Archives: Quiz

Given the following information, calculate the expected return of Portfolio ABC. Expected return of stock A = 10%, Expected return of stock B = 15%, Expected return of stock C = 6%. 40 percent of the portfolio is invested in […]

Most analysts today agree that using money as an indicator of future economic activity is accurate. Mr. Baker, a single person in early retirement, owns a house, a well-used car, and minimal life insurance. He has pension assets of about […]

What are the major advantages of a private placement for the issuer of securities? Why was the Markowitz model impractical for commercial use when it was first introduced in 1952? What has changed by the 1990s? Answer: The volume of […]

No-load funds charge a one-time expense fee to cover all operating expenses. Answer: F If interest rates rose, you would expect ———— to also rise. business riskfinancial riskliquidity riskinflation risk Answer: d A number of companies that formerly experienced rapid […]

What are support and resistance levels? If an analyst uses ex post data to calculate the correlation coefficient and covariance and uses them in the Markowitz model, the assumption is that past relationships will continue in the future. Answer: T […]

An analyst determined that for the past two quarters the risk-free rate has exceeded the return on the market portfolio. Does this information disprove the CML? A negative correlation coefficient indicates that the returns of two securities have a tendency […]

In a portfolio consisting of two perfectly negatively correlated securities, the highest attainable expected return will consist of a portfolio containing 100% of the asset with the highest expected return. What are the appropriate uses of the Sharpe and the […]

What are the advantages to investors’ of keeping their securities in street name? If interest rates are expected to rise, you would expect: bond prices to fall more than stock pricesbond prices to rise more than stock pricesstock prices to […]

In private placements, new securities issues are sold directly to financial institutions. On the other side of every futures transaction is: a. the dealer. b. the futures exchange. c. the commodity producer. d. the clearinghouse. Answer: d What is the […]

What economic functions are fulfilled by futures? What are the assumptions in the CAPM? Can these be relaxed without destroying the conclusions of the model? Answer: (1) homogeneous expectations, (2) one-period time horizon, (3) borrow-lend at RF, (4) no transactions […]

The return relative solves the problem of: a. inflation b negative returns c. interest rates d. tax differences According to Jensen’s differential return measure, what is alpha? a. The intercept of the SML line b. The intercept of the CML […]

The advance estimate of GDP predicts direction of quarterly change in real GDP growth approximately what percent of the time? a. 10%. b. 25%. c. 75%. d. 90%. Approximately what percentage of futures contracts is closed by offset before the […]

Infinite growth is a problem with the dividend discount model because: a. The expected stream of dividends is infinite b. At reasonably high discount rates, such as 12 percent, dividends received in the distant future (40 or 50 years from […]

The _________ is a plot of __________. a. CML . . . individual stocks and efficient portfolios b. CML . . . both efficient and inefficient portfolios, only c. SML . . . individual securities and efficient portfolios d. SML […]

Indifference curves: a. always curve to the left b. have a positive slope c. cannot intersect d. are convex Strategic asset allocation is usually done: a. once every few years, establishing a long-run or strategic asset mix. b. using Monte […]

Other things equal, a. the higher the expected growth rate, the lower the P/E ratio. b. if the risk-free rate rises, the required rate will decline. c. as the required rate rises, the P/E ratio declines. d. if the risk […]

One form of interest rate forecasting is: a. horizon analysis, which requires projections of bond performance over a planned investment period. b. yield-to-maturity analysis, which requires expectations about reinvestment rates and future market rates to be calculated in expected returns. […]

If investors in the market become more pessimistic, it is expected that the required return will ———-. a. decrease. b. increase. c. stay the same. d. there is not enough information to answer the question. _____ governs employer-sponsored retirement plans.: […]

If a market is inefficient, as new information is received about a security: a. nothing will happen. b. the stock price will fall at first and then later rise. c. there will be a lag in the adjustment of the […]

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 […]

Under the P/E model, stock price is a product of: a. EPS and DPS b. P/E ratio and EPS c. EPS and required return d. P/E ratio and required return The disposition effect relates to the fact that: a. investors […]

Which of the following would not be considered a capital market security? a. a 20-year corporate bond b. a common stock c. a 6-month Treasury bill d. a mutual fund share The following information is to be used to answer […]

A lady bought 100 shares of a leading diamond mining company with an expected return of 20 percent per year. The following day the company’s president announced a major new discovery in Arkansas. The stock price immediately doubled. This scenario […]

Which of the following is true regarding Modigliani-squared? a. It compares Treasury bills to the S&P 500 Index. b. It states its results in both percentage and graphical form. c. It equates the volatility of a portfolio with the market. […]

If an investor buys a stock when its price has increased 15 percent from its previous low, the investor is employing: a. a contrarian indicator. b. a filter rule. c. a sentiment indicator. d. relative strength analysis. The type of […]

