If an investor buys a stock when its price has increased 15 percent from its previous
low, the investor is employing:
a. a contrarian indicator.
b. a filter rule.
c. a sentiment indicator.
d. relative strength analysis.
The type of bonds with the thinnest secondary market is:
a. agency bonds
b. corporate bonds
c. Treasury bonds
d. municipal bonds
Which of the following statements regarding commissions charged by full-service
brokers is not true?
a. Commissions vary by product.
b. The more complicated the transaction, the higher the commission.
c. The commission on many bonds is already built into the trade.
d. There is no commission on U.S. Treasury securities.
In modern investment analysis, the market risk of a stock is measured byits:
a. beta.
b. standard deviation.
c. leverage.
d. coefficient of variation.
Calculate the risk (standard deviation) of the following two-security portfolio if the
correlation coefficient between the two securities is equal to 0.5.
Variance Weight (in the portfolio)
Security A 10 0.3
Security B 20 0.7
a. 17.0 percent
b. 5.4 percent
c. 2.0 percent
d. 3.7 percent
Basis =
a. cash price
b. futures price
c. cash price + futures price
d. cash price – futures price
The second step in the fundamental analysis of common stock, after the economy, is:
a. company
b. economy
c. industry
d. business cycle
The major advantage of Separately Managed Accounts (SMA) is control and the direct
owner may be able to specify investment restrictions.
Standard & Poor’s new Global Industry Classification system divides everything into
_________economic sectors.
a. 10
b. 24
c. 68
d. 154
Options sold on exchanges are protected against
a. stock dividends and splits.
b. cash dividends.
c. interest rate movements.
d. inflation.
The Securities Investor Protection Corporation (SIPC) insures customer accounts at
member brokers against brokerage failure as follows:
a. securities totaling $250,000, cash totaling $100,000
b. securities totaling $250,000, cash totaling $250,000
c. securities totaling $500,000, cash totaling $100,000
d. securities totaling $500,000, cash totaling $250,000
Which of the following is not true regarding the NYSE Amex?
a. It specializes in technology and biotech stocks
b. It trades only ETFs
c. It specializes in small- and mid-cap stocks
d. It is an Over-the-Counter (OTC) market
The Dow-Jones Industrial Average has historically consisted of high quality stocks that
were considered to be:
a. OTC stocks
b. cyclical stock
c. blue-chip stocks
d. defensive stocks
Which of the following is NOT among the qualitative factors that should be analyzed to
assess an industry’s future?
a. Historical performance
b. Competition
c. Growth rate of sales
d. Structural changes
If we are to assess performance carefully, we must do so on what kind of basis?
a. quarterly
b. annual
c. attribution-weighted
d. risk-adjusted
Which of the following is the correct calculation for the required rate of return under
the CAPM?
a. beta (market risk premium)
b. beta + market risk premium
c. risk-free rate + risk premium
d. risk-free rate(market risk premium)
Which of the following is NOT one of the factors used in calculating duration?
a) The final maturity of the bond.
b) The coupon payment.
c) The yield to maturity.
d) The current price.
The food industry would be considered:
a. growth industry.
b. defensive industry.
c. cyclical industry.
d. countercyclical industry.
With regard to market efficiency, identify the INCORRECT statement.
a. Information is the central issue of the efficient markets concept.
b. The most stringent form of market efficiency is the strong form.
c. The efficient market concept does not require a perfect adjustment in price following
new information.
d. Tests of the usefulness of price data are semi-strong form tests.
In the case of a futures contract, buyers can settle a contract
a. only by taking delivery.
b. only by arranging an offsetting contract.
c. either by delivery or offset.
d. by a combination of delivery and offset.
Total return as defined in the text is:
the difference between the sale price and the purchase price of an investment.measured
by dividing the sum of all cash flows received by the amount invested.the reciprocal of
a return relative.measured by dividing all cash flows received by its selling price.
What are the main differences between a closed-end and an open-end investment
company?
Technical analysis involves the use of historic price and volume information to predict
future price movements. What does the EMH say about technical analysis?
Bond ratings are primarily used to assess interest rate risk.
Each investment company investor shares in the returns of the fund’s portfolio and also
shares in the cost of running the fund.
Index funds provide low-cost, passive investment exposure in a similar fashion to:
hybrid mutual fundsmoney market mutual fundsexchange-traded fundsequity income
funds
Investors who have all their assets in one portfolio of securities should rely on the
Sharpe measure rather than the Treynor measure.
Bond investors can avoid the risk that interest rates will rise and incur capital losses by:
a. buying zero coupon bonds.
b. buying Treasury bonds with maturities of one year or longer.
c. holding bond funds till maturity.
d. holding individual bonds till maturity.
What are the methods of settling a futures contract?