1) The numerical value of beta for the market equals 1.
2) If a firm’s inventory turnover is 4 and days sales outstanding (average collection
period) is 60, then it takes about five months for newly acquired inventory to generate
cash.
3) The informed investor can expect consistently to outperform the market.
4) Municipal bonds are often examples of serial bonds.
5) An investor may not sell short the shares of an ETF.
6) The shares of a closedend investment company often sell for a discount from their
net asset value.
7) If an individual has a long position in bond futures, that investor is anticipating lower
interest rates.
8) There is no limit to the potential loss from buying a call option
9) The Black/Scholes option valuation model divides the option’s strike price by the
probability that the option will be exercised.
10) The federal funds rate is the rate banks charge each other when they borrow
reserves.
11) Hedge fund strategies may include buying one stock while shorting another.
12) Calculation of the returns earned on a highyield security should include the sale
price of bond as well as interest received.
13) Treasury bills are sold for a premium.
14) According to the efficient market hypothesis, purchasing high P/E stock should not
produce superior investment results.
15) The price of gold tends to rise during inflationary periods.
16) The amount of margin required to enter into a futures contract is at least 50 percent
of the value of the contract.
17) An increase in the targeted federal funds rate implies that the Fed is buying
securities.
18) Stock dividends reduce the firm’s total equity.