Securities and
\nInvestments<\/p>\n
2. What is thebest
\nreason to use the price-to-sales (P\/S) ratio instead of the
\nprice-to-earnings
\n(P\/E) ratio in valuing
\nstocks?
\nA.The P\/S
\nratio is influenced by a corporation\u00e2\u0080\u0099s book value.
\nB.The P\/S
\nratio can be contrasted with the ratio of cash flow to price.
\nC.The P\/S
\nratio doesn\u00e2\u0080\u0099t have the same weaknesses as the P\/E ratio.
\nD.The
\nP\/S ratio is useful for stocks issued by corporations that have no earnings.<\/p>\n
3. If you analyzed a
\nstock\u00e2\u0080\u0099s value using the dividend growth model, you would discount
\nA.future
\ncash flows from dividends, incorporating project ( help with nursing paper writing from experts with MSN & DNP degrees)ed growth in dividends.
\nB.future cash
\nflows from dividends and from the project ( help with nursing paper writing from experts with MSN & DNP degrees)ed growth in the value of
\nthe stock.
\nC.the future
\nvalue of the stock, assuming a fixed growth and discount rate over a
\npreestablished time
\nperiod.
\nD.the value
\nof a fixed, periodic annuity the way you would discount the value of future
\nperiodic interest
\npayments.<\/p>\n
4. If you wanted thesafest
\ninvestment among the following choices, which should you select?
\nA.The stock
\nof large corporations paying high dividends
\nB.U.S.
\nTreasury bills
\nC.The stock
\nof small corporations
\nD.Long-term
\ngovernment bonds<\/p>\n
5. At what rate does
\n$1,000 grow to $1,953 after three years? Use the formula for the future
\nvalue of a lump sum,
\nand assume annual compounding.
\nA.25
\npercentC.
\n75 percent
\nB.31.8
\npercentD.95.3 percent<\/p>\n
6. What is the holding
\nperiod return on an investment of $1,000 held for 10 months with $30
\nin dividends and a
\nselling price of $1,250?
\nA.28 percentC.23.3
\npercent
\nB.25 percentD.
\n3 percent<\/p>\n
7. Given a choice
\nbetween calculating returns using the holding period return (HPR) or the
\nformula for the future
\nvalue, you should select the future value formula because the
\nA.HPR fails to consider the discounted value of the purchase price.
\nB.future
\nvalue formula incorporates the timing of cash flows.
\nC.HPR
\noverstates the internal rate of return in direct proportion to the discount
\nrate.
\nD.future value formula
\nincorporates cash payments that are omitted in the HPR.
\n8. Which of the
\nfollowing statementsmostaccurately explains
\nthe utility of the dividend
\ngrowth model?
\nA.Dividend
\ngrowth increases the total return earned on equity investments.
\nB.Projected
\ndividend growth can be incorporated into calculation of the discounted value of
\ncash flows.
\nC.Stocks with
\nrising dividends generally outperform stocks that don\u00e2\u0080\u0099t pay dividends or
\nthat pay relatively
\nstatic dividends.
\nD.Rising
\ndividends, plotted as a function of time, appear as an exponential function
\nwith a
\npositive slope.<\/p>\n
9. ABC Corporation
\nrecently announced its plans to pay a 5 percent stock dividend in addition
\nto its scheduled $0.32
\nquarterly dividend, which has been paid on its common stock in all
\nof the previous 13
\nquarters. The ex-dividend date will be one month after the announcement.
\nABC Corporation hadn\u00e2\u0080\u0099t
\npaid a stock dividend in the past nine years. You own 100
\nshares of ABC
\nCorporation common stock valued at $68 per share. Which of the following
\nexplanationsaccuratelyproject ( help with nursing paper writing from experts with MSN & DNP degrees)s
\nthe effect of these transactions?
\nA.Dilution
\nwill effect a 5 percent decline in price per share. That will be offset by the
\n2
\npercent (annualized)
\ndividend for a net decline of 3 percent in the stock price.
\nB.The 5
\npercent stock dividend is equivalent to 1-for-20 stock split. Stock prices
\ngenerally
\nrise after stocks
\nsplit, so the 5 percent dilution effect will be reduced to either a price rise
\nor a decline that\u00e2\u0080\u0099s
\nsmaller than 5 percent.
\nC.The
\nstock price will drop about 5 percent if all other factors remain constant.
