Financial Markets Coursera week 1 Quiz

In this blog you will find the correct answer of the Coursera quiz Financial Markets Coursera week 1 Quiz mixsaver always try to bring the best blogs and best coupon codes

1. Which of the following professions has the highest projected employment for 2024?

Teacher
Economist
Truck driver
Financial Advisor

2. Which of the following is NOT a learning objective in this course?

Applying psychology and sociology to finance
How to make money
Regulating financial markets
How we incentivize people to get things done

3. According to Andrew Carnegie, what should somebody do once she is wealthy?

Throw extravagant parties to help her wealth trickle down
Pass it on to her children
Retire early and commit to philanthropy while young
Retire late to accumulate as much wealth as possible, and then give the wealth away

4. Why is it relevant that finance tends to attract large amounts of money?

Money can be used for good or evil
Finance attracts people from around the globe
Financial markets are a critical components of economic success
All of the above

Lesson #2 Quiz

1. A stress test: (check all that apply)

Tries to incorporate all the interconnections between financial institutions.
Aims to test the behavior of historical returns and their fluctuations during all sorts of potential financial crises.
Tries to incorporate all potential economic and financial crises, such as recessions, appreciation and depreciation of currency, liquidity crisis, etc.
Does not look at historical returns, and looks at all the details of the portfolios and their vulnerabilities during all sorts of potential financial crises.

2. A 5% 3-month Value At Risk (VaR) of $1 million represents:

A 5% decline in the value of the asset after 3 month, per each $1 million of notional.
A 5% chance of the asset increasing in value by $1 million during the 3-month time frame.
A 5% chance of the asset declining in value by $1 million during the 3-month time frame.
The likelihood of a 5% of $1 million decline in the asset over the next 3-month.

3.In the Capital Asset Pricing Model (CAPM), a measure of systematic risk is captured by:

The standard deviation of returns.
The variance of returns.
The Beta.
The Alpha.

4. Market (or systematic) risk ___________ whereas idiosyncratic risk

__________.

Is the risk for an asset to not be able to be traded in the market at a later time
Is the risk for an asset to experience losses due to factors that affect the entire stock market
Is the risk for an asset to experience losses due to factors that affect the entire stock market
Is the risk which is endemic to a specific asset and therefore not the market as a whole
Is the risk for an asset to experience losses due to factors that affect the entire stock market
Is the risk which is endemic to the industry of the asset and therefore not the market as a whole
Is the risk for an asset to experience losses due factors that solely affect the industry associated with the asset
Is the risk which is endemic to a specific asset and therefore not the market as a whole

5. Why might an investor not normally invest large sums of money into Walmart or Apple stock?

Both companies have received extensive media coverage
The stock prices are very stable, making it difficult to gain large sums of money
Their stock prices are highly volatile, and thus carry a lot of risk
Their stock prices closely track the S&P500

6. Why is the normal distribution not a good model of some financial data?

Extreme events occur in it too often
The standard deviation is too high
It does not have many outliers
The standard deviation is too low

Lesson #3 Quiz

1. Which of these best describes risk pooling?

If individual events are not independent, risk can be decreased by averaging across all of the events
If individual events are independent, risk can be decreased by averaging across all of the events
Insurance companies must avoid situations whereby customers are incentivized to intentionally cause an incident (e.g. burning their house down)
Sick people are more likely to sign up for health insurance, and healthy people will not purchase the policy because this will make the premium more expensive

2. Which of the following was NOT a factor which led to the proliferation of life insurance?

Insurance salespeople
Increased life expectancy
Statistical data on life expectancy
New sales pitches

3. What happens in the United States if your insurance company goes bankrupt?

There is no protection from the government against insurance company failure
Consumers are insured from insurance company failure at the state level
Insurance companies are partially owned by the government, and thus are not allowed to fail.
Just like the FDIC protects consumers from bank failures, the federal government insures against insurance company failures

4. What problem does the US Affordable Care Act (“Obamacare”) attempt to address and how does it do so?

It addresses selection bias by forcing everybody to buy health insurance or else face a tax penalty.
It addresses selection bias by creating a healthcare system which is fully publicly-funded.
It addresses moral hazard by forcing hospitals to provide emergency services to those who cannot pay for it.
It addresses moral hazard by allowing hospitals to refuse treatment to those who cannot pay for it.

5. One of the main reasons why many homeowners did not have flood insurance before the advent of Hurricane Katrina in 2005 was:

Many homeowners were relying on the government instead.
Many homeowners were not aware that flood insurance existed in the first place.
Insurance premiums in Louisiana went up by 70% between 1997-2005, causing many people to cancel their insurance.
Homeowners thought that the likelihood of a flood was too low to justify buying a flood insurance.

Lesson #4 Quiz

1. Under the “Don’t put all your eggs in one basket” analogy, the eggs represent individual investments and the basket represents the overall investment portfolio. Spreading your “eggs” around allows you to:

Minimize the possibility that bad luck for a single investment adversely affects your overall portfolio.
Maximize the possibility that good luck for a single investment positively affects your overall portfolio.
Maximize the return of your overall portfolio.
Increase the uncertainty of your overall portfolio so you can try to generate an extra return.

