41.Wheneverthepriceofanassetrisesabovewhatappearstobeitsfundamentalvalue,themarketissaidtobeexperiencinga a.conjecturalmistake. b.fundamentalmishap. c.speculativebubble. d.temporaryinefficiency. 42.Whichofthefollowingtermsisusedtodescribeasituationinwhichthepriceofanassetrisesabovewhatappearstobeitsfundamentalvalue? a.“randomwalk” b.“randombubble” c.“speculativebubble” d.“speculativehedge” 43.Anassetmarketissaidtoexperienceaspeculativebubblewhen a.thepriceoftheassetrisesabovewhatappearstobeitsfundamentalvalue. b.thepriceoftheassetappearstofollowarandomwalk. c.themarketcannotestablishanequilibriumpricefortheasset. d.theassetisanaturalresourceanditssupplyismanipulatedbyforeignnationsandforeignfirms. 44.Thepossibilityofspeculativebubblesinthestockmarketarisesinpartbecause a.stockpricesmaynotdependatallonpsychologicalfactors. b.fundamentalanalysismaybethecorrectwaytoevaluatethevalueofstocks. c.futurestreamsofdividendpaymentsareveryhardtoestimate. d.thevalueofsharesofstockdependsnotonlyonthefuturestreamofdividendpaymentsbutalsoonthepriceatwhichthestockwillbesold. 45.Ifassetmarketsaredrivenbythe“animalspirits”ofinvestors,then a.thosemarketsreflectrationalbehavior. b.thosemarketsreflectirrationalbehavior. c.theefficientmarketshypothesisiscorrect. d.thestockmarketexhibitsinformationalefficiency. 46.Diversification a.increasesthelikelyfluctuationinaportfolio’sreturn.Thus,thelikelystandarddeviationoftheportfolio’sreturnishigher. b.increasesthelikelyfluctuationinaportfolio’sreturn.Thus,thelikelystandarddeviationoftheportfolio’sreturnislower. c.reducesthelikelyfluctuationinaportfolio’sreturn.Thus,thelikelystandarddeviationoftheportfolio’sreturnishigher. d.reducesthelikelyfluctuationinaportfolio’sreturn.Thus,thelikelystandarddeviationoftheportfolio’sreturnislower. 47.Thevalueofastockisbasedonthe a.presentvaluesofthedividendstreamandfinalprice.Asaresult,thevalueofastockriseswheninterestratesrise. b.presentvaluesofthedividendstreamandfinalprice.Asaresult,thevalueofastockfallswheninterestratesrise. c.futurevaluesofthedividendstreamandfinalprice.Asaresult,thevalueofastockriseswheninterestratesrises. d.futurevaluesofthedividendstreamandfinalprice.Asaresult,thevalueofastockfallswheninterestratesrise. 48.Supposethatanincreasedriskofmortgagedefaultslowerstheexpectedprofitabilityofbanks.Thenwewouldexpecttosee a.thedemandforbankstocksrisewhichwouldraisethepricesofbankstocks. b.thedemandforbankstocksrisewhichwouldreducethepricesofbankstocks. c.thedemandforbankstocksfallwhichwouldraisethepricesofbankstocks. d.thedemandforbankstocksfallwhichwouldreducethepricesofbankstocks. 49.Anautomobilemanufacturerunexpectedlyannouncesthatithashiredanewchiefexecutiveofficer.Itiswidelybelievedthatthepresenceofthisindividualwillraisetheprofitabilityofthecorporation.Atthesametimeinterestratesunexpectedlyrise.Whichoftheabovewouldtendtomakethepriceofthestockrise? a.theannouncementandtheriseininterestrates b.theannouncementbutnottheriseininterestrates c.theriseininterestrates,butnottheannouncement d.neithertheannouncementnortheriseininterestrates 50.Theefficientmarketshypothesisimplies a.thatallstocksarefairlyvaluedallthetimeandthatnostockisabetterbuythananyother. b.thatallstocksarefairlyvaluedallthetime,butthatsomestocksmaybebetterbuysthanother. c.thatsomestocksmaybebetterbuysthanothersandstockexpertscandeterminewhichones. d.thatnostockisefficientlyvalued.