Download Combining Securities - Economics of Financial Markets - Exam and more Exams Financial Accounting in PDF only on Docsity! EC362 Autumn 2010 Page 1 of 1 Ollscoil na hÉireann, Gaillimh GX_____ National University of Ireland, Galway Autumn Examinations 2010 Exam Code(s) 3BA1, 3BA5, 4BA4, 3BC1, 4BC2, 4BC3, 4BC4, 3FM2, 1EM1, 1OA1 Exam(s) B.A., B.A. (Public & Social Policy), B.A. (Economic & Social Studies), B.Comm., B.Comm. International, 3rd B.Sc. in Financial Mathematics and Economics, Erasmus, International Students Module Code(s) EC362 Module(s) ECONOMICS OF FINANCIAL MARKETS Paper No. 1 Repeat Paper Special Paper External Examiner(s) Prof. C. Ryan Internal Examiner(s) Prof. J. McHale C. Twomey Instructions: Section A – answer all questions (20 marks) Section B - answer 4 out of 6 questions (80 marks) There are 100 marks in total. All questions will be marked equally. If you attempt MORE THAN the correct number indicate clearly those questions which you wish to be graded. Duration 2hrs No. of Answer Books 1 Requirements: None No. of Pages 5 Department(s) Economics EC362 Autumn 2010 Page 2 of 2 SECTION A Answer all questions. This section is worth 20 marks. Each question is worth 2 marks. NB: Write your answers in the answer book, not on the exam paper. 1. Portfolio risk is reduced by combining securities with: a) high standard deviations. b) low standard deviations. c) less than perfect correlation. d) perfect correlation. 2. Stock market bubbles and subsequent crashes are examples of market: a) risk aversion. b) inefficiency. c) weak form efficiency. d) strong form efficiency. 3. In an efficient stock market, new information: a) arrives in a random fashion. b) arrives in a predictable fashion. c) is biased. d) is ignored by insiders and the general public. 4. Which of the following is the most likely action of investors with representativeness bias? a) They hold onto loser stocks for too long to avoid regret. b) They infer that good companies are also good investments. c) They buy the stocks other investors buy. d) They attribute to bad luck any loss of money. 5. If a company announced the resignation of its CEO and the stock price of that company increased by 1.2%. The DJIA rose by 1.3% in that day. The average return for the company is 0.50% over the last six month. The beta is 0.8 and alpha is -0.2. What is the abnormal return of this company based on the mean-adjusted model? a) -0.10% b) 0.10% c) 0.36% d) 0.70% 6. If a portfolio has two shares: GE and DIS weighted as 60% and 40%, respectively. If the standard deviation for GE is 15% while for DIS is 13%. The covariance between those two stocks is 150 what is the standard deviation of this portfolio? a) 11.87% b) 12.73% c) 13.42% d) 180%
