You calculate the intrinsic value of a stock to be $27. You check The Wall Street Journal
and find the actual price to be $30. What could differ in your analysis and the market’s
valuation? If you are confident about your analysis, should you buy or not?
What is a market anomaly? Give examples of several market anomalies.
Interest rate risk is composed of:
a. market risk and default risk.
b. price risk and credit risk.
c. price risk and reinvestment risk.
d. default risk and money risk.
You buy 1,000 shares of Sunbeam at 11 1/8 and write 10 calls at a premium of 4 3/8
with a strike price of 7 1/2. The stock goes to 20 in 6 months. You receive a 8 cent
dividend per share. If the calls are exercised (which is the likely assumption), what is
your percentage return?
Which of the following requires a relatively large minimum investment, usually
$100,000 or higher?
a. a cash account
b. an asset management account
c. a margin account
d. a wrap account at a large brokerage firm
In the 1990s, many investment firms hired large numbers of fundamental analysts and
very few technical analysts. Following the market downturns of 2000 and 2001,
investment firms realized their mistake and hired far more technical analysts than
fundamental analysts.