Practice MCQ Questions and answers on Risks & Diversification & Efficient Market Hypothesis Mcqs

A. during periods of extreme pessimism because so many stocks become undervalued

B. only when people are irrational

C. when stocks are fairly valued

D. because rational people may buy an overvalued share if they think they can sell it to someone for even more at a later date

A. Increasing the number of shares from 10 to 20

B. All of these answers provide the same amount of risk reduction

C. Increasing the number of shares in the portfolio from 1 to 10

D. Increasing the number of shares from 20 to 30

A. information analysis

B. risk management

C. fundamental analysis

D. diversification

A. reduce aggregate risk

B. eliminate all risk

C. increase the standard deviation of the portfolio’s return

D. reduce idiosyncratic risk

A. After Gull buys fire insurance, he begins to smoke cigarettes in bed.

B. None of these answers demonstrate moral hazard

C. Mahmood has been feeling poorly lately so he seeks health insurance

D. All of these answers demonstrate moral hazard

A. None of these answers are true

B. All of these answers are true

C. They dislike bad things more than the like comparable good things

D. The utility they would lose from losing a Rs50 bet would exceed the utility they would gain from winning a Rs 50 bet

E. Their utility function exhibit the property of diminishing marginal utility of wealth

A. increases the present value of future returns from investment and increases investment

B. decreases the present value of future return from investment and decreases investment

C. decreases the present value of future returns from investment and increase investment

D. increases the present value of future returns from investment and decreases investment

A. Rs400.00

B. Rs 104.00

C. Rs 121.67

D. Rs 123.98

A. stock markets tend to be inefficient

B. all of these answers

C. index funds are able to buy undervalued stocks

D. actively managed funds trade more often and charge fees for their alleged expertise

A. shares are overvalued

B. people behave irrationally when choosing shares

C. markets reflect all available information in a rational way

D. shares are undervalued