Question 1

Speculators in the stock market

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...

Question 2

Define the following terms briefly and concisely.
a.stock
b.bond
c.portfolio diversification
d.speculation
e.random walk

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The answer of Define the following terms briefly and concisely.
a.stock
b.bond
c.portfolio...

Question 3

Corporate income is taxed twice-once in the form of corporate income tax and the second time when the owner must pay income tax on dividends.What are the effects of this double taxation?

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Question 4

If the random walk theory is correct, a prudent investor might choose her stock portfolio by

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Question 5

If stock prices follow a random walk,

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If stock prices follow a random walk, it means that they do not follow any predictable pattern and are subject to random fluctuations. Therefore, a stock's past performance is not a good indicator of its future performance, as each day's price movements are independent of the previous day's movements.

Question 6

Define the following terms and explain their importance to the study of economics.
a.partnership
b.corporation
c.limited liability
d.plowback

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Question 7

The concept of "random walk" applies most closely to predictions of

Accepted Answer

The concept of a random walk refers to the idea that future stock prices cannot be predicted based on past prices or any other factors, as movements in the stock prices are assumed to be completely random. Therefore, predicting the price of a particular stock one year from now is the closest application of the random walk concept among the given options.

Question 8

Speculation serves the market in which of the following ways?

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Question 9

Over the long run, stock prices have

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Historically, the stock market has shown an upward trend over the long term despite short term fluctuations and market corrections. Therefore, option C, "generally risen" is the correct choice.

Question 10

The actions of speculators

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Speculators can provide liquidity and absorb risk, which can help stabilize prices and reduce volatility. By buying and selling futures contracts, speculators help provide a market for hedgers and producers to manage their risks. While speculators are often blamed for causing price spikes or drops, they can also play a role in preventing extreme price movements. Overall, speculation can have a useful economic purpose in providing liquidity and managing risk in markets.

Question 11

Why are bonds risky to a corporation?

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Question 12

How is it possible to have a separation between ownership and control of a major corporation? What specific type of market imperfection can cause this?

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Question 13

Speculators make their profits on

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Speculators make their profits by purchasing assets or securities at a low price and then selling them at a higher price in a different time period. This is known as buying low and selling high. Speculators may use various strategies to predict price movements, such as technical analysis or fundamental analysis. Their profits come from the difference between the buying price and the selling price. Thus, option A is the best choice. The other options do not accurately describe how speculators make profits.

Question 14

In the fifteenth and sixteenth centuries, most towns prohibited individuals from accumulating stocks of grain.Since such individuals sold the grain and profited greatly during food shortages, they were considered to be exploiting people in need.The result of this prohibition was

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Question 15

If stocks are more risky than bonds, why would a rational investor ever buy stocks?

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Question 16

Figure 9-1
 
-Which of the graphs in Figure 9-1 best illustrates the path of a composite of common stock prices over the long term?

Accepted Answer

Graph (3) typically best illustrates the path of a composite of common stock prices over the long term, showing a general upward trend with fluctuations. This reflects the historical tendency of the stock market to increase in value over time, despite short-term volatility.

Question 17

Random walk theory says

Accepted Answer

Random walk theory suggests that stock prices are essentially random and cannot be predicted consistently. Therefore, the theory holds that randomly selecting stocks is just as likely to result in a profitable portfolio as any other method of stock selection.

Question 18

Composites of stock prices

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Composites of stock prices tend to fluctuate around a rising trend over time, as the overall value of the stock market usually increases in the long run. However, there can still be significant short-term fluctuations and volatility.

Question 19

If a team from the NFC wins the Superbowl, we can accurately predict

Accepted Answer

There is no correlation between the outcome of the Super Bowl and future stock prices. Therefore, we cannot make any accurate predictions about future stock prices based on the outcome of the Super Bowl.

Question 20

Predictions of stock prices by stock market analysts

Accepted Answer

Stock prices are subject to various factors which cannot be predicted accurately by analysts, hence the prediction of stock prices based on past trends and future projections can be poor due to randomness.

Quiz 9: Securities: Business Finance, and the Economy: The Tail that Wags the Dog?