Investments fuck this this stupid fucking class he can suck my left toe

Which of the following is a real asset?

Patent on a new drug

Real assets are assets used in production (land, buildings, patents). A patent is a productive resource.

Treasury bonds, mutual fund shares, and preferred stock are financial assets

A higher expected return on an investment is generally accompanied by

Higher risk

Higher expected returns are typically compensation for assuming higher risk (risk-return trade-off)

The Efficient Market Hypothesis implies

All securities are priced given all available information

The Efficient Market Hypothesis states that security prices reflect all available information

In a price-weighted stock index like the Dow Jones Industrial Average, which company will affect the index the most when its stock price changes?

Firms with higher stock prices

In a price-weighted index like the DJIA, the index is the average of the stock prices. Therefore, companies with higher stock prices have a greater impact when their prices change.

In a price-weighted stock index such as the Dow Jones Industrial Average (DJIA), how do changes in stock prices influence the index?

Stocks with higher share prices exert a greater effect on the index.

In a price-weighted index like the DJIA, higher-priced stocks move the index more than lower-priced ones; changes don’t affect it equally.

A limit order differs from a market order because

It specifies the price at which the trade can occur

A limit order sets a maximum purchase price or a minimum selling price. It differs from a market order, which executes immediately at the best available price.

A  Treasury bond with a face value of $1,000 pays semi-annual coupons at 5% annually. Which 21statement is true?

The bond pays $25 every 6 months

Coupon = 5% × $1,000 = $50 per year; paid semi‑annually ⇒ $25 each six months.

A Treasury bill is quoted at 2.50% (bid) and 2.30% (ask). An investor buying the T-bill from the dealer will receive which rate?

2.30%

An investor buying the T-bill pays the dealer’s ask price, which is associated with the lower yield of 2.30%. The bid yield (2.50%) applies if selling to the dealer.

The primary market refers to

First-time sale of new securities to the public

The primary market is where firms raise new capital by issuing new securities to the public for the first time.

The Net Asset Value (NAV) of a mutual fund is calculated as

Market value of assets minus liabilities, divided by shares outstanding.

NAV reflects the per‑share value of a fund’s net assets (assets – liabilities) divided by the number of shares.

The holding period return (HPR) on an investment is defined as

Price change + dividends) ÷ beginning price

HPR = (P1 − P0 + D1) ÷ P0, representing the total percentage return over the holding period.

A market order instructs a broker to

Buy or sell immediately at the best current price

Market orders execute instantly at the prevailing market price without price restrictions

According to the Fisher equation, the nominal interest rate equals

Real interest rate + expected inflation rate

According to the Fisher equation: nominal rate ≈ real rate + expected inflation.

The bid-ask spread represents

Dealer’s profit margin

The bid-ask spread is the difference between the price at which a dealer buys (bid) and sells (ask) a security; it represents the dealer’s trading profit

Exchange-Traded Funds (ETFs) typically offer all of the following advantages EXCEPT:

Guaranteed to always trade at NAV

ETFs usually trade close to NAV due to arbitrage, but are not guaranteed to always trade exactly at NAV

Identify TWO key players in the financial markets

Firms; Financial intermediaries

Firms demand capital to finance investment. Financial intermediaries channel funds from savers to borrowers. Households provide funds but are not classified as market intermediaries.

Which of the following statements are correct about investor behavior under risk?

Risk-averse investors refuse fair gambles; Risk-neutral investors care solely about expected return.

Risk-averse investors require compensation to accept risk, while risk-neutral investors focus only on expected return regardless of variance. Risk-seeking investors prefer gambles, not guaranteed returns

Which TWO of the following are money market securities?

Treasury Bills; Certificates of Deposit; Eurodollars

All three are money market instruments (short‑term, liquid, low‑risk debt). Mortgage‑backed securities are capital‑market instruments

The risk premium on a risky asset is best described as

The expected return on the risky asset minus the risk-free rate, E) The additional return investors require for bearing extra risk

The risk premium represents the extra compensation investors demand for choosing a risky asset over a risk-free one. it reflects the additional return required (Option E) to make investors willing to accept the uncertainty of the risky investment compared to a risk-free alternative.

Identify TWO correct statements about buying on margin

Involves borrowing part of the stock purchase price from a broker; Margin calls occur if equity falls below the maintenance level.

Buying on margin means the investor uses borrowed funds from the broker; margin calls are triggered if equity drops below the required maintenance margin. It generally magnifies both gains and losses rather than reducing them. Proceeds from a short sale belong to the broker until the position is closed, and margin trading requires collateral.

Which TWO of the following are valid measures of investment performance?

Holding Period Return; Sharpe Ratio

HPR measures actual investment return over a period, while the Sharpe ratio measures risk-adjusted performance. Inflation rate and market capitalisation are not performance metrics.

Which TWO of the following are examples of managed investment companies?

Open-end mutual funds; Closed-end funds

Managed investment companies actively manage portfolios for investors; both open‑end mutual funds and closed‑end funds fall under this category. Unit investment trusts are unmanaged, ETFs are hybrid exchange‑traded vehicles, and hedge funds are private pools

Identify TWO common types of mutual funds that combine both stocks and bonds in their portfolios

Balanced funds; Asset allocation funds

Both invest in a mix of stocks and bonds to achieve diversified risk/return. Money market funds focus on short‑term debt, equity funds invest mainly in stocks, and sector funds focus on specific industries.

Which securities are part of the bond market rather than the money market?

Mortgage-backed securities; Federal agency bonds with maturities greater than one year

Treasury bills, commercial paper, and federal funds are money market instruments due to short maturities. Bonds and mortgage-backed securities belong to the bond market.

Which TWO instruments are typically traded in the capital market?

Treasury Notes; Preferred Stock; Revenue Bonds

These are capital‑market instruments (maturity > 1 year or equity). Commercial paper and federal funds are money‑market instruments.