In this blog you will find the correct answer of the Coursera quiz Understanding Financial Markets Coursera Answer mixsaver always try to brings best blogs and best coupon codes
 

Week- 1

Graded quiz on the content of Module 1

1. Suppose the aggregate earnings of the companies that are part of an index fall more than the price of the index (which is an aggregation of the stock prices of these same companies). Which of the following statements is/are true?

 

  • The index is now “cheaper” because its Price/Earnings ratio is higher.
  • The index is now “cheaper” because its Price/Earnings ratio is lower.
  • The index is now “more expensive” because its Price/Earnings ratio is lower.
  • The index is now “more expensive” because its Price/Earnings ratio is higher.

2. Which of the following statements about market valuation is/are true?

 

  • Market valuation can be assessed by just looking at the price of a stock index
  • Market valuation can be assessed by just looking at the aggregate earnings of the companies that constitute a stock index
  • An “expensive” market can always become “more expensive”
  • A “cheap” market can always become “cheaper”

3. A stock has a price of 100. Over the following two months, its monthly returns are 20% and 10% respectively. Among the following expressions, which is/are equal to the price of the stock after these two months?

 

  • Stock price after two months = 100 * (1 + 15%) * (1 + 15%)
  • Stock price after two months = 100 * (20%) * (10%)
  • Stock price after two months = 100 * (1 + 20%) * (1 + 10%)
  • Stock price after two months = 100 * (1.2) * (1.1)
  • Stock price after two months = 100 * (0.02) * (0.01)

4. When talking about an histogram, what does “skewness” refer to?

 

  • The scale, i.e. whether the histogram is very spread out (say between -50% and +50%) or very narrow (say between -10% and +10%)
  • The thickness of the tails, i.e. whether extreme events (good or bad) are likely or not.
  • The asymmetry of the histogram, i.e. whether one tail (the left one or the right one) is “longer” than the other.
  • The interval of returns (say between 0% and 5%) that has the highest bar, i.e. the one that contains the most observations.

5. Who are the main participants in financial markets?

 

  • Tax collectors
  • Journalists
  • Academics
  • Investors
  • Financial intermediaries
  • Firms
  • The government

6. You hold some shares of company XYZ and you would like to sell them to pay a speeding ticket you just received. Which of the following markets will you turn to?

 

  • The secondary market
  • The primary market

7. Which of these examples best illustrates “insider trading”?

 

  • Some intermediaries that are supposed to execute trades for their clients but actually take advantage of the situation to execute trades for themselves before doing it for their clients.
  • Some investors using very modern and sophisticated computer-intensive systems to execute orders on exchanges right before “normal” investors.
  • Some powerful investors colluding with each other to manipulate the price of an asset.
  • Some investors benefiting from privileged information about a company and illegally taking advantage of it by trading shares of the company.

8. You have gathered the following information about the performance of the American and Brazilian stock indices:

Which of the following statements is/are true?

 

  • Based on this data alone and using the return/risk ratio as the decision tool, one should invest in the Brazilian index rather than the American index.
  • Based on this data alone and using the return/risk ratio as the decision tool, one should invest in the American index rather than the Brazilian index.
  • The return/risk ratio is higher for Brazil than the USA.
  • There is not enough information to compute the return/risk ratios for both countries.
  • With no access to additional data, an investment opportunity with a higher return/risk ratio should be preferred to another investment opportunity with a lower return/risk ratio.

9. Based on the data you gathered, you were able to plot the following histogram:

Which of the following statement is/are true about this histogram?

 

  • Over this time period, there was a 30% chance of observing a monthly return between 0% and 10%.
  • The distribution is skewed to the right (i.e. the right tail is “longer”).
  • Over this time period, there was a 80% chance of observing a monthly return between -10% and 10%.
  • Over this time period, there was a greater chance of observing extremely bad monthly returns (more negative than -20%) than extremely good monthly returns (more positive than 20%).

10. What are the 3 advantages that private investors enjoy over their professional counterparts?

 

  • The ability to deal with illiquidity, the ability to take a much longer term view than professional investors and an access to a greater set of information.
  • The fact that they don’t have expenses, the ability to take a much longer term view than professional investors and the fact that they do not have to track or try to beat a particular benchmark.
  • The ability to deal with illiquidity, a better reactivity when faced with short term moves in the market and the fact that they do not have to track or try to beat a particular benchmark.
  • The ability to deal with illiquidity, the ability to take a much longer term view than professional investors and the fact that they do not have to track or try to beat a particular benchmark.

 

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