1) Portfolio risk is the summation of business and financial risk.
2) The most the investor who sells a naked stock index option can lose is the cost of the
option.
3) Hedge funds are sold primarily to high net worth investors and financial institutions
such as pension plans.
4) Calls are options to sell stock at a specified price
within a specified time period.
5) If a firm repurchases debt at a discount, its net income is increased.
6) To construct a bear spread, the investor buys a call option and shorts the stock.
7) Convertible preferred stock generally has a call feature designed to force conversion.
8) The potential capital gains from a convertible bond tend to be less than the potential
capital gains on the stock into which the bond may be converted.
9) Insider purchases of stock are considered bullish.
10) Since bonds are legal obligations, there is little
risk associated with purchasing these securities.
11) If an investor believes that financial markets are inefficient, that argues for the
individual to pursue a more active portfolio strategy.
12) The spread between the bid and ask prices should be viewed as one of the costs of
investing.
13) A higher beta decreases the required rate of return.
14) U. S. citizens may invest in foreign stocks by purchasing American Depository
Receipts (ADRs).