If a market is inefficient, as new information is received about a security:
a. nothing will happen.
b. the stock price will fall at first and then later rise.
c. there will be a lag in the adjustment of the stock price
d. there will be negative demand for the stock.
The Markowitz model identifies the efficient set of portfolios, which offers the
a. highest return for any given level of risk or the lowest risk for any given level of
return.
b. least-risk portfolio for a conservative, middle-aged investor.
c. long-run approach to wealth accumulation for a young investor.
d. risk-free alternative for risk-averse investors.
Listed below are the option quotes on JUP, Inc., in January of this year.
(a) Which calls are in the money?
(b) Which puts are in the money?
(c) Why are investors willing to pay 3 1/2 for the MARCH 35 call but only 1/2 for the
March 35 put?
(d) Calculate the intrinsic value of the June 35 call.
(e) Calculate the intrinsic value of the March 40 put.
Current stock prices reflect:
a. investors’ confidence in the current economy.
b. investors’ confidence in the current administration.
c. investors’ expectations of the future.
d. investors’ attitudes about the past market.
Which of the following is frequently used to test the semistrong form of the EMH?
a. statistical tests of stock-price change independence.
b. tests of specific trading rules that use past price dat
a.
c. event studies.
d. insider returns.
The dividend model that is most appropriate for a young company that pays small
dividends now but is expected to increase dividends in a few years is the:
a. zero-growth model.
b. constant growth model.
c. expansion growth model.
d. multiple growth model.
Because of increasing correlation between U.S. markets and foreign markets, most
professional investors now recommend:
a. zero exposure to foreign markets for the foreseeable future
b. replacing foreign stock exposure with U.S. Treasury bonds
c. maintaining some reasonable exposure to foreign markets
d. replacing foreign stock exposure with sovereign debt from investment grade
countries.
An attempt to exploit the differences between the prices of a stock index future and the
prices of a stock index is known as:
a. index programming.
b. arbitrage speculation.
c. index arbitrage.
d. program speculation.
Which of the following is not true regarding earnings estimates?
a. Some companies provide guidance on forthcoming earnings announcements.
b. The guidance number plays a major role in the consensus estimate.
c. The variance of actual reported earnings from the consensus had typically constituted
the “whisper” forecast.
d. All of the above are true.
Which of the following is NOT a major consideration in the asset allocation process?
a. Return requirements
b. Risk tolerance
c. Ease of monitoring progress
d. Time horizon
Systematic risk is also called:
a. diversifiable risk
b. market risk
c. random risk
d. company-specific risk
Which of the following is true regarding value funds and growth funds?
a. Value funds seek stocks that are cheap by fundamental standards while growth funds
seek stocks with high current earnings.
b. Growth funds typically outperform value funds.
c. Value funds and growth funds tend to perform well at different times.
d. Value funds typically have higher P/E ratios than growth funds.
Which of the following is NOT a true statement?
a) Duration measures the time until the principal is repaid.
b) Duration is the weighted average of the timing of the bond’s payments.
c) The weights in the calculation of duration are the present value of each payment,
divided by the value of the bond.
d) Modified duration measures the sensitivity of the bond’s price to interest rate
changes.
Which of the following statements regarding retained earnings is not true?
a. It is part of stockholders’ equity.
b. It represents spendable funds for a company.
c. It designates that part of previous earnings not paid out as dividends.
d. It is irrelevant in security valuation. .
Stock market index options are available on all of the following EXCEPT
a. the Standard and Poor’s 500 Index.
b. the Major Market Index.
c. the National OTC Index.
d. the Shearson Lehman Hutton Index.
If a U.S. investor buys foreign stock, his dollar-denominated return will increase if the
dollar:
appreciates in value.depreciates in value.remains unchanged.moves to a net gain
position.
The most common measure of inflation is the Producer Price Index.
A bond investor has $100,000 to invest and has determined 10 years is his maximum
term. He puts $10,000 in one-year bonds, $10,000 in two-year bonds, $10,000 in
three-year bonds, etc. all the way to $10,000 in ten-year bonds. This is an example of:
a. bond equality
b. bond laddering
c. bond blending
d. bond term management
Relatively small changes in inputs used in DDM can change the estimated value by
large percentage amounts.
The deeper the discount on a zero-coupon bond, the lower the effective return.
An efficient market is defined as one in which prices of securities fully reflect all
known ______________________ quickly and accurately.
Compare the cash flows an investor expects from coupon bonds, zero-coupon bonds,
and preferred stock.
The ___________________________________ requires most investment companies to
register with the Securities and Exchange Commission (SEC), the primary federal
agency regulating investment companies.
Term bonds have a single maturity.
The number of covariances in the Markowitz model is ________ ; the number of
unique covariances is [n (n-1)]/2.