1) An increase in stock prices is a lagging indicator of economic activity.
2) The required rate of return includes the riskfree rate and a risk premium.
3) An exit fee (e.g., 3 percent) has the same impact on an investor’s return as an equal
load fee (e.g., 3 percent).
4) Some municipalities have their municipal bonds insured in order to facilitate
marketing (issue) them.
5) Monetary and fiscal policy may affect stock prices through their impact on corporate
earnings.
6) The S&P 500 stock index is value-weighted.
7) The tendency of investors to follow a herd mentality helps explain financial bubbles.
8) The value of a bond depends on the amount of principal, when it matures, and the
interest it pays.
9) Agencies of the federal government are not allowed to issue bonds.
10) Movements in stock prices are often illustrated using relative (percentage) price
changes instead of absolute price changes.
11) The price of a municipal bond will tend to rise when interest rates decline.
12) A convertible bond’s value fluctuates with the price of the stock into which the bond
may be converted.
13) While individuals can write call options, they can only buy put options.
14) The statement of cash flow places emphasis on management’s ability to retire debt.
15) A Eurobond is denominated in the currency of a European nation.
16) If the anticipated return exceeds the required rate of return, the investor should buy
the stock.
17) Gross domestic product (GDP) is the sum of spending on consumer goods,
government spending, and investing in stocks and bonds.
18) A mutual fund has a fixed capital structure.