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CHAPTER 1—THE INVESTMENT SETTING TRUE/FALSE Question: The rate of exchange between certain future dollars and certain current dollars is known as the pure rate of interest. ANSWER: Question: An investment is the current commitment of dollars over time to derive […]

CHAPTER 10—ANALYSIS OF FINANCIAL STATEMENTS TRUE/FALSE Question: Financial Accounting Standards Board (FASB) recognizes that it would be improper for all companies to use identical and restrictive accounting principles. Answer: Question: The balance sheet shows what assets the firm controls at […]

CHAPTER 11—AN INTRODUCTION TO SECURITY VALUATION TRUE/FALSE Question: Fundamentalists typically use the “Bottom-Up Approach” whereas technicians use the “Top-Down Approach” to the valuation process. Answer: Question: Empirical studies have shown that the market factor has increased over time and now […]

CHAPTER 12—MACROANALYSIS AND MICROEVALUATION OF THE STOCK MARKET TRUE/FALSE Question A main limitation of the NBER indicator series is false signals. Answer: T PTS: 1 Question Stock prices move coincidentally with the economy. Answer: F PTS: 1 Question The cyclical […]

CHAPTER 13—INDUSTRY ANALYSIS TRUE/FALSE Question: Complete consistency over time for different industries would indicate that industry analysis is not necessary after market analysis. Answer: Question: Studies of industries indicate that their past performance can be useful in predicting future performance. […]

CHAPTER 14—COMPANY ANALYSIS AND STOCK VALUATION TRUE/FALSE Question: A growth company is one whose stock is undervalued by the market. Answer: Question: A cyclical companys sales and earnings are heavily influenced by aggregate business activity. Answer: T PTS: 1 Question: […]

CHAPTER 15—TECHNICAL ANALYSIS TRUE/FALSE Question: Fundamentalists contend that past price movements will indicate future price movements. Answer: Question: Technical analysts believe that security prices do not adjust rapidly. Answer: T PTS: 1 Question: One of the potential disadvantages of technical […]

CHAPTER 16—EQUITY PORTFOLIO MANAGEMENT STRATEGIES TRUE/FALSE Question: Active equity portfolio management is a long-term buy-and-hold strategy. Answer: Question: A benchmark portfolio is defined as a passive portfolio whose average characteristics match the clients risk-return objectives. Answer: T PTS: 1 Question: […]

CHAPTER 17—BOND FUNDAMENTALS TRUE/FALSE Question: Public bonds differ from other debt because they are sold to the public rather than to a single investor. Answer: Question: A nonrefunding provision prohibits a call and premature retirement of an issue from the […]

CHAPTER 18—THE ANALYSIS AND VALUATION OF BONDS TRUE/FALSE Question: For a bond the present value model incorporates both the coupon receipts and the capital gain or loss. Answer: Question: The major problem facing a bond analyst is the ability to […]

CHAPTER 19—BOND PORTFOLIO MANAGEMENT STRATEGIES TRUE/FALSE Question: A bond portfolio is immunized from interest rate risk if the modified duration of the portfolio is always equal to the desired investment horizon. Answer: Question: Interest rate anticipation is the most conservative […]

CHAPTER 2—THE ASSET ALLOCATION DECISION TRUE/FALSE Question: Experts suggest life insurance coverage should be seven to ten times an individuals annual salary. Answer: T PTS: 1 Question: Term life insurance provides both a death benefit and a savings plan. Answer: […]

CHAPTER 20—AN INTRODUCTION TO DERIVATIVE MARKETS AND SECURITIES TRUE/FALSE Question: A cash or spot contract is an agreement for the immediate delivery of an asset such as the purchase of stock on the NYSE. Answer: Question: Forward and future contracts, […]

CHAPTER 22—OPTION CONTRACTS TRUE/FALSE Question: The Chicago Board Options Exchange has the largest share of stock option trading. Answer: Question: Index options are settled by delivery of the stocks that make up the index. Answer: F PTS: 1 Question: In […]

CHAPTER 23—SWAP CONTRACTS, CONVERTIBLE SECURITIES, AND OTHER EMBEDDED DERIVATIVES TRUE/FALSE Question: A warrant is an option to buy a stated number of shares of common stock at a specified price at any time during the life of the warrant. Answer: […]

CHAPTER 3—SELECTING INVESTMENTS IN A GLOBAL MARKET TRUE/FALSE Question: The U.S. equity and bond markets have grown in terms of their relative size of the world equity and bond market. Answer: Question: Diversification with foreign securities can help reduce portfolio […]

CHAPTER 5—SECURITY-MARKET INDEXES TRUE/FALSE Question: The general purpose of a market indicator series is to provide an overall indication of aggregate market changes or movements. Answer: Question: An aggregate market index can be used as a benchmark to judge the […]

CHAPTER 6—EFFICIENT CAPITAL MARKETS TRUE/FALSE Question: Prices in efficient capital markets fully reflect all available information and rapidly adjust to new information. Answer: Question: An efficient market requires a large number of profit-maximizing investors. Answer: T PTS: 1 Question: If […]

CHAPTER 7—AN INTRODUCTION TO PORTFOLIO MANAGEMENT TRUE/FALSE Question: A good portfolio is a collection of individually good assets. Answer: Question: Risk is defined as the uncertainty of future outcomes. Answer: T PTS: 1 Question: Prior to the work of Markowitz […]

CHAPTER 9—MULTIFACTOR MODELS OF RISK AND RETURN TRUE/FALSE Question: Studies strongly suggest that the CAPM be abandoned and replaced with the APT. Answer: Question: The APT does not require a market portfolio. Answer: T PTS: 1 Question: Studies indicate that […]