Which of the following statements regarding the short interest ratio is true?
a. It is calculated by the total shares sold short divided by total shares outstanding
b. It indicates the dollar amount needed to cover all short positions
c. The higher the ratio, the more bullish investors are
d. It is the amount of shares sold short divided by average trading volume
The income statement is more frequently used than the balance sheet by investors to:
a. assess current management performance over an accounting period.
b. as a guide to company future profitability at a moment in time.
c. assess current management performance and as a guide to company future
profitability at a moment in time.
d. assess current management performance and as a guide to company future
profitability over an accounting period.
Stockholders that own more than ____% of a company’s stock are considered insiders
by the SEC.
a. 10
b. 20
c. 30
d. 40
Which of the following represents the rate at which a company can grow from internal
sources?
a. return on assets
b. sustainable growth rate
c. adjusted EPS
d. return on equity
The paradox of efficient markets is that
a. even though markets are efficient overall, there are pockets of
inefficiency.
b. news about anomalies makes the market less efficient.
c. investors attempting to uncover and use information about security prices
help make the market more efficient (i.e., an “efficient amount of inefficiency “)
d. investors make the market less efficient.
The return on a portfolio during a particular period was 13 percent, the risk-free rate
was 6 percent, the return on the market was 12 percent, and the portfolio beta was 1.2.
The performance of the portfolio (according to Jensen’s measure) was __________ the
market.
a. inferior to
b. superior to = (13 ‘ 6) ‘ [1.2(13 ‘ 6)]
c. the same as = -0.2 percent
d. not compared to Negative alpha, if statistically significant, means inferior
performance.
What will a bond be worth on the day it matures?
a. $0
b. $100
c. its face value (plus remaining coupon, if applicable)
d. its remaining coupon, if applicable
Investors following a passive strategy use which of the following as the best estimate of
a security’s value?
a. the dividend discount model.
b. Fisher model.
c. current market price.
d. current earnings per share.
The single index model divides a security’s return into _______ and ________ parts.
a. supply; demand
b. control; non-control
c. company-related; industry-related
d. micro; macro
One problem with style analysis is style:
a. consistency.
b. comparability.
c. correctness.
d. character.
During a typical contraction, stock prices decline 25 percent from peak. During recent
recessions, however, the range of decline has been:
a. less than 20 percent.
b. between 20 and 30 percent.
c. between 30 and 40 percent.
d. greater than 40 percent.
Which of the following variables has an inverse relationship with the P/E ratio?
a. payout ratio
b. expected growth rate of dividends
c. expected growth rate of earnings
d. required rate of return
Investors normally assume a Moderate trade-off between risk and return in the ____
phase of the life-cycle.
a. accumulation
b. consolidation
c. spending
d. gifting
ABC, which closed at $151, has call options trading in April, July, and October with the
following values:
(a) Calculate the intrinsic value of the April 150 call.
(b) Calculate the intrinsic value of the April 140 call.
(c) Should the price of ABC rise to $156, what is the minimum value that the April 150
call should trade at?
What is usually shown at the bottom of a bar chart?
a. a point and figure chart
b. advance/decline line
c. closing price
d. volume
The reward-to-variability ratio measures:
a. return above the risk-free rate.
b. excess return per unit of total risk.
c. total risk per unit of excess return.
d. return above the risk-free rate relative to the risk-free rate.
Which of the following sectors was adversely affected by the recent
accounting changes requiring the expensing of stock options?
a. manufacturing
b. technology
c. energy
d. utilities
For U.S. companies, dividends are typically paid:
a. monthly
b. quarterly
c. semi-annually
d. yearly
Other things equal, if the
a. required rate of return increases, the P/E ratio will rise.
b. risk premium increases, the P/E ratio will rise.
c. risk-free rate rises, the P/E ratio will fall.
d. dividend payout increases, the P/E ratio will fall.
——Call—— ——Put——Option/Strike Exp. Vol.
Last Vol. Last.XYZ38 5/8 25 Dec. — —– 100 1/838 5/8 30
Nov. 250 8 ¾ 464 1/1638 5/8 30 Dec. — —– 572
5/1638 5/8 35 Nov. 154 4 1/2 1748 5/1638 5/8 35 Dec. 923 5
1/4 580 1 3/1638 5/8 35 Mar. — —– 33 2 5/838 5/8 40
Nov. 2023 1 1/8 530 2 3/8 Of the various combinations shown above, how
many combinations of put contracts are currently trading “out-of-the-money?”
a. 6
b. 5
c. 4
d. 1
The two components of ROE are
a. ROA and book value per share.
b. ROA and leverage.
c. ROA and profit margin.
d. leverage and book value.
The key item for investors on the income statement is:
a. sales.
b. gross profit.
c. operating expenses.
d. after-tax net income.
To value the market, an investor must analyze both corporate earnings and multipliers.
LEAPS are typically:
more expensive than short-term options.cheaper than short-term options.only available
for major indexes, not individual stocks.long-term options, with maturities often
between 5 and 10 years.
Calculate the required rate of return on DCM Corporation’s stock if its current price is
$35 per share, next year’s expected dividend is $2. 00 per share, its return on equity is
12 percent, and its dividend payout ratio is 55 percent.
A 12b-1 fee is used to cover a fund’s cost of distribution.
Regardless of how closely a company adheres to good accounting practices and
auditors do their job, investors need to examine “Notes to the Financial Statements” on
10-K and 10-Q Reports to understand the company’s financial situation.
The major problem with the Markowitz model is its:
lack of accuracypredictability flawscomplexityinability to handle large number of
inputs
When should an investor use the arithmetic mean return? The geometric mean return?
How do asset-backed securities improve the flow of funds from savers to borrowers?
The best return measure to use if you are trying to measure the total effect of returns
over time given some stated beginning amount is the:
total returnreturn relativecumulative wealth indextotal yield
EBITDA, sometimes called operating profit, is often emphasized by
telecommunications companies because of their lack of real profitability.