Why might a small investor be interested in buying a mutual fund as opposed to stock in an individual company?
What will be an ideal response?
By buying shares in a mutual fund, small investors reduce the costs they would pay to buy many individual stocks and bonds. Small savers who have only enough money to buy a few individual stocks and bonds can use mutual funds to diversify, which lowers their investment risk because most mutual funds hold a large number of stocks and bonds. If a firm issuing a stock or bond declares bankruptcy, causing the stock or bond to lose all of its value, the effect on a mutual fund's portfolio is likely to be small. The effect might be devastating, though, to a small investor who invested most of his or her savings in the stock or bond. Because mutual funds are willing to buy back their shares at any time, they also provide savers with easy access to their money.
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Transactions costs refer to
A) the cost of transporting goods from one destination to another. B) the raw material cost of production. C) the costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services. D) the implicit costs of production.
The concept of loss aversion is:
A. preferring certain outcomes over uncertain ones. B. a general tendency for people to put more effort into achieving gains than avoiding losses. C. a general tendency for people to put more effort into avoiding losses than achieving gains. D. a spectrum of tolerance for risky situations.
What do you mean by the term 'equilibrium wage'? a. It is the wage that is determined when potential employers and potential employees are free to transact as they wish. b. It is a wage determined by the government with an intention to narrow the gap between the higher and the lower income groups. c. It is a wage at which the workers refuse to offer labor
d. It is a minimum possible rate that an employer must pay in order to hire a labor. e. It is a wage at which there is an excess supply of workers.
When quality cannot be easily judged in advance, what provides consumers with information about the quality of a product?
a. a brand name b. a tie-in c. the quantity available for sale d. the amount of deadweight loss