1) According to put-call parity, if a stock is overvalued (overpriced), the investor should
sell the stock short, sell the put, buy the call, and buy the bond.
2) Unsystematic risk refers to factors that are unique to the specific asset.
3) Put-call parity explains why a change in interest rates by the Federal Reserve affects
stock and option prices.
4) Ginnie Mae bonds are secured by private mortgages.
5) Once securities are purchased, they may be registered in the brokerage firm’s name.
6) The present value of an annuity due is not affected by
the frequency of compounding.
7) The writer of a call option does not receive any dividends paid by the firm.
8) Mutual funds report their returns on a beforetax basis.
9) An equity REIT does not use financial leverage (i.e., its financing is entirely equity).
10) Technical analysis stresses historical information and suggests that patterns of
securities prices repeat.
11) In an “underwriting” the investment banker guarantees
the firm selling the securities a specified amount of funds.
12) If an investor is bearish, he or she should not buya stock index call option.
13) According to the efficient market hypothesis, purchasing low P/S stocks should
produce superior investment results.
14) When an investor enters (also referred to as purchases) commodity contracts, the
individual takes physical delivery of the goods.
15) The longer it takes to overcome the capital gains
advantage to the stock, the less attractive is a convertible bond.
16) While diversification decreases risk, it also increases the chance of a large gain.
17) Lower depreciation increases earnings and cash flow.
18) Studies of investment returns suggest that investors can expect to earn at least 15
percent annually.