31-33 It has seemed reasonable, from the standpoint of financial theory, that st

Question

31-33

It has seemed reasonable, from the standpoint of financial theory, that stock prices are approrimately AR-1 process (First-Order Autoregressive Process specifies that the output variable depends linearly on its oun previous values) (a) True (b) False 32. How do you evaluate the following statement: The old investing adage "don't put all your eggs in one basket" sounds very simple: Don't put your entire portfolio in one stock. The mean-variance portfolio theory of Markowitz (1952) suggests that putting one share of each stock in one's portfolio is enough to create a perfect portfolio. (a) True (b) False 33. How do you evaluate the following statement: The eguivalent annual cash-flou technigue is primarily used whenever the lives of tuo diferent projects are the same. (a) True (b) False

Explanation / Answer

Stock Prices follow stochastic processes as Autoregressive processes are identifiable using PACF but stochastic process are random most of the times

Hence asnwer is false

Ans 32)

True that

Mutual fund is a portfolio in which stocks from different sectors are beought to make one portfolio which diversifies risk and justifies the idiom mentioned in question

Ans 33)

True

As time period must be the same for mutually exclusive projects

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