Treasury bonds generally have maturities of: a. 5 to 15 years b. 5 to 30 years c. 10 to 20 years d. 10 to 30 years Which of the following is the best definition of “realized compound yield”? a) The […]

An index fund that uses futures to hold the S&P 500 Index and invests the remainder in bonds would be an example of: a. a value index fund. b. a derivatives index fund. c. an enhanced index fund. d. an […]

One of the most famous investment advisory services since 1965 is: a. The Wall Street Journal b. Standard and Poor’s Corporate Records c. Moody’s d. Value Line Investment Survey Which of the following is not true regarding money market funds? […]

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. […]

NASDAQ tends to list stocks concentrated in this industry: to be concentrated in these two industries: a. aerospace. b. energy. c. technology. d. telecommunications. Assume you are a U. S. citizen who purchases $20,000 worth of bonds of the Deep […]

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 […]

Which of the U.S. Treasury securities is always sold at a discount? a. Treasury bills b. Treasury notes c. Treasury bonds d. Treasury inflation protected securities (TIPS) One approach to style analysis which uses the stocks in a portfolio to […]

The most important decision to make when building a diversified stock portfolio is: a. individual security analysis. b. asset allocation. c. minimization of market risk. d. maximization of expected return. A change in the correlation coefficient of the returns of […]

The interest rate charged on margin accounts is determined by: a. adding a percentage to the broker call rate. b. adding a percentage to the margin interest rate. c. subtracting a percentage to the broker call rate. d. subtracting a […]

Concerning index options, which of the following statements is FALSE? a. Index options appeal to speculators due to the leverage they offer. b. Investors can write index options. c. If exercised the holder of an index option receives the strike […]

A less restrictive form of the Single Index Model is the: a. Risk-free Model. b. CAPM. c. CML. d. Market Model. The expected return on the market for next period is 11 percent. The risk free rate of return is […]

Which of the following statements concerning index funds and actively managed funds is true? a. Their performance is about equal. b. They tend to have an inverse relationship. c. Actively managed funds tend to outperform index funds. d. Index funds […]

An example of indirect investing would be buying shares in a mutual fund. Investors always seek to minimize their risk of investing. Answer: False Holding maturity constant, a decrease in rates will raise bond prices on a percentage basis more […]

Reinvestment risk represents the possibility that future payments cannot be reinvested at the assumed rate. Risk is defined as the possibility of loss. Answer: False Both 401(k) plans and IRAs are self-directed retirement plans. Answer: True For a zero coupon […]

Sony’s design of its new large-screen television set with smoked-glass control panel cover and other visual changes would be classified as a(n)____________modification; changes to make the TV’s remote easier to use would be classified as a(n)____________modification. a. functional; aesthetic b. […]

Scenario 13.2 Use the following to answer the questions. Star Supplies Inc. manufactures commercial-grade floor cleaners, such as vacuums and floor polishers. The firm has recently begun manufacturing other janitorial-related product lines, such as paper products and chemical cleaners. Star […]

When Cadillac buys headlights from Delco, both of which are divisions of General Motors,_________pricing occurs. a. base-point b. zone c. transfer d. geographic e. matrix The absolute dollar outlay for advertising is usually low. a. True b. False Answer: False […]

Anyone who becomes a member of social networking sites is a Collector. a. True b. False Customer advisory boards are small groups of actual customers who serve as sounding boards for new product ideas and offer insights into their feelings […]

Scenario 5.1 Use the following to answer the questions. Lil’ Angels Kids Spa offers various treatments designed to appeal to the younger customers. Treatment options include manicures, pedicures, facials, tea parties, and dress up photos. Parents can even purchase a […]

A commonly used computerized means of integrating order processing with production, inventory, accounting, and transportation is: a. web-based inventory management. b. just-in-time production. c. electronic data interchange. d. universal product codes. e. activity based management. It is not unusual for […]

Many suppliers and their customers invest time and resources to build and maintain mutually beneficial relationships which are known as: a. partnerships. b. co-ops. c. monopolies. d. reciprocities. e. resellers. Honeybees are disappearing at an alarming rate and since they […]

When a manufacturer rewards retailers based on the number of pieces moved through their scanners, this sales promotion method is known as a: a. merchandise allowance. b. count-and-recount allowance. c. buy-back allowance. d. scan-back allowance. e. scan-count allowance. Brand recognition […]

Grant Turner makes an appointment to visit with a new dermatologist in town because of recent bad sunburn. When he arrives at the dermatologist’s office, Grant notices a foul odor in the air, worn floor coverings, cluttered rooms that have […]

Markup is measured either as a percentage of______or a percentage of________. a. selling price; cost b. cost; profit c. revenue; contribution margin d. resources used; cost e. demand; competition A marketer’s advertising platform should consist of issues that are important […]

The producers of C & H Cane Sugar sell the product in five-pound bags, one-pound bags, and one-pound boxes. When developing its advertising strategy, C & H will most likely use a(n)_____ market. a. undifferentiated b. differentiated c. product strategy […]