Questions from General Investment


Q: REITs pay dividends in order to retain their favorable tax status.

REITs pay dividends in order to retain their favorable tax status. As the next chapter on stock explains, corporate dividends are made from earnings. REIT dividends often are not made from earnings bu...

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Q: The portfolio manager of a hedge fund believes that stock A is

The portfolio manager of a hedge fund believes that stock A is undervalued and stock B is overvalued. Currently their prices are $30 and $30, respectively. The portfolio manager of the fund buys 100 s...

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Q: Currently a stock index stands at 100 and the leveraged ETF

Currently a stock index stands at 100 and the leveraged ETF is selling for $100. The ETF should generate a return that is twice the daily return on the index. Over the next 21 days the value of the i...

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Q: What are several human traits that tend to affect investment decisions?

What are several human traits that tend to affect investment decisions?

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Q: In October 2009, Ares Capital Corporation (ARCC) announced that

In October 2009, Ares Capital Corporation (ARCC) announced that it was acquiring Allied Capital (ALD). The terms of the acquisition specified that one share of ALD would become 0.325 share of ARCC. Pr...

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Q: You make an investment and the annual returns are as follows:

You make an investment and the annual returns are as follows: The average annual return is 3 percent. What is the true annualized return?

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Q: The following correlation matrix gives the correlation coefficients for several sectors within

The following correlation matrix gives the correlation coefficients for several sectors within the S&P 500. What can you conclude concerning investing in the sectors to diversify a portfolio?

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Q: Ken Saffaf’s 22-year-old daughter Bozena has just accepted

Ken Saffaf’s 22-year-old daughter Bozena has just accepted a job with Doctor Medical Systems (DMS), a firm specializing in computer services for doctors. DMS offers employees a 401(k...

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Q: Amanda Monaco has just inherited her father’s company. Prior to his

Amanda Monaco has just inherited her father’s company. Prior to his death, Mr. Monaco was the sole stockholder, and he left the entire company to his only daughter. Although Amanda h...

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Q: An investor requires a return of 12 percent on risky securities.

An investor requires a return of 12 percent on risky securities. A stock sells for $25, it pays a dividend of $1, and the dividends compound annually at 7 percent. Will this investor find the stock at...

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