chapter 4 questions

explain why you would be more or less willing to buy a house under the following: 5. you expect housing prices to fall

less because its expected return has fallen

explain why you would be more or less willing to buy a share of polaroid stock in the following situations: 3.the bond market becomes more liquid

less, because it has become less liquid relative to bonds

explain why you would be more or less willing to buy a share of polaroid stock in the following situations: 4. you expect gold to appreciate in value

less, because its expected return has fallen relative to gold

explain why you would be more or less willing to buy a house under the following: 3. you expected polaroid stock to double in value next year

less, because its expected return has fallen relative to polaroid stock

explain why you would be more or less willing to buy a share of polaroid stock in the following situations: 1. your wealth falls

less, because your wealth has declined

explain why you would be more or less willing to buy a share of polaroid stock in the following situations: 5. prices in the bond market become more volatile

more, because it has become less risky relative to bonds

explain why you would be more or less willing to buy a house under the following: 4. prices in the stock market become more volatile

more, because it has become less risky relative to stocks

explain why you would be more or less willing to buy a house under the following: 2. real estate commissions fall from 6% of the sales price 4% of the sales price

more, because it has become more liquid

explain why you would be more or less willing to buy a share of polaroid stock in the following situations: 2. you expect it to appreciate in value

more, because its relative expected return has risen

explain why you would be more or less willing to buy a house under the following: 1. just inherited 100, 000 dollars

more, because your wealth has increased

"No one who is risk-averse will ever buy a security that has a lower expected return, more risk, and less liquidity than another security." Is this statement true, false, or uncertain?

true, because for a risk averse person, more risk , a lower expected return and less liquidity make a security less desirable

"the more risk-averse people are, the more likely they are to diversify" is this statement true, false, or uncertain?

true, because the benefits to diversification are greater for a person who cares more about reducing risk