1) The P/E ratio is determined by
a. The required rate of return.
b. The expected dividend payout ratio.
c. The expected growth rate of dividends.
d. Choices a and b
e. All of the above
2) Exhibit 10.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
What was BMC’S net profit margin?
a. 0.058
b. 0.037
c. 0.125
d. 0.015
e. 0.165
3) The dividend payout ratio for the aggregate market is 55 percent, the required rate of
return is 15 percent, and the expected growth rate for dividends is 7 percent. Compute
the current earnings multiple.
a. 3.93
b. 78.6
c. 6.88
d. 39.3
e. None of the above
4) Which index is created by first deriving the initial total market value of all stocks
used in the index?
a.Equally-weighted index.
b.Price-weighted index.
c.Unweighted index.
d.Value-weighted index.
e.All of the above
5) Exhibit 12.9
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The aggregate market currently has a retention ratio of 60 percent, a required rate of
return of 12 percent, and an expected growth rate for dividends of 4 percent.
Starting with the initial conditions, you expect the retention ratio to be constant, the rate
of inflation to increase by 2 percent, and the growth rate to increase by 1 percent. What
is the expected P/E?
a. 4.44
b. 5.00
c. 5.71
d. 6.67
e. 8.00
6) The annual rate of inflation is 2.5%
Refer to Exhibit 3.2. What is the large company stock nominal return?
a.3.56%
b.5.37%
c.6.19%
d.9.16%
e.11.32%
7) Exhibit 10.8
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Zeco Company has the following financial statements for year ending 12/31/2008.
The Zeco Company’s industry averages are as follows:
Net Profit Margin = 4.5%; Total Asset Turnover = 0.8; Total Assets/Equity = 1.5
Calculate Zeco Company’s Net Profit Margin.
a. 0.42%
b. 0.97%
c. 1.50%
d. 19.60%
e. 25.00%
8)
Refer to Exhibit 7.9. What is the standard deviation of this portfolio?
a. 5.16%
b. 5.89%
c. 6.11%
d. 6.57%
e. 7.02%
9) Which of the following is a matched funding technique?
a. Classical immunization
b. Contingent immunization
c. Bond swaps
d. Valuation analysis
e. Interest rate anticipation
10) Which of the following statements regarding global industry analysis is true?
a. Cavaglia, Brightman, and Aked (2000) found that country factors dominated industry
factors in terms of explaining equity returns.
b. Cavaglia, Brightman, and Aked (2000) found that industry factors have been
declining in importance.
c. Cavaglia, Brightman, and Aked (2000) found that industry factors dominate country
factors.
d. Both a and b are true
e. All of the above are true