Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Peter Lynch is one of the most successful active investor who has generated an average return of more than 25% per year over a period of one and a half decades, which has outperformed the stock market of 12% many times over.
(a) Judge the relevance of the
(b) Discuss your investment strategy assuming the efficient market hypothesis holds true. Your answer should not exceed 200 words.
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- Although investing all at once works best when stock prices are rising, dollar-cost averaging can be a good way to take advantage of a fluctuating market. Dollar-cost averaging is an investment strategy designed to reduce volatility in which securities are purchased in fixed dollar amounts at regular intervals regardless of what direction the market is moving. This strategy is also called the constant dollar plan. You are considering a hypothetical $1,200 investment in a media company's stock. Your choice is to invest the money all at once or dollar-cost average at the rate of $100 per month for one year. Assume that the company allows you to purchase "fractional" shares of its stock. (a) If you invested all of the money in January and bought the shares for $12 each, how many shares could you buy? shares (b) From the following chart of share prices, calculate the number of shares that would be purchased each month using dollar-cost averaging and the total shares for the year. Round to…arrow_forwardYou are the CFO of a profitable firm that is financially constrained. The stock market is currently going through a boom phase (assume this is a bubble). From what you have learned in this course, you know that the rational decision would be to issue new shares and use this income to pursue positive NPV projects. Before you make this decision, what is the most important variable that you would examine Assume you have information on all these variables. Select one: O a. Market Q O b. Fundamental Q O c. Elasticity of price demand for common shares O d. Cash Savingsarrow_forwardCAN I GET HELP as soon as possible please Explain your answer for each of them. Show all your work. The required return on ABC stock is 14%. The risk-free rate of return is 4% and the real rate of return is 2%. How much are investors requiring as compensation for risk? A) 8% B) 10% C) 12% D) 14% The efficient market hypothesis suggests thatA) investors should not try to outguess the market by constantly buying and selling securities. B) investors do better on average if they adopt a "buy and hold" strategy.C) buying into a mutual fund is a sensible strategy for a small investor.D) all of the above are sensible strategies.E) only A and B of the above are sensible strategies.arrow_forward
- Hedge Funds have become an increasingly popular investment options over the past 15 years, with managers making bold statements about the benefits of investingwith hedge funds. List the three main benefits that are claimed to arise when investing in a hedge fund. Do you believe that these benefits exist?arrow_forwardI need help pleasearrow_forwardAbout market efficiency, which of the following statements is right:a. In a highly efficient stock market, it is almost impossible for an investor to make profit from the stock market.b. In a highly efficient stock market, some smart investors can definitely beat the market even without the inside information. c. An investor can make profit by buying the stock of free Inc. since it just reported that the half-year profit doubled with respect to that during the same period in the last year. d. The stock prices of big companies are closer to their intrinsic values than those of small companies since more people follow those big companies, whereas few people follow those small companies.arrow_forward
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