2. Risk diversification can be better achieved: (check all that apply)

With only low risk assets in your portfolio.
By including in your portfolio all classes of assets traded in the market, independently of their risks.
With mutual funds or unit investment trusts if you hold a small number of assets.
With only stocks in your portfolio.

3. Short selling, which is defined as the sale of a security that the seller has borrowed, is motivated by the belief that:

The price of the security will rise.
The price of the security will decline.
Short selling is never prompted by speculation.
The price of the security will stay the same.

4. The expected return of a portfolio is computed as ___________ and the standard deviation of a portfolio is ___________.

the simple average of the expected returns of each asset in the portfolio
NOT the weighted average of the standard deviations of each individual asset
the weighted average of the expected returns of each asset in the portfolio, weighted by the investment in each asset
NOT the weighted average of the standard deviations of each individual asset
the weighted average of the expected returns of each asset in the portfolio, weighted by the investment in each asset
the weighted average of the standard deviations of each individual asset
the simple average of the expected returns of each asset in the portfolio
the weighted average of the standard deviations of each individual asset

5. An efficient portfolio is a combination of assets which:

Achieves the highest return for a given risk.
Minimizes risk by ensuring only diversifiable risk remains.
Offers a risk free rate of return by minimizing the risk of the portfolio.
Achieves the highest possible covariance among its assets.

Module 1 Honors Quiz

1. Which of the following are new advancements and changes in finance?

Information technology
Banking
Insurance
Behavioral finance

2. What did Andrew Carnegie believe some people succeed in business and others don’t?

The business world selects for people with natural talent
The business world selects for people who work hard
The business world selects for people with a good education
The business world selects for people who get lucky opportunities

3. The main difference between Value at Risk and Stress Testing is:

Value at Risk takes a non-statistical approach, as opposed to Stress Testing.
Stress Testing takes a non-statistical approach with its scenarios analysis.
Value at Risk is not a quantitative approach.
There are no differences between the two approaches.

4. According to the Capital Asset Pricing Model (CAPM), a security with:

An alpha of zero is able to generate a return which greater than the market return.
A positive alpha is considered overpriced, since the security outperforms the market.
An alpha of zero is able to generate a return which is inferior to the market return.
A positive alpha is considered underpriced, since the security outperforms the market.

5. Which of the following are true about fat tail distributions?

They are a good model for some financial data
The mean is a good representation of the distribution
They are the best choice for most types of data
We must rely on the central limit theorem to gather useful information about them.

6. If an insurance company has 10000 policies, and each has 0.1 probability of making a claim, what is the standard deviation of the fraction of policies which result in a claim?

0.003

7. Why was the National Association of Insurance Commissioners created?

To suggest laws that would prevent insurance corporations from becoming “too big to fail”
To suggest laws that would decentralize the insurance industry
To suggest laws that would decrease the complexity of insurance regulation
To suggest laws that would strengthen the insurance industry

8. Insurance is managed by employers, so if an employee is sick and loses her job, her insurance will be expensive due to preexisting conditions; by contrast, a healthy person who loses his job may not be incentivized to purchase health insurance. This is an example of

Moral hazard
Selection bias
Pooled risk
HMO

9. In addition to earthquake, hurricane and terrorism, which of the following could be categorized as a “disaster” risk?

Market liquidity risk
A World War
Bankruptcy Risk
Currency Risk

10. One of the mentioned assumptions of portfolio management theory is that investors are rational. A rational investor:

Invests only in fully diversified portfolios.
Is always averse to risk.
Prefers a higher return for a given risk and prefers a lower risk for a given return
Invests in passive funds rather than active funds.

11. The market portfolio, which includes all traded assets available in the market, must have a beta which is:

Negative
Equal to 1
Above 1
Equal to 0

12. Among the risks associated with short selling a stock are: (check all that apply)

Default risk: potential unlimited losses when buying back the stock.
Regulatory risk: a ban on short sales can create a surge in the stock price.
Dividend risk: the short seller must provide dividend payments on the shorted stock to the entity from whom the stock has been borrowed.
Systematic risk: the uncertainty inherent to the market as a whole and which cannot be diversified.

13. Leveraging your portfolio: (check all that apply)

Allows you increase your return on equity, magnifying positive (or negative) returns by borrowing money.
Increases your default risk by magnifying the standard deviation (risk) of your portfolio.
Does not increase the standard deviation of your portfolio, since the borrowed money is risk free and therefore has a standard deviation of zero.
Increases systematic risk within your portfolio, that is the uncertainty inherent to the market as a whole and which cannot be diversified.

14. You are an investor who wants to form a portfolio that lies to the right of the “optimal” minimum standard deviation portfolio on the efficient frontier. You must:

Invest only in risky securities.
Borrow money at the risk-free rate, invest in the minimum standard deviation portfolio and, in addition, only in risky securities.
Borrow money at the risk-free rate and invest everything in the minimum standard deviation portfolio.
Invest only in risk-free securities.

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