Question

Kenji and Lucia are building their portfolios. Kenji purchases shares in a mutual fund and pays fees to a manager who actively manages the mutual fund's portfolio. He does so because he believes that the manager can identify inexpensive stocks that will rise in value. Lucia is not convinced. She buys shares in an index fund—a type of mutual fund that simply buys all of the stocks in a given stock index rather than actively managing a portfolio.
Kenji builds his portfolio on the supposition that:________

a. Stock analysts can use fundamental analysis to identify undervalued stocks.
b. Stock prices follow a random walk
c. The stock market exhibits informational efficiency.

Answer 1

Answer:

Kenji and Lucia are building their portfolios. Kenji purchases shares in a mutual fund and pays fees to a manager who actively manages the mutual fund's portfolio. He does so because he believes that the manager can identify inexpensive stocks that will rise in value. Lucia is not convinced. She buys shares in an index fund—a type of mutual fund that simply buys all of the stocks in a given stock index rather than actively managing a portfolio.

Kenji builds his portfolio on the supposition that:________

A. Stock analysts can use fundamental analysis to identify undervalued stocks.

B. Stock prices follow a random walk

C. The stock market exhibits informational efficiency.

-KeonLee

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Answer 2

Answer:

a. Stock analysts can use fundamental analysis to identify undervalued stocks.

Explanation:

Since in the question it is mentioned that he would trust the manager that it could identify the inexpensive stock that would increase the value  but on the other side lucia not convinced, so she purchased the shares

So the kenji create his portfolio based on that the stock analyst would applied the fundamental analysis in order to analyze the undervalue of the stock

hence, the option a is correct