Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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For investors, the function of secondary markets is to provide marketability for the shares of securities they own at a fair price. Select one :
a . True
b . False
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- Which of the following statements is false? A. Mutual funds are pool investor funds to purchase financial instruments and thus reduce risks through diversification. B. Initial public offering (IPO) occurs when firm issues stock in the public market for the first time. C. The difference between current assets and non-current assets equals to working capital. D. Owner’s equity is the residual interest in assets that remains after subtracting an entity’s liabilities.arrow_forwardMost capital market transactions are made in marketable securities. Select one: True Falsearrow_forwardCost of common stock equity: CAPM Netflix common stock has a beta, b, of 0.8. The risk-free rate is 3%, and the market return is 10%. a. Determine the risk premium on Netflix common stock. b. Determine the required return that Netflix common stock should provide. c. Determine Netflix’s cost of common stock equity using the CAPM.arrow_forward
- Relative value strategies seek profits from pricing discrepancy between securities. Select one: True Falsearrow_forwarda) Distinguish between systematic risk and unsystematic risk, and explain the significance of the distinction in portfolio analysis. b) Explain what is meant by a share’s beta value. c) Outline the main practical problems in using the CAPM in capital investment decisions. d) Discuss the assumption in CAPM analysis that corporate debt has a zero beta valuearrow_forwardThe cost of capital can be thought of as the rate of return required by investors in the firm's securities. O a. false O b. truearrow_forward
- “The Capital Asset Pricing Model [CAPM] assumes that the stock market is dominated by well-diversified investors who are concerned with specific risk. “ is the following statment correct? And explain why.arrow_forwardThe disposition effect: a. Is the tendency of stock investors to sell their winning stocks and hold onto their losing stocks b. Is consistent with regret avoidance behaviour c. Is a consequence of investors’ preference for lottery-type stocks d. (a) & (b) e. (a), (b) & (c)arrow_forwardCost of Capital' concept and its importance in the valuation of common stocks. How is the concept utilized in practice? Are there any deficiencies or inconsistencies in current practice?arrow_forward
- describe the process of short selling. define the theoretical fair value of an asset and relate it to the concept of market efficiency. discuss and relate the concepts of arbitrage and the law of one price. describe how and why risk is transferred from hedgers to speculators in derivative markets.arrow_forwardAn investor gathered the following information regarding three stocks, which are not in the market portfolio: Standard Deviation 25% 30% 23% Stock A B с The return on the market portfolio is 15% with a standard deviation of 21%, and the risk-free rate of return is 4%. Stock A's nonsystematic variance is closest to: O 0.0036 O 0.0247 Expected Return 22% 17% 19% O 0.0091 Beta 1.1 1.4 0.8arrow_forward
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