In this blog you will find the correct answer of the Coursera quiz Financial Markets Coursera week 2 Quiz mixsaver always try to brings best blogs and best coupon codes
Lesson #5 Quiz
1. While discussing what the future of financial markets will look like, the following arguments were mentioned (check all that apply):
- It is hard to predict the nature of future financial markets, this evolution will depend on the involvement of young generations within the financial community.
- Financial markets will evolve following simple ideas and ideals, such as the ones historically mentioned by Karl Marx or Robert Owen.
- It is hard to predict the nature of future financial markets, since human species is the product of a complex evolution.
- Financial markets are likely to stay the way they are now for the next three decades.
2.In his work, David Moss describes how investors’ psychology favored limited liability after the early 19th century New York experiment. In fact, the comparison between investors’ psychologies in the context of unlimited liability and lottery tickets is:
- Symmetrical. Unlimited liability and lottery tickets investors tend to overestimate the minimum probability of loss.
- Asymmetrical. Unlimited liability investors tend to overestimate the minimum probability of loss, whereas in lottery tickets, they overestimate the minimum probability of win.
- Symmetrical depending on the amount of money involved. For large amounts, both unlimited liability and lottery tickets investors tend to overestimate the minimum probability of loss.
- There is no such comparison between lottery tickets and unlimited liability investors.
3. The introduction of inflation indexed debt was motivated by: (check all that apply)
- An incentive to hedge from inflation volatility.
- The idea to generate profits when inflation is equal to 0.
- Historical examples of nominal debt being wiped out in real terms by high inflation.
- An incentive to have a debt contract fixed in real terms.
4. Why did Chile introduce the Unidad de Fomento ?
- To provide stimulus to the economy.
- To create a unit of account indexed to inflation, in order to counteract the impact of hyperinflation.
- To bolster international trade.
- To replace the peso as the official currency because of hyperinflation.
5. The concept of equity-protected mortgages consists in:
- Mortgages that include fire insurance.
- Mortgages that include casualty insurance.
- Mortgages that include house price insurance.
- Mortgages that include accident insurance.
Lesson #6 Quiz
1.In the S&P 500 forecasting exercise, many subjects seemed to be subject to the representativeness heuristic. This concept of behavioral finance posits that:
- Most people don’t behave like forecasters, they tend to be affected by their recurring thoughts at the time.
- Most people don’t behave like forecasters, they tend to interpret new evidence as a confirmation of their existing beliefs or theories.
- Most people don’t behave like forecasters, what they saw in the past is representative of the future.
- Most people don’t behave like forecasters, they tend to rely too heavily on the first piece of new information offered when making decisions.
2. An efficient market is defined as one in which:
- All participants have the same opportunity to generate the same returns.
- Asset prices quickly and fully reflect all available information.
- Asset prices are often in line with the intrinsic value.
- Transactions are ultimately costless.
3. The Dividend Discount Model (or Gordon Growth Model) can be stated as follows.
Let the investor’s discount rate be equal to r .If earnings equal dividends, and if dividends grow at the long-run rate g, then the price of the stock P can be written as follows:
- P = E/(r+g)
- P = (E*g)/(r)
- P = E/(r-g)
- P = (E*r)/(g)
4. Human judgment and experience can play a role in the advent of stock market crash because:
- Investors with an experience of financial crises are better at staying out of the market in turbulent times.
- A lot of people who have lived through financial crises have reported that, as a consequence of these crises and their narratives, their faiths in the market have diminished.
- Investors with an experience of financial crises are better at diversifying their portfolios.
- Investors with an experience of financial crises are better at exploiting profit opportunities.
Lesson #7 Quiz
1. Which of the following best describes the “invisible hand”?
- Subtle government economic interventions can lead to the inefficient allocation of resources.
- The free market, guided by self-interest, is mislead to inefficiently allocate resources.
- Subtle government economic interventions can ensure the sufficient production of goods to meet society’s demands.
- The free market, guided by self-interest, ensures the sufficient production of goods to meet society’s demands.
2. What problems does prospect theory solve? (check all that apply)
- People can underestimate high probabilities and overestimate low probabilities
- People do not treat gambles as equivalent to their expected utility
- People will make big gambles to avoid losses
- People will often make purchases impulsively
3. What is the wishful thinking bias?
- People think that, if they hope for something strongly enough, it will be more likely to happen.
