Round 3 - investment golden rules 3 questions

Question 1 answer is B. Arbitrage pricing theory (APT) is an alternative to the capital asset pricing model (CAPM) for explaining returns of assets or portfolios. It was developed by economist Stephen Ross in the 1970s. In economics and finance, arbitrage is the practice of taking advantage of a difference in prices in two or more markets; striking a combination of matching deals to capitalize on the difference, the profit being the difference between the market prices at which the unit is traded. Interpretation into stock market investment that arbitrage occurs when an investor can make a profit from simultaneously buying and selling in two or more different markets. For example, crude oil and gas company may be traded on Singapore, USA and Hong Kong stock exchanges.
Question 2 answer is A. The word hedge is from Old English hecg, originally any fence, living or artificial. The first known use of the word as a verb meaning 'dodge, evade' dates from the 1590s; that of 'insure oneself against loss,' as in a bet, is from the 1670s. A hedge is an investment position intended to offset potential losses or gains that may be incurred by a companion investment.on the word, in stock market investment that hedging is an insurance-like investment that protects you from risks of any potential losses of your finances. Hedging is similar to insurance as we take an insurance cover to protect ourselves from one or the other loss. For example, if we have an asset and we would like to protect it from floods.
Question 3 answer is A. Richard Thaler, a pioneer of behavioral science, first introduced the sunk cost fallacy, suggesting that “paying for the right to use a good or service will increase the rate at which the good will be utilized” (1980, pp. 47). sunk cost, in economics and finance, a cost that has already been incurred and that cannot be recovered. In economic decision making, sunk costs are treated as bygone and are not taken into consideration when deciding whether to continue an investment project. The scenario for stock market investment in laymen term that Investors fall into the sunk cost trap when they base their decisions on past behaviors and a desire to not lose the time or money they have already invested, instead of cutting their losses and making the decision that would give them the best outcome going forward.