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- In insurance, all of the following loses are an example of pure risk EXCEPT: a. Injury to a business persons customer. b. Decline of stock values in the stock marketIf you are in financial hardship, explain what it means. If we suppose that financial hardship occurs, explain how and why financial distress would make a company's stock more hazardous.A stockbroker advises a client to “buy preferred stock. . . . With that type of stock, . . . [you] will never have to worry about losing the dividends.” Is thebroker correct?
- Despite some theoretical assertions, many investors do care a great deal about dividends. They believe that sure dividends today (a bird in the hand) are less risky than a return in the form of capital gains in the future. The following table lists some factors that might affect an investor’s preference for dividends. Indicate whether the given factors are likely to make an investor prefer to receive more or fewer dividends for each statement. When an investor dies, his or her heirs are not liable for taxes on the capital gains generated during the investor’s life. They are only liable for the capital gains earned since the investor’s death. Risk-averse investors prefer to minimize uncertainty with their expectations of income from their investment. Investors expect a reliable annual cash flow from their stock portfolios.Why might a rational investor invest in the stock of a company that pays no dividend?What are some of the risks an investor would face when investing in a stock? In addition to the business risk coming from the type of business environment that your company operates in, what additional risk would be of concern to an investor? The company might be mismanaged and do poorly or go out of business. The company's stock market return might be wildly unpredictable as the operating performance might be unstable. The company's competitors might do a better job and take market share away? The list goes on and on... What risks would you face if you bought 100 shares of Tesla?
- A retiree believes that investing in a non-dividend paying growth firm, which requires the periodic sale of stock for income, will eventually lead to a loss of all shares. Explain the flaw in this logic.which of the following statements is true? Select one: Investors sell a stock when required return is less than expected return and buy a stock when required return above expected return None of the answers are correct Investors buy a stock when it is under-valued and sell it when it is over-valued Investors sell a stock when it is under-valued and buy it when it is over-valued.A stockbroker advises a client to “buy preferred stock. … With that type of stock, … [you] will never have to worry about losing the dividends.” Please let us know if the broker is correct.
- Why is it reasonable to ignore diversifiable risk and care only about nondiversififiable risk? What about an investor who puts all of his money into only a single risky stock? Can he properly ignore diversififiable risk?Give one example of overconfidence bias in investing and how to overcome it. Thank you!You are concerned about one of the assets in your diversified portfolio. You just have an uneasy feeling about the CFO of that particular firm. You do believe however that the firm makes a good product and that it is appropriately priced by the market. Should you be concerned about the effect on your portfolio if the CFO embezzles a portion of the firm's cash? Discuss based on diversification of assets in a portfolio. Further assume your friend is trying to decide to purchase stock from that same company. She does not hold a diversified portfolio like you do. Based on the relationship between risk and return, will you be willing to pay a higher price for the stock than her? Explain