfolios as they can easily sell them off to cover margin calls. B. Liquid assets can quickly be converted into cash without changing prices too much. O C. Corporate bonds are among the most liquid financial assets as they trade at a very high frequency. D. Liquid assets tend to be cheaper as investors are not willing to pay for their liquidity benefits.
You buy a stock from the capital market. If the capital market is semi-strong efficient, which of the following statements is NOT correct? a. You cannot earn any abnormal returns above the required return by trading on public information. b. Past stock prices can be used to predict future stock prices. c. The technical analysis of publicly available information will not lead to any abnormal returns. d. The stock is fairly priced. e. Stock prices reflect all publicly available information.
If an investor can earn abnormal returns based on insider trading, the stock market is at best Multiple Choice inefficient. weak form efficient. semistrong form efficient. strong form efficient.
Which of the following is NOT correct with respect to the Efficient Market Hypothesis? If markets are semi-strong form efficient, then fundamental analysts would not be able to earn abnormally good returns, after considering the risk they assume. O Semi-strong form efficiency says that if a company announces a labor strike, the stock price very quickly adjusts downward. Evidence suggests that markets are NOT strong form efficient, since insiders could make abnormally good returns trading on private information. However, that is illegal. () Semi-strong form efficiency says that when Stryker makes an earning announcement, the stock price quickly reflects the new information. )Weak form efficiency says that technical analysts who study charts of stock prices and volumes can regularly make abnormally good returns, after considering the risk the assume. Page 24 of 30
3) Most individual investors do not participate directly in the money market due to A) prohibitions against individual investors trading too frequently. B) limited access to this market. C) the large size of the transactions. D)the small physical locations used to trade money market securities.
Mark thinks that there is an interesting paradox of the efficient market hypothesis. If the market believes that prices reflect all information, investors will stop seeking mispriced securities. This may lead to more mispriced stocks and more inefficiency. However, if the market believes that inefficiency still exists, the competition of trying to be the first to find mispriced securities will make markets more efficient. Do you agree with Mark? Why or why not? Please briefly comment.
Short selling a. What does it mean to short sell a security? b. What is the risk associated with short selling. c. When should an investor short sell? d. How can investors sell stocks they do not own? e. How is a short position closed?

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		In order to complete large transactions, they may need to accept higher transaction costs or slower time until completion.
		If large investors want to trade large amounts of stock without affecting the stock price and while remaining anonymous, they may use a dark pool.
		If they make a large transaction, they may not receive the best price for those financial securities.
		Large investors trades are usually executed significantly slower than small investors trades.