19) Stock prices are: 19) ______

A) set by the central bank.

B) determined by market transactions.

C) set by the company issuing the stock.

D) unrelated to the value of the company issuing the stock.

20) U.S. monetary policy is best described as: 20) ______

A) determining the denominations of a country's currency.

B) aimed at keeping inflation low and stable and growth high and stable.

C) attempting to keep inflation constant at zero percent.

D) one of the most important functions of congress.

21) An investment will pay $2,000 half of the time and $1,400 half of the time. The standard deviation for this investment is: 21) ______

A) $30. B) $300. C) $90,000. D) $1,700.

22) Up to what amount would a risk-neutral gambler pay to enter a game where on the flip of a fair coin, if you call the correct outcome the payoff is $2,000? 22) ______

A) Up to $2,000.

B) More than $1,500.

C) Up to $1,000.

D) More than $1000 but less than $2000.

23) Systematic risk: 23) ______

A) cannot be eliminated through diversification.

B) is the risk eliminated through diversification.

C) represents the risk affecting a specific company.

D) is another name for risk unique to an individual asset.

24) An automobile insurance company that writes millions of policies is practicing a form of: 24) ______

A) mutual fund. B) hedging risk.

C) eliminating systematic risk. D) spreading risk.

25) A portfolio of assets has lower risk than holding one asset, but the same expected return and higher transaction costs. Which of the following statements is most correct? 25) ______

A) The portfolio is attractive to investors who are risk seekers.

B) The portfolio is attractive to people who are risk-averse and risk-neutral, but not to risk seekers.

C) The portfolio is not attractive to investors who are risk-neutral.

D) The portfolio is attractive to investors who are risk-neutral.