Investments Questions?

True/False Fill in the blank (3 points each answer) Financial assets are claims on the cash flows (income) of real assets. The return on a portfolio comprised of one share of each stock in the S&P 500 will match the return of the S&P 500 index (ignoring dividends). The bid/ask spread is positively correlated with the liquidity of the asset. One implication of the Random Walk theory and the EMH is that investors and/or speculators can never ever outperform a diversified, passively managed, portfolio of randomly chosen stocks over a long period of time. 5. If you want to buy a stock when it drops to a specific price you will issue a through your broker. order Until they cover, short sellers are responsible for any dividends paid by the shorted stock. The stock price of a company is not correlated with its value. In a repurchase agreement, the dealer promises to an investor's T-bill at a specific time and price, thus locking in a rate. This protects the investor's risk. An allure of technical and fundamental analysis is the frequency with which it seems to be successful 10. A trade using margin of 10 percent amplifies returns times relative to a non-margin trade