Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Relative to the strategy of buying and then holding for long time, frequently buying and selling securities will result in all of the followings for sure EXCEPT ____.
a. Group of answer choices
b. greater commissions paid to security brokers
c. greater taxes paid to the government
d. greater returns for the investor
e. greater bid-ask spreads paid to security dealers
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Greater Commissions depends on the no. of transactions taken place
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- Which of the following characteristics accurately describes the stock market? An active market that determines the price of a firm’s shares A fixed-income market where participants buy and sell debt securities The bid-ask spread in a dealer market represents the profit that a dealer would make on a transaction involving a security. Which of the following statements best describes the bid-ask spread? The difference between the closing price of the security and the opening price of the security on the day of the transaction. The sum of the price at which a dealer is willing to buy a security and the price at which a dealer is willing to sell it. The difference between the price at which a dealer is willing to buy a security and the price at which a dealer is willing to sell it. Fernando, a trader, wants to buy 1,000 shares of XYZ stock, while a second trader, Ally, is willing to sell 1,500 shares of the same stock. Unfortunately, Fernando…arrow_forwardA best efforts underwriting is a situation where: Question 31Answer a. An underwriter buys securities from an issuer and reoffers them to the public at a higher price. b. An underwriter commits to securing 100% market acceptance of a securities issue. c. The issuer receives all the proceeds from a market issue. d. The underwriter act as an agent of the issuer in marketing the securities to investorsarrow_forwarda) In order to test the weak form of the efficient-market hypothesis, researchers have used the following methods excepta.estimation of the serial correlation (autocorrelation) for securities and markets.b.measurement of the profitability of trading rules used by technical analysts.c.measurement of how rapidly security prices adjust to different news items.d.All of the options are methods used for testing weak-form market efficiency. b) A firm has $100 million in current liabilities, $200 million in long-term debt, $300 million in stockholders' equity, and total assets of $600 million. Calculate the firm's ratio of long-term debt to long-term debt plus equity.a.40 percentb.20 percentc.50 percentd.17 percentarrow_forward
- A friend of yours owns a company that is about to get a large government contract. He tells you this inside information about the contract and also mentions that it should make the company's stock price increase dramatically. If you invest based on this inside information, then you are implicitly saying that stock markets are inefficient in which context? Question 5 options: weak form efficient market theory semi-strong form efficient market theory strong form efficient market theoryarrow_forwardWhich is correct about financial securities? a. Financial securities guarantees return to investors. b. Financial securities eliminate risk that most financial managers are facing. c. Diversification spreads risk and improves expected total return. d. Financial securities protect investors against risk shocks brought by social, economic, and political events. e. All of the above f. None of the above Which is correct about debt securities? a. Debt securities make the holders owners and give them the right to vote in all matters of the firm. b. Debt securities give the holders the right to receive interest and dividends. c. Debt securities give the holders the right to be elected as board of directors or to vote them. d. Debt securities give the holders the right to convert them into stocks if the indenture states. e. All of the above f. None of the above.arrow_forwardWhich 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.arrow_forward
- What is the primary motivation of investors in performing security analysis? A-identify the best times to buy and sell securities B-Contribute to the efficiency of securities markets C-Identify securities whose insrinsic values are at or near their market values D-Identify mispriced stocksarrow_forwardSolve this practice problem. Both pictures are the same problemarrow_forwardWhich of the following is NOT right for the buy-and-hold investment strategy? Takes continuous efforts to select stocks that have good potential. Minimizes brokerage fees, transaction costs. Involves buying stock and holding it for a period of years. Avoids timing the market. Postpones capital gains taxes.arrow_forward
- Now suppose there is no financial intermediary to handle liquidity shocks. However, at t = 1 a market for bonds opens up and agents can trade their wealth at t = 1 for wealth at t = 2. Each bond pays 1 at t = 2 and its price is pM. Calculate the consumer's optimal investment decision IM at t = 0, the price of the bond pM, and the optimal consumption in the two states cM, cM. Compare the mutual fund and bond market allocations: are c4 and c bigger or smaller than cf and c, respectively?arrow_forwardYou believe you have found a trading strategy that could make significant profits. It requires looking at analyst forecasts and purchasing stock where therehas been an upgrade in the recommendation and selling shares where there has been a downgrade in the recommendation.a. Describe which form the Efficient Market Hypothesis will be viola ed if you are able to make significant profits from your trading strategy in the future.b. List three factors that you may be overlooking in assessing the profitability of your trading strategy.arrow_forwardWhich of the following is true regarding the smart investor? Multiple Choice A. They require a risk premium for the risk taken B. They trade in the mornings when the market is least volatile C. They avoid risky investments D. They like investments with betas < 1arrow_forward
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