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Self-test Questions

Select the radio button corresponding to your choice of answer for each question, and then click on "Submit Answers" to find out how many you answered correctly.

1

A risk loving person will bet _____________
A)if there are favourable odds
B)if the odds are unfavourable
C)if odds are not unfavourable
D)on anything
2

In the insurance industry, high-risk customers are more likely to take out insurance. This is an example of
A)moral hazard
B)risk aversion
C)adverse selection
D)a poor gamble
3

Moral hazard means that the act of insuring _____________that the desired outcome will occur
A)reduces the likelihood
B)increases the likelihood
C)guarantees
D)none of the above
4

A person's choice of a financial portfolio reflects their _________ and ____________
A)wealth, interest rates
B)income, consumption patterns
C)trade-off between risk and return, market opportunities
D)expectations, political stability
5

Normally you would expect a stockbroker to look for __________ shares
A)negative beta
B)low beta
C)high beta
D)safe
6

Individual share prices reflect
A)anticipated dividends
B)anticipated capital gain
C)their riskiness
D)all of the above
7

If a market produces prices that always reflect the most up to date information, it can be described as _______________
A)rapidly adjusting
B)competitive
C)free to enter
D)efficient
8

Trading assets on the basis of how other people are expected to behave in the future is known as ____________
A)risk hedging
B)fiscal prudence
C)risk-loving
D)speculation
9

If you were to sign a contract today to buy a car in one year at an agreed price, this would be an example of ___________
A)a spot contract
B)a hedging contract
C)a forward contract
D)a contract for differences
10

When risks on different asset returns are related, the risk on the whole portfolio can be reduced by diversification
A)TRUE
B)FALSE
11

A spot market deals in contracts made today for delivery at a future date
A)TRUE
B)FALSE
12

If you acquire a portfolio that you feel is too risky, you might wish to shift some of the risk onto somebody else by
A)speculating
B)diversifying
C)buying more
D)hedging






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