Deciding That It Must Be Raining Because the Weather Person

question 36

Multiple Choice

Deciding that it must be raining because the weather person said it would rain today is an example of which method of knowing?

• A) intuition
• B) authority
• C) observation
• D) deduction

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Definitions:

Diversifiable Risk

A type of investment risk that can be reduced through diversification, relating to factors affecting specific industries, companies, or securities rather than the market as a whole.

Publicly Traded Stocks

Stocks of companies that are traded on public stock exchanges, making them available to buy and sell by investors.

True Market Portfolio

An optimal portfolio that includes all available assets in the market, their proportions reflecting their market values, as suggested by the Capital Asset Pricing Model.

Derivatives

Claims whose value depends on what happens to the value of some other asset. Futures and options are two important types of derivatives, and their values depend on what happens to the prices of other assets. Therefore, the value of a derivative security is derived from the value of an underlying real asset or other security.