ESSENTIALS OF INVESTMENTS CHAPTERS 1-3 QUESTIONS WITH CORRECT ANSWERS

ESSENTIALS OF INVESTMENTS b b




CHAPTERS1-3QUESTIONSWITH
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CORRECT ANSWERS 2024-2025
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Investment-correctanswer-Tradingpresentresourcesforfuturepayoff.
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RealAssets-correctanswer-Usedto producegoodsandservices. Ex.
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Land, buildings, equipment and knowledge.
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FinancialAssets-correctanswer-Claimsonrealassets. Ex.
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Bank loans, stocks, bonds and options.
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RepresentP60%oftotalassets ofU.S. households. b b b b b b




ConsumptionSmoothing-correctanswer-Savingfortherainydays:retirementaccount,insurance
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Allocationofrisks -correctanswer- b b b b b




Diversificationoveralargerownership.Repackagingrisktomatchinvestor'sriskappetite. b b b b b b b b b b b




AgencyProblem-correctanswer-Separationofownershipandmanagement
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MarketEfficiency-correctanswer- b b b b




Does not require that themarket pricebe equal to true value at every point intime. All it requires isthat errors in
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the market price be unbiased.
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ActiveManagement-correctanswer-Inefficientmarkets
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-Findingundervaluedsecurities b b




-Markettiming b




PassiveManagement-correctanswer-EfficientMarkets
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-Noattempttofindundervaluedsecurities
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