A. during periods of extreme pessimism because so many stocks become undervalued
B. only when people are irrational
C. when stocks are fairly valued
D. because rational people may buy an overvalued if they think they can sell it to someone for even more at a later date

A. Increasing the number of s from 10 to 20
B. All of these answers provide the same amount of risk reduction
C. Increasing the number of s in the portfolio from 1 to 10
D. Increasing the number of s from 20 to 30

A. information analysis
B. risk management
C. fundamental analysis
D. diversification

A. reduce aggregate risk
B. eliminate all risk
C. increase the standard deviation of the portfolio’s return
D. reduce idiosyncratic risk

A. After Gull buys fire insurance, he begins to smoke cigarettes in bed.
B. None of these answers demonstrate moral hazard
C. Mahmood has been feeling poorly lately so he seeks health insurance
D. All of these answers demonstrate moral hazard

A. None of these answers are true
B. All of these answers are true
C. They dislike bad things more than the like comparable good things
D. The utility they would lose from losing a Rs50 bet would exceed the utility they would gain from winning a Rs 50 bet
Their utility function exhibit the property of diminishing marginal utility of wealth