The zero-growth dividend model:
a. gives the highest value for a common stock.
b. is the most accurate model to use.
c. is equivalent to the valuation model for preferred stock.
d. assumes the highest required return possible.
On a company’s balance sheet, shareholder’s equity is nearly always described by its?
a. Book value
b. Market value
c. Current value
d. Stock value
The last step in top-down fundamental analysis is to analyze:
a. individual industries
b. individual companies
c. individual securities
d. perform technical analysis
All of the following are considered market anomalies EXCEPT:
a. size effect
b. January effect
c. earnings announcement anomaly
d. accounting changes effect
An order that must be filled immediately in its entirety, or otherwise must be canceled,
is known as:
a. an immediate or cancel order.
b. an all or none order.
c a fill or kill order.
d. a full or bust order.
What is meant by the real risk-free rate of interest?
a) The opportunity cost of foregoing consumption, representing the rate that must be
offered to individuals to persuade them to save rather than consume.
b) The rate actually used in the market, not in textbooks.
c) The rate quoted on short-term Treasury bills.
d) The nominal risk-free interest rate, less the expected inflation.
Which of the following bonds will be most sensitive to changes in market interest rates?
a) 8 percent semiannual coupon with 8 years to maturity.
b) 6 percent semiannual coupon with 8 years to maturity.
c) 8 percent semiannual coupon with 6 years to maturity.
d) 6 percent semiannual coupon with 6 years to maturity.
Discounted cash flow techniques used in valuing common stock are based on:
a. future value analysis.
b. present value analysis.
c. the CAPM.
d. the APT.
Under the CMT, the relevant risk to consider with any security is:
a. its correlation with other securities in the portfolio.
b. its covariance with the market portfolio.
c. its deviation from the portfolio required rate of return.
d. its variance from the risk-free rate of return.
The retirement plans that guarantee retirees a set amount of money each month are
known as:
a. 401(k) plans
b. self-directed plans
c. defined-benefit plans
d. defined-contribution plans
How often are futures contracts marked to market?
a. daily
b. weekly
c. monthly
d. quarterly
An example of simultaneous buying of one bond (for example, with fixed rate coupon
payments) and selling of another (for example, with variable rate interest payments)
occurs when one participates in a:
a. bond ladder strategy.
b. bond swap.
c. interest rate futures transaction.
d. bond portfolio immunization strategy.
The ability of the market to predict economic recoveries is remarkably good. Stock
prices almost always turn up how many months before recovery?
a. 3-5, with 4 typical.
b. 3-7, with 5 typical.
c. 4-8, with 6 typical.
d. 5-9, with 7 typical.
Which of the following types of industries is likely to be least affected in a recession?
a. Expansionary
b. Interest-rate sensitive
c. Defensive
d. Countercyclical
Most investors are risk averse which means:
a. they will assume more risk only if they are compensated by higher expected return.
b. they will always invest in the investment with the lowest possible risk.
c. they actively seek to minimize their risks.
d. they avoid the stock market due to the high degree of risk.
Which of the following statements regarding market P/E ratios is true?
a. P/E ratios are higher when interest rates are lower.
b. P/E ratios are higher when interest rates are higher.
c. P/E ratios are higher when inflation is higher.
d. P/E ratios are lower when unemployment is higher.
Technically, investments include:
a. only financial assets.
b. only marketable assets.
c. financial and real assets that are marketable or non-marketable.
d. only financial and real assets that are marketable.
The evidence obtained on weak-form efficiency casts serious doubts on fundamental
analysis.
The capital market includes both fixed-income and equity securities.
Some market scholars talk about tiers of stocks in the markets. A top tier on the NYSE
would be the largest, most widely held stocks. Second and third tiers would consist of
stocks that are less widely held and followed by fewer analysts. Is it possible that the
market might be more efficient for the top tier and progressively less efficient for the
lower tiers?
What are the major similarities and differences between a specialist and a
dealer?
An impending recession is an example of:
interest rate riskinflation riskmarket riskfinancial risk
How is the earnings retention rate related to the dividend payout rate?
TIPS adjust for inflation by adjusting the rate of interest paid on the bond.
Single-country funds have traditionally:
outperformed international funds.underperformed international funds.been
open-end.been closed-end.
A security that plots above the SML would be a good security to sell short.
Upon analyzing the financial statements of Jain Industries, you discover that it is
currently retaining 60 percent of its earnings (which were $6 this past year), and is
experiencing a ROE of almost 20 percent. Assuming a risk-free rate of 4 percent and a
risk-premium of 8 percent, how much would you be willing to pay for Jain Industries
stock on the basis of the P/E ratio approach?