1. ‐‐‐‐‐‐‐‐‐‐‐‐‐ is a barometer for market behavior.
Correct : B. Index
2. Devise adopted to make profit out of the difference in prices of a security in two different markets is called‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐.
Correct : A. Arbitrage
3. Which of the following bonds has the shortest duration?
Correct : C. Coupon = 15%, time to maturity = 15 years, yield to maturity = 15%
4. An investor who expects increasing interest rates should purchase a bond that has a _____ coupon and a _____term to maturity.
Correct : A. high, short
5. A bond that makes no coupon payments (and thus is initially priced at a deep discount to par value) is called a_______ bond.
Correct : D. zero-coupon
6. The annual coupon of a bond divided by its face value is called the bond:
Correct : E. Coupon rate
7. The rate of return required by investors in the market for owning a bond is called the:
Correct : D. Yield to maturity.
8. The Yield to Maturity of a bond is the same as_____________?
Correct : B. The bonds internal rate of return
9. If a firm increases its plowback ratio, this will probably result in _______ P/E ratio.
Correct : D. Can’t be determined
10. The accounting measure of a firm's equity value generated by applying accounting principles
to asset and liability acquisitions is called ________.
Correct : A. Book Value
11. The price-to-sales ratio is probably most useful for firms in which phase of the industry life
cycle?.
Correct : A. Start-up phase
12. A stock has an intrinsic value of $15 and an actual stock price of $13.50. You know that this
stock
Correct : B. signals buy opportunity
13. If a stock is correctly priced, then you know that ____________.
Correct : C. the sum of the stock's expected capital gain and dividend yield is equal to the stock's required rate of return
14. Bill, Jim, and Shelly are all interested in buying the same stock that pays dividends. Bill plans on holding the stock for 1 year. Jim plans on holding the stock for 3 years. Shelly plans on holding the stock until she retires in 10years. Which one of the following statements is correct?
Correct : C. All three should be willing to pay the same amount for the stock regardless of their holding period.
15. The constant-growth dividend discount model (DDM) can be used only when the ___________.
Correct : C. growth rate is less than the required return
16. You want to earn a return of 10% on each of two stocks, A and B. Each of the stocks is expected to pay a dividend of $4 in the upcoming year. The expected growth rate of dividends is 6% for stock A and 5% for stock B. Using the constant-growth DDM, the intrinsic value of stock
A _________.
Correct : A. will be higher than the intrinsic value of stock B
17. You are considering acquiring a common share of Sahali Shopping Center Corporation that you would like to hold for 1 year. You expect to receive both $1.25 in dividends and $35 from the sale of the share at the end of the year. The maximum price you would pay for a share today is __________ if you wanted to earn a 12% return.
Correct : B. $32.37
18. An efficient market is defined as one in which
Correct : C. securities’ prices quickly and fully reflect all available information.
19. Weak form market efficiency
Correct : C. involves price and volume information.
20. The highest level of market efficiency is
Correct : D. strong form efficiency.
21. The random walk hypothesis is most related to the:
Correct : A. weak-form EMH
22. According to the semi-strong form of the EMH, investors who invest in a stock after a highly positive announcement concerning the stock can expect to earn a(n)
Correct : A. normal return because the stock will be fairly priced when purchased.
23. Which of the following is not a method employed by fundamental analysts?
Correct : B. Relative strength analysis
24. Which of the following is not a method employed by followers of technical analysis?
Correct : C. Earnings forecasting
25. If you believe in the __________ form of the EMH, you believe that stock prices reflect all publicly available information but not information that is available only to insiders.
Correct : A. Semi strong
26. Choosing stocks by searching for predictable patterns in stock prices is called ________.
Correct : B. Technical Analysis
27. Which of the following terms represents an upper price limit for a stock, based on the quantity
of willing sellers?
Correct : D. Resistance.
28. Which of the following is not a basic tenet of the Dow Theory?
Correct : E. A bear market is established when the Dow Jones Industrial Average is moving down
29. Which of the following is not part of the bar chart?
Correct : A. Opening price.
30. Which of the following is not a part of the candlestick chart?
Correct : D. Volume of trading
31. When technical analysts say a stock has good relative strength, they mean the:
Correct : B. ratio of the price of the stock to a market index has trended upwards.
32. Market price breaking through the moving average from below is a ……indicator.