Which of the following statement is FALSE? A. If you ignore a margin call when you...

Which of the following statement is FALSE?

	A.	If you ignore a margin call when you are using margins account, your broker immediately may sell some of your securities to repay the margin loan.
	B.	When forecasting future returns, geometric average will have pessimistic view for short-term period forecasts.
	C.	Geometric average will always be greater than the arithmetic average returns as long as the returns each year are not the same.
	D.	On a short sale, your maximum loss is unlimited.
	E.	Research shows that about 90% of portfolio performance stems from asset allocation.

Expert Solution

Answer - Option C is false

Explaination-

Option A is accurate. The broker does have the right to sell securities to take care of the liabilities if you do not pay attention to a margin call.

Option B is also correct, though the difference in short term is not very high. Note that Option C is incorrect as AM or arithmatic mean is always greater than or equal to geometric mean.

Theoretically, you have unlimited loss potential on short sale. Thus, Option D is correct.

Option E is correct according to Portfolio Performance research (Brinson, Hood, Beebower, 1986)

jeff jeffy answered 2 years ago

If you ignore a margin call, your broker immediately:

If you ignore a margin call, your broker immediately:Will seize all the assets in your accountMay sell some of your securities to repay the margin loanWill increase both your margin loan and the interest rate on that loanWill let you walk away without payingNone of the above

Which of the following statement is false?

Which of the following statement is false?Dividends are not an expense of the company.Dividends are defined in s 6(1) of ITAA 1936.All shareholders are automatically entitled to franking credits attached to a franked distribution of profit.A dividend includes any amount credited by a company to its shareholders as shareholders.

When would we call the Income Statement the Statement of Operations and when would we call...

When would we call the Income Statement the Statement of Operations and when would we call the Balance Sheet the Statement of Financial Position?

Mark the following statement as true or false. If you believe that the statement is false,...

Mark the following statement as true or false. If you believe that the statement is false, briefly say why you think it is false. A statistically significant chi squared in the test of independence implies a causal relationship between the variables that define a contingency table. Choose the correct answer below. A. The statement is false. A statistically significant chi squared indicates an association between the variables. B. The statement is false. A statistically insignificant chi squared implies a causal...

Which statement is false?

Which statement is false? A Every square is a parallelogram B Some rhombuses are rectangles C Every rhombus is a quadrilateral D Every parallelogram is a rhombus

When does a futures trader receive a margin call?A.When the trader's margin account drops...

When does a futures trader receive a margin call?A.When the trader's margin account drops below the initial margin valueB.When the trader's margin account drops below the maintenance margin valueC.When the trader's total open positions exceed the position limitD.All of the above conditions will result in a margin call

At what price will you get a margin call if the maintenance margin is 30%? Initial margin = 50%

You have opened a stock portfolio account with a brokerage firm. You have only purchased stocks of Home Depot. You purchased 200 shares of HD at $178/share.At what price will you get a margin call if the maintenance margin is 30%? Initial margin = 50%

1) Which of the following investments does require initial margin? A. buying a call option B....

1) Which of the following investments does require initial margin? A. buying a call option B. buying a put option C. buying a futures contract D. none of the above 2) If the underlying asset has a current market price of $40 and the strike price on an option contract on that asset is $45, then: A. the option is in-the-money if it is a put option B. the option has $5 of intrinsic value if it is a call...

Which of the following statements is FALSE? a. When using the incremental IRR rule, you must...

Which of the following statements is FALSE? a. When using the incremental IRR rule, you must keep track of which project is the incremental project and ensure that the incremental cash flows are initially positive and then become negative. b. When the risks of two projects are different, only the NPV rule will give a reliable answer. c. Problems arise using the IRR method when the mutually exclusive investments have differences in scale. d. Picking one project over another simply...

Which of the following statements are true? Which are false? Explain (for each statement) According to...

Which of the following statements are true? Which are false? Explain (for each statement) According to the Phillips curve, in the long run there is a trade-off between inflation and unemployment Phillips curve represents a structural relationship between unemployment and inflation that never changes. Unemployment rate counts all people who do not have jobs.

Question