Question 1

Explain how derivates were used to increase risk making the financial crisis of 2007-2009 more severe.

Accepted Answer

The answer of Explain how derivates were used to increase...

Question 2

As an investor, would you agree to the statement "put all your eggs in one basket?" Substantiate your answer.

Accepted Answer

The answer of As an investor, would you agree to...

Question 3

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

Accepted Answer

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

Question 4

An investor is trying to decide whether to put his funds into stocks or bonds.He expects rising interest rates over the next year and higher inflation.Your advice?

Accepted Answer

The answer of An investor is trying to decide whether...

Question 5

From the viewpoint of the individual investor, are stocks or bonds riskier?
 Explain.

Accepted Answer

The answer of From the viewpoint of the individual investor,...

Question 6

Explain how mutual funds are advantageous to small investors.

Accepted Answer

The answer of Explain how mutual funds are advantageous to...

Question 7

Explain why using leverage to purchase risky securities is so popular.

Accepted Answer

The answer of Explain why using leverage to purchase risky...

Question 8

Explain why bond prices and interest rates are inversely related.

Accepted Answer

The answer of Explain why bond prices and interest rates...

Question 9

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?

Accepted Answer

The answer of Corporate income is taxed twice-once in the...

Question 10

Would a corporation seeking to raise capital sell its new shares on the stock market?If not, why not?

Accepted Answer

The answer of Would a corporation seeking to raise capital...

Question 11

What is the stock market's role in achieving efficient use of resources?

Accepted Answer

The answer of What is the stock market's role in...

Question 12

Why is diversification recommended for investors?

Accepted Answer

The answer of Why is diversification recommended for investors?...

Question 13

Assume Jean-Claude purchased real estate for $500,000 using $50,000 of which is his own money and $450,000 which he borrowed at an 8% interest rate.If the value increased by 10% in one year and he sold the property, what was Joe's rate of return on his investment?
 If the value of the property had declined by 2%, what would have been the rate of return on his investment?

Accepted Answer

The answer of Assume Jean-Claude purchased real estate for $500,000...

Question 14

Explain how a diversified portfolio can reduce fluctuations in returns even when the economy as a whole is experiencing contractions and expansions.

Accepted Answer

The answer of Explain how a diversified portfolio can reduce...

Question 15

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

Accepted Answer

The answer of If stocks are more risky than bonds,...

Question 16

Write a short note on the regulation of the U.S.securities markets.

Accepted Answer

The answer of Write a short note on the regulation...

Question 17

Why is plowback the overwhelming favorite among choices of sources of funds for financing corporate investment?

Accepted Answer

The answer of Why is plowback the overwhelming favorite among...

Question 18

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?

Accepted Answer

The answer of How is it possible to have a...

Question 19

Explain how "herd behavior" affects the stock market, and contributes to recession.

Accepted Answer

The answer of Explain how "herd behavior" affects the stock...

Question 20

Why are bonds risky to a corporation?

Accepted Answer

The answer of Why are bonds risky to a corporation?...

Quiz 9: Securities: Business Finance and the Economy: the Tail That Wags the Dog