Dave,an Accountant,does Not Work for Emergent Company,but Wrong?fully Obtains Inside

question 14

Multiple Choice

Dave,an accountant,does not work for Emergent Company,but wrong?fully obtains inside information concerning Emergent.Based on the in?forma?tion,Dave buys and sells Emergent stock for personal gain.The Securities and Exchange Commission prose?cutes Dave,arguing that he is liable because he stole in?formation right?fully belonging to another.This argument is

• A)the blue-sky theory.
• B)the misappropriation theory.
• C)the red-herring theory.
• D)the tipper/tippee theory.

Recognize the concept and significance of diversification in investment portfolios.

Define risk in investment and understand its measurement.

Learn the basics of portfolio theory and its implications on investment decisions.

Understand the concepts of expected and required returns on investments.

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Definitions:

Financial Asset

An intangible asset representing a legal claim to future payment, such as stocks, bonds, or bank deposits.

Security

A financial asset. Commonly a stock or a bond. An asset pledged to guarantee the repayment of a loan.

Stock

Equity securities representing ownership interest in a company; holders may enjoy dividends and voting rights.

Partial Ownership

Holding a fraction of the equity shares or interest in an entity, providing the holder with a proportionate share of the profits and losses.