Final Review

What is meant by financial assets ?

• Assets that determine the productive capacity of the economy

• Examples include buildings and machinery

• Intrinsic value remains unchanged

• Claims on real assets

Which market handles the initial sale of securities ?

• Secondary market

• Capital market

• Primary Market

• Money Market

What is the main difference between broker and dealer markets?

• The type of securities traded

• The way transactions are executed

• The level of available liquidity

• The size of companies traded

Why must companies register with the SEC before an IPO ?

• To ensure compliance with state regulations

• To guarantee the accuracy of all information

• To be able to trade in international markets

• To reduce the cost of offering shares

How is standard deviation calculated in investment ?

• Using the expected average return

• Taking the square root of the average squared variation

• Dividing the sum of returns by the number of possibilities

• Subtracting the average from each expected return

What is the main function of diversification in a portfolio ?

• Increasing the overall risk of the portfolio

• Reducing unsystematic risk

• Eliminating market risk entirely

• Guaranteeing higher returns

What does beta signify in the context of investment risk ?

• The sensitivity of an asset's return to the overall market

• A measurement of specific asset risk

• The ratio of return to standard deviation

• An absolute measure of return volatility

How do assets with a beta greater than one react to market changes ?

• They move more significantly compared to the market

• They are more stable than the market

• They Experience changes proportional to the market

• They are unaffected by market fluctuations

What is the Capital Asset Pricing Model ( CAPM ) ?

• A model that describes the relationship between risk and expected return

• A model for calculating beta exclusively

• A model that eliminates market risk altogether

• A method for determining asset prices based on historical cost

Real assets determine the productive capacity of the economy

• True

• False