Graded quiz on the content of Module 1

Graded quiz on the content of Module 1 >> Understanding Financial Markets

1 point

The index is now “more expensive” because its Price/Earnings ratio is higher.

The index is now “cheaper” because its Price/Earnings ratio is higher.

The index is now “cheaper” because its Price/Earnings ratio is lower.

The index is now “more expensive” because its Price/Earnings ratio is lower.

1 point

Market valuation can be assessed by just looking at the aggregate earnings of the companies that constitute a stock index

An “expensive” market can always become “more expensive”

Market valuation can be assessed by just looking at the price of a stock index

A “cheap” market can always become “cheaper”

1 point

Stock price after two months = 100 * (20%) * (10%)

Stock price after two months = 100 * (1.2) * (1.1)

Stock price after two months = 100 * (0.02) * (0.01)

Stock price after two months = 100 * (1 + 15%) * (1 + 15%)

Stock price after two months = 100 * (1 + 20%) * (1 + 10%)

1 point

The scale, i.e. whether the histogram is very spread out (say between -50% and +50%) or very narrow (say between -10% and +10%)

The interval of returns (say between 0% and 5%) that has the highest bar, i.e. the one that contains the most observations.

The asymmetry of the histogram, i.e. whether one tail (the left one or the right one) is “longer” than the other.

The thickness of the tails, i.e. whether extreme events (good or bad) are likely or not.

1 point

The primary market

The secondary market

1 point

Some powerful investors colluding with each other to manipulate the price of an asset.

Some intermediaries that are supposed to execute trades for their clients but actually take advantage of the situation to execute trades for themselves before doing it for their clients.

Some investors benefiting from privileged information about a company and illegally taking advantage of it by trading shares of the company.

Some investors using very modern and sophisticated computer-intensive systems to execute orders on exchanges right before “normal” investors.

Which of the following statements is/are true?

1 point

With no access to additional data, an investment opportunity with a higher return/risk ratio should be preferred to another investment opportunity with a lower return/risk ratio.

Based on this data alone and using the return/risk ratio as the decision tool, one should invest in the Brazilian index rather than the American index.

The return/risk ratio is higher for Brazil than the USA.

Based on this data alone and using the return/risk ratio as the decision tool, one should invest in the American index rather than the Brazilian index.

There is not enough information to compute the return/risk ratios for both countries.

Which of the following statement is/are true about this histogram?

1 point

Over this time period, there was a greater chance of observing extremely bad monthly returns (more negative than -20%) than extremely good monthly returns (more positive than 20%).

Over this time period, there was a 30% chance of observing a monthly return between 0% and 10%.

Over this time period, there was a 80% chance of observing a monthly return between -10% and 10%.

The distribution is skewed to the right (i.e. the right tail is “longer”).

1 point

The fact that they don’t have expenses, the ability to take a much longer term view than professional investors and the fact that they do not have to track or try to beat a particular benchmark.

The ability to deal with illiquidity, the ability to take a much longer term view than professional investors and the fact that they do not have to track or try to beat a particular benchmark.

The ability to deal with illiquidity, the ability to take a much longer term view than professional investors and an access to a greater set of information.

The ability to deal with illiquidity, a better reactivity when faced with short term moves in the market and the fact that they do not have to track or try to beat a particular benchmark.

Graded quiz on the content of Module 1 >> Understanding Financial Markets

Graded quiz on the content of Module 1

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