\nD.The
\ndiscounted value of the stock split and will render a price decline smaller
\nthan 5
\npercent.<\/p>\n
10. If you purchase a
\nstock one month before the date of record, if a friend purchases the
\nsame stock on the ex-dividend
\ndate, and if both of you hold the stock at least two months,
\nA.both you
\nand your friend receive the dividend.
\nB.your friend
\nreceives the dividend, you don\u00e2\u0080\u0099t.
\nC.you receive
\nthe dividend, your friend\u00e2\u0080\u0099s investment is uncertain.
\nD.you
\nreceive the dividend, your friend doesn\u00e2\u0080\u0099t.<\/p>\n
11. In the absence of
\ncompelling empirical data to support technical analysis, which of these
\narguments supports its
\nuse?
\nA.The Dow
\nTheory has a long history of successful use and has earned respect in
\nnonacademic circles.
\nB.Traders of
\nodd lots tend to be smaller, less sophisticated investors who reliably make
\nthe wrong investment
\ndecisions.
\nC.Emotions
\nlead to irrational investment decisions that can be overcome by applying a
\nstrict set of technical
\nmethods.
\nD.Several
\ntechnical methods capitalize on empirical data supporting the contention that
\nsecurity prices move in the same direction.<\/p>\n
12. The technical
\nanalysis methods presented in the textbook use
\nA.methods
\nthat are widely accepted in academic circles.
\nB.historical
\nprice and volume to predict future prices.
\nC.a
\ncombination of price, volume, and analysis of economic and industry factors to
\narrive
\nat the intrinsic value
\nof the corporation.
\nD.methods
\nthat are unanimously rejected in academic circles.<\/p>\n
13. The rationale
\nbehind a moving average is that
\nA.observations
\nfalling within one standard deviation of the moving average are expected
\nin approximately
\ntwo-thirds of all observations, and when an observation falls outside of
\nthis range, it\u00e2\u0080\u0099s
\nindicative of a future change in the direction of prices.
\nB.deviation
\nfrom historical trends may be indicative of a change in trend.
\nC.when
\nobservations fall more than 1.96 standard deviations from the moving average,
\ntheir probability is
\n.05.
\nD.a
\nchange in the direction of the moving average indicates an opposite change in
\nthe
\ndirection of stock
\nprices.<\/p>\n
14. Investors
\ncontribute to the efficiency of security markets by
\nA.using
\navailable information to make investment decisions.
\nB.applying
\ntechnical analysis to their investment decisions.
\nC.combining
\ncash flow analysis and ratio analysis to estimate stock value.
\nD.avoiding
\nhot tips.<\/p>\n
15. In calculating
\nreturn on assets, you need to know
\nA.cash flow
\nin order to back out noncash items.
\nB.earnings
\nafter taxes divided by the asset portion of equity.
\nC.both
\nincome statement and balance sheet information.
\nD.only
\nbalance sheet information.<\/p>\n
16. Which of the
\nfollowing statements iscorrect?
\nA.Security
\nselection can be a complex process that\u00e2\u0080\u0099s aided by Internet financial
\ninformation services.
\nB.Security
\nselection is most efficiently practiced by applying both technical and
\nfundamental analysis.
\nC.Security
\nselection requires only the use of accounting ratios.
\nD.Security
\nselection simplifies investment decisions.<\/p>\n
17. The rationale for
\nratio analysis is explainedbestby the fact that
\nratios
\nA.are readily
\nunderstood and easy to calculate.
\nB.may be
\ncomputed and interpreted from two perspectives, time-series analysis, and
\ncross-sectional
\nanalysis.
\nC.influence
\nmanagement and creditor decisions.
\nD.indicate
\na corporation\u00e2\u0080\u0099s financial and operational effectiveness, which in turn affect
\nthe market value of its stock.<\/p>\n
18. When interpreting
\nthe difference between the return on assets and the return on equity of
\na single corporation
\nfor identical periods, you must take into consideration the
\nA.impact of
\nnet income on the corporation\u00e2\u0080\u0099s total return on assets.
\nB.contribution
\nof current assets to total assets.
\nC.period-to-period
\nrate of change in revenue.
\nD.corporation\u00e2\u0080\u0099s
\nuse of financial leverage, which is its use of debt.
\n19. In fundamental
\nanalysis, the value added by industry analysis is particularly apparent
\nA.when
\ninflation rates are high and have a broad negative impact on business in
\ngeneral.
\nB.in industries
\nwhere business levels significantly change in certain seasons or in
\nrelation to the
\nbusiness cycle.
