You may be unwilling to buy a used car because you suspect the last owner found out the car was a lemon. You may treat a car you rented with a little less care than you'd use on your own car.()
A. Both examples primarily illustrate adverse selection.
Both examples primarily illustrate moral hazard
C. The first example primarily illustrates adverse selection; the second primarily illustrates moral hazard.
D. The first example primarily illustrates moral hazard; the second primarily illustrates adverse selection.
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Which of the following is not consistent with the efficient market hypothesis?()
A. Stock prices should follow a random walk
B. Index funds should typically outperform highly managed funds.
C. News has no effect on stock prices.
D. There is little point in spending many hours studying the business pages looking for undervalued stocks.
Suppose you are deciding whether or not to buy a particular bond. If you buy the bond and hold it for 5 years, then at that time you will receive a payment of $10,000. If the interest rate is 6 percent, you will buy the bond if its price today is no greater than()
A. $8,225.06
B. $7,652.58
C. $7,472.58
D. $6,998.98
Diversification of a portfolio()
A. can eliminate market risk, but it cannot eliminate firm-specific risk.
B. can eliminate firm-specific risk, but it cannot eliminate market risk.
C. increases the portfolio’s standard deviation.
D. is not necessary for a person who is risk averse.
When a person engages in detailed analysis of a company to determine its value, he or she is engaging in()
A. standard deviation analysis.
B. informational analysis.
C. fundamental analysis.
D. efficiency analysis.