A block trade is defined as a transaction involving at least:
a. 1,000 shares
b. 5,000 shares
c. 10,000 shares
d. 1 million share
If the dividend growth rate increases for a firm, its P/E will ———, other things the
same.
a. increase
b. stay the same
c. decrease
d. increase or decrease but not stay the same
An investor at what stage of a company’s life cycle typically stands to earn the highest
return?
a. pioneering stage.
b. expansion stage.
c. stabilization stage.
d. maturity stage.
All “known ” information means:
a. past information only.
b. past and current information.
c. past, current, and inferred information.
d. past, current, inferred and relative information.
Stock-index futures can be used to hedge against which of the following types of risks?
a. Diversifiable risk
b. Systematic risk
c. Unsystematic risk
d. Company specific risk
Tests of the semistrong EMH include:
a. regression analysis.
b. correlation tests that compare the security returns to the overall market return.
c. tests of the speed of adjustment of stock prices to company announcements.
d. queuing line theory tests.
Which of the following laws eliminated all fixed commissions?
a. Securities Exchange Act of 1934
b. Securities Acts Amendments of 1975
c. Investor Advisor Act of 1940
d. Securities Investor Protection Act of 1970
Weak form market efficiency
a. implies that the expected return on any security is zero.
b. incorporates semi-strong form efficiency.
c. involves price and volume information.
d. is compatible with technical analysis.
For adequately diversified common stock portfolios, market effects often account for
——– percent and more of the variability of the portfolio’s return.
a. 60
b. 70
c. 80
d. 90
When speculation pushes asset prices to unsustainable highs, this is known as a:
a. crash.
b. contraction.
c. recession.
d. bubble.
Which of the following is not true regarding ETFs?
a. They trade on exchanges like individual stocks.
b. They can be bought on margin or sold short.
c. ETFs have been adversely affected by growth in closed end funds.
d. Assets held in ETFs exceed assets held in mutual funds.
The expected return for the market is 12 percent, with a standard deviation of 20
percent. The expected risk-free rate is 8 percent. Information is available for three
mutual funds, all assumed to be efficient, as follows:
Mutual Funds SD(%)
Affiliated 15
Omega 17
Ivy 19
(a) Based on the CML, calculate the market price of risk.
(b) Calculate the expected return on each of these portfolios.
Which of the following statements regarding the SEC is not true?
a. The SEC is an independent, quasi-judicial agency of the U.S. government
b. The SEC has the power to disapprove securities for lack of merit
c. The SEC has nine regional offices and approximately 200 examiners
d. The SEC administers all U.S. securities laws
Analysts often use a ________% rule in security valuation in recognition of the fact that
estimating a security’s value is an inexact process.
a. 5
b. 10
c. 15
d. 20
In the early stages of a business cycle, yield tends to be:
a. low and upward sloping.
b. flat.
c. high and downward sloping.
d. inverted.
Which of the following is true regarding earnings estimates?
a. management at most firms will update estimates monthly
b. analysts typically rely on the estimates provided by management
c. some firms have chosen not to provide estimates of earnings
d. most analysts arrive at similar estimates of earnings
_______ use a computer program in an attempt to imitate the brain in analyzing
securities.
a. Decision trees
b. Program trading
c. Day traders
d. Neural networks
Generally speaking, if interest rates fall and other factors remain constant, the P/E ratio
of most companies company will:
a. become negative.
b. increase.
c. decrease.
d. become more volatile.
Living expenses are covered from accumulated assets rather than from earned income
in the __________ phase of the life cycle.
a. accumulation
b. consolidation
c. spending
d. gifting
Regulation FD applies to disclosure between:
a. private companies and public officials
b. public companies and investment professionals
c. public companies and public officials
d. private companies and investment professionals
The writer of a naked call faces
a. an unlimited potential loss.
b. a specified potential loss.
c. no chance of loss because this is a conservative strategy.
d. an unlimited potential gain.
Commodity ETF’s are mainly used as speculative plays by:
a. hedge fund traders.
b. conservative investors.
c. mutual fund managers.
d. value investors.
Which of the following statements regarding a buy and hold strategy are true?
a. There are no selection choices to be made under this strategy.
b. This strategy is applicable only to large portfolios.
c. There is no reinvestment decision to make under this strategy.
d. This strategy produces lower transactions and search costs.
How can historical performance help the analyst assess the future prospects for an
industry?
The exercise price on an option is also known as the:
premium.strike price.theoretical value.spot price.
What are the advantages and disadvantages of index funds for an individual bond
investor?
A portfolio consisting of two securities with perfect negative correlation in the proper
proportions can be shown to have a standard deviation of zero. What makes this riskless
portfolio impossible to achieve in the real world?
Why is the stock market a leading indicator of the economy? Use the constant-growth
dividend discount model in your explanation.
Immunization is a strategy in which bond investors:
a. buy only high-quality bonds.
b. attempt to avoid default risk.
c. attempt to avoid call and convertible risk.
d. attempt to avoid reinvestment and price risk.
It is a relatively simple matter of finding industries that will perform well in the short
run.