\nC.during
\nrecessions when business levels are suppressed across most industries.
\nD.during the
\nrapid growth stage of an economy.<\/p>\n
20. Which of the following
\nreasons best explains why you would include inflation in a fundamentalanalysis
\nof stock values?
\nA.Inflation
\nexerts broad influence on factors that underlie the economy.
\nB.Inflation
\ngenerally increases stock prices at a faster rate than other prices.
\nC.Inflation
\ngenerally increases stock prices because cash inflows increase.
\nD.High inflation
\ncorresponds with high interest rates and low bond values.
\n1. A bond will pay
\nprincipal of $1,000 upon maturity in 10 years
\nfrom now, plus it will
\npay $60 every six months, including the
\ndate of maturity and
\nstarting six months from now. What price
\nwould you expect to
\npay for the bond if comparable bonds yield
\n8 percent?
\nA.$1,272C.
\n$815
\nB.$1,162D.
\n$456<\/p>\n
2. What is the yield
\nto maturity on a municipal bond scheduled to
\npay $10,000 upon
\nmaturity 5 years from now? This is a zerocoupon
\nbond selling for
\n$8,220. Round the yield to maturity to
\nthe nearest percent.
\nA.8 percentC.4
\npercent
\nB.5 percentD.
\n3 percent
\n3. What is the yield
\nto maturity on a corporate bond scheduled to pay annual interest of $100
\nand $1,000 upon
\nmaturity 3 years from now? The bond is selling for $1,025.31. Round the
\nyield to maturity to
\nthe nearest percent.
\nA.11 percentC.
\n8 percent
\nB.9
\npercentD.7 percent<\/p>\n
4. What is the
\nduration of a bond that will pay $50 per year in coupon payments and $1,000
\nafter four years? Use
\na discount rate of 10 percent.
\nA.8.4 yearsC.3.7
\nyears
\nB.4.0 yearsD.
\n0.27 years<\/p>\n
5. What is the present
\nvalue of a share of preferred stock that you own indefinitely? The
\nstock\u00e2\u0080\u0099s dividend is
\n$5. The appropriate discount rate is 6 percent.
\nA.$13.33C.
\n$852.33
\nB.
\n$83.33D.
\n$852.98<\/p>\n
6. A perpetual bond
\nannually pays interest of $35 and alternative investments yield 14 percent.
\nWhat is the present
\nvalue of the bond?
\nA.$250C.
\n$490
\nB.$355D.
\n$505
\n(35\/14%)<\/p>\n
7. Duration is a
\nbetter way to compare cash flows than simply comparing present values
\nbecause
\nA.duration
\nincorporates cash flow volatility.
\nB.present
\nvalue fails to incorporate the timing of cash flows.
\nC.when
\nmaturities differ among compared cash flows, present value inaccurately
\nrepresents the yield
\nto maturity.
\nD.duration
\neffectively treats cash flows as a perpetuity, incorporating the reinvestment
\nrate.<\/p>\n
8. One of the benefits
\nof the laddered approach to managing interest rate risk in a bond
\nportfolio is that
\nA.reinvestment
\nrisk is eliminated because you standardize the timing of bond maturities.
\nB.the
\nportfolio includes bonds issued by different organizations, thereby reducing
\ndefault risk.
\nC.all bonds
\nare liquidated if the investor elects to capitalize on an opportunity.
\nD.when
\nbonds mature at different intervals, you diversify the timing of reinvestment.<\/p>\n
9. If you want to
\nmaximize safety and earn federally tax-exempt interest, you should buy
\nA.municipal
\nbonds backed by the revenue earned on the project ( help with nursing paper writing from experts with MSN & DNP degrees) funded by the bond.
\nB.municipal
\nbonds backed by the taxing authority of the issuing government.
\nC.U.S.
\nTreasury bonds backed by the taxing authority of the U.S. federal government.
\nD.U.S. Treasury bills
\nbacked by the taxing authority of the U.S. federal government.
\n10. To participate in
\nthe U.S. national mortgage market by investing in bonds, thebest
\nway
\nwould be to invest in
\nA.revenue
\nbonds issued by a sprawling suburban city.
\nB.treasury
\nbonds that ultimately depend on funding from households.
\nC.mortgage
\npass-through bonds issued by a federal government agency.
\nD.stocks
\nissued by banks that make mortgage loans.<\/p>\n
11. One strategy for
\ndiversifying government-issued bonds and earning tax-exempt