*which of the following statements is true? Select one: O Investors sell a stock when required return is less than expected return and buy a stock when required return above expected return O Investors sell a stock when it is under-valued and buy it when it is over-valued. Investors buy a stock when it is under-valued and sell it when it is over-valued O None of the answers are correct
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- Which of the following strategy would you adopt if you expect the fall in prices of a stock? A. Buy a call B. Sell a call C. Sell a put D. Buy a future1. What does the term "intrinsic value" mean? Discuss. 2. Once an investor calculates intrinsic value for a particular stock, how does he or she decide whether or not to buy it? Explain. ExpectationsIf an investor believes that the expected return is lower than the required rate of the return, the stock should be and he should . Group of answer choices overvalued, buy the stock. undervalued, not buy the stock overvalued, not buy the stock undervalued, buy the stock.
- According to the efficient market theory, whenever investors find that the required return of stock is less than the expected return of the stock, the investor will buy the stock. This will: a. drive the price up b. cause the market to crash c. drive the price down d. not affect the priceIf the market value and the intrinsic value of a stock differ; O a. the stock sells for its fair value O b. the stock sells for its equilibrium value O c. the stock is mispriced O d. the stock is fairly pricedA variant of the Glosten-Milgrom model. The underlying stock can take on one of three values: V < V ∗ < V . with probabilities δV , δV ∗ and δV = 1 − δV − δV ∗ respectively. • The informed trader can decide whether to buy, sell or make no transaction. • In the event that a trade would yield zero or negative profit, the informed trader will not trade. • The uninformed traders always trade. • The model is dynamic, that is, traders are repeatedly drawn and are given the opportunity to trade with the dealer. • The dealer is a monopolist. 1.1 What is the optimal strategy of the informed trader? 1.2 What is the optimal pricing scheme of the dealer? 1.3 If the dealer executes trader with many traders over time, what happens to the bid and ask prices?
- The disposition effect: a. Is the tendency of stock investors to sell their winning stocks and hold onto their losing stocks b. Is consistent with regret avoidance behaviour c. Is a consequence of investors’ preference for lottery-type stocks d. (a) & (b) e. (a), (b) & (c)f a stock's expected return as seen by the marginal investor exceeds his or her required return, then the investor will buy the stock until its price has risen enough to bring the expected return down to equal the required return. O False O True Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.Which of the following statement(s) is(are) TRUE? (i) The valuation price of a stock primarily depends on expected future dividends to its shareholders and its required rate of return. (ii) An investor who intends to sell a stock after holding it for a short period will forgo all future dividends, thus will be willing to pay for a lower price for the stock compared to another investor who prefers to hold the share for a longer period. (iii) The valuation share price is positively related to the share's required rate of return.
- At time t you own one stock that pays no dividends, and observe that F(t, T) < St/Z(t, T). What arbitrage is available to you, assuming that you can only trade the stock, ZCB and forward contract? Be precise about the transactions you should execute to exploit the arbitrage.If the fair value of a stock is more than its market value, which of the following is a reasonable conclusion? a. The stock has a low level of risk b. The stock offers a high dividend payout ratio c. The market is undervaluing the stock d. The market is overvaluing the stockWhich of the following is true? A call on a stock plus a stock the same as a put O Along call is the same as a short put OA short call is the same as a long put O None of the other choices