Question

Jake routinely directly holds his own stocks. He updates the stocks in his portfolio every week, trying to pick the stocks that will perform the best over the next week. Jake is managing his assets using ________.

an active investing strategy

a passive investing

a mutual fund

a bank

Suppose that you own stock in a company that sells flour. If you wanted to diversify to protect your portfolio against the risk that severe flooding might cause crop failure, leading to a rise in wheat prices and adverse conditions in the flour industry, which stock should you add to your portfolio?

A company that sells umbrellas

A company that sells sunscreen

A company that sells tractors

A company that sells airplanes

The efficient market hypothesis implies the only way to beat the market consistently is by being a financial genius.

False

True

Boats are an asset that consistently tend to lose value over time, meaning they pay a negative interest rate. Why do people continue to invest in boats?

They pay a high non-monetary return for people who enjoy boating and fishing.

Boats offer a better way to diversify your portfolio than many other assets.

The return on boats has extremely little risk.

Savvy investors know the value of boats will increase as global warming continues to cause sea levels to rise.

Suppose that you believe there will soon be a boom in the tech sector in the United States, causing the profits of tech companies to soar. Which of the following mutual funds would best let you take advantage of this?

A mutual fund whose portfolio replicates the NASDAQ Composite Index

A mutual fund whose portfolio replicates the S&P 500 Index

A mutual fund whose portfolio replicates the Dow Jones Industrial Average

A mutual fund whose portfolio holds low-risk corporate bonds

Answer 1

1) Jake routinely directly holds his own stocks. He updates the stocks in his portfolio every week, trying to pick the stocks that will perform the best over the next week. Jake is managing his assets using an active investing strategy.

Reason

Since Jake is involved in buying and selling of stocks every week implying he is highly active on the platform. therefore he is involved in active investing strategy. He is keeping a close eye on market trends and frequently making the chances to pick the best of stocks in order to maximise his gains.

2) Suppose that you own stock in a company that sells flour. If you wanted to diversify to protect your portfolio against the risk that severe flooding might cause crop failure, leading to a rise in wheat prices and adverse conditions in the flour industry, which stock should you add to your portfolio?

A company that sells umbrellas.

Reason

To diversify the portfolio and to make it more balanced one has to think what will be the good option to invest in even if the conditions are flooding. One of the prominent reason for flooding is excessive rainfall. so in such a scenario the demand of umbrellas will rise and hence making it profitable to buy stocks of the company that sells umbrella.

3)The efficient market hypothesis implies the only way to beat the market consistently is by being a financial genius.

No

Reason

The Efficient market hypothesis is highly controversial and debatable. The reason being even the person who is financially genius can't fully understand the randomness and unpredictability of the market. however there is no denying the fact that a financial genius can do much better than the others but outperforming the market consistently for long is not that easy as the market forces are very unpredictable.

4) Boats are an asset that consistently tend to lose value over time, meaning they pay a negative interest rate. Why do people continue to invest in boats?

They pay a high non-monetary return for people who enjoy boating and fishing.

Reason

Boats is a fixed asset that depreciates very quickly as compared to other fixed assets like machines, plant and furniture. However still people prefer to buy boat even though it has negative interest rate the primary reason for that is that it has very high non-monetary gains for them as they enjoy boating and fishing.