- People over-estimate probabilities of things they would like to be true.
- People do not consider the probability of the things they want most.
- People hope that their sports team or political candidate will win
4. Ricardo thinks that, since society seems similar to what it was in the late 1920s, a second Great Depression is coming soon. To which cognitive bias is Ricardo falling victim?
- Representativeness heuristic
- The framing effect
- The disjunction effect
- Attention anomalies
5. What is Newcomb’s paradox?
- People behave irrationally when faced with decisions which involve large sums of money.
- People will behave differently if playing games against a computer compared to playing them with a human opponent.
- People sometimes change their behavior when they learn about a prediction which has been made about the future.
- People prefer a small chance at winning $1 million than a high chance of winning $1000.
6. Which of the following is NOT a common trait of somebody with Antisocial Personality Disorder?
- Lack of empathy
- Lack of desire to interact with others
- Heightened self-esteem
Module 2 Honors Quiz
1. A limited liability corporation in which you are a shareholder has just gone bankrupt. The company has a large debt, that is its liabilities are far in excess of its assets. Hence, you will be called on to pay:
- A proportion of the total debt, which is decided at the discretion of the bankruptcy judge.
- An amount that could, at most, equal what you originally paid for the shares of common stock in the corporation.
- A proportional share of all creditor claims based on the number of common shares that you own.
2.The inflation risk, which inflation indexation aims to mitigate (check all that apply)
- Is not the risk that there will be inflation, it is the risk that inflation will significantly fluctuate over time.
- Is the risk that the nominal rate of return of an investment will exceed the rate of inflation.
- Is the risk that the cash flow from an investment won’t be worth as much in the future because of changes in purchasing power due to inflation.
- Is associated with any investment that involves cash flows over time.
3. The concept of human capital risk (check all that apply):
- Is a risk associated with the present value of all your future wages.
- Is not correlated with professional competency.
- Is not correlated with the stock market.
- Can also be considered as a protection against inflation.
4. The random walk hypothesis of the Efficient Market Theory posits that:
- Historical stock prices follow a random walk.
- Stock price volatility follows a random walk.
- Historical stock returns follow a random walk.
- Short-term investment returns are inherently unpredictable.
5. Suppose a market is inefficient. As new information is received about an asset:
- There will be a lag in the adjustment of the stock price.
- Nothing will happen.
- The volatility (standard deviation) of the stock price will increase.
- Investors will short the stock.
6.Investors mainly use the price-to-earnings (P/E) ratio in order to:
- Decide how much profit a company is likely to make in the future.
- Decide whether a company’s shares are overpriced or underpriced.
- Determine the optimal risk-return ratio.
- Determine the optimal price for the company’s products.
7. What is the shape of the value function in prospect theory?
- Gains: concave up; Losses: concave up
- Gains: concave up, Losses: concave down
- Gains: concave down; Losses: concave up
- Gains: concave down; Losses: concave down
8. Which of the following provide evidence that investors experience cognitive dissonance?
- Investors buy and sell stocks very rapidly
- Investors choose investments which already have many other investors
- Investors do not remember the negative performance of their investments.
- Investors hold onto funds that are doing poorly
9. Which of the following situations are examples of the framing effect? (check all that apply)
- An elevator lists a maximum capacity of 2000 lbs, even though it can safely carry up to 5000 lbs.
- A mattress which costs $1000 is advertised as $4000 with a “75% off” sticker on it
- A gold coin is sold for $1000, even though it is only worth $300.
- A stock splits from $60 to $30 and investors are given twice as many shares
10. Which of the following defines the relationship of doctors to patients, but generally does not apply to the relationship of financial advisors to their clients?
- Patients can do their own background research on medical concepts to help them better understand their health, but finance is too complicated for clients to do this.
- Doctors use both data and experience/intuition when advising patients, but financial advisors must use either one or the other.
- Doctors have made an oath of loyalty to their patients, but financial advisors have not.
- Patients may seek second opinions from other doctors, but not from financial advisors.
11. Which describes the concept of social contagion?
- Mathematical models of disease spread can be applied to the spread of ideas
- When an idea gains cultural momentum, it is more likely to be propagated throughout generations
- Contagious diseases tend to spread in social situations.
- Ideas can evolve and develop in a similar way to genes, and we can use the principles of evolutionary biology to understand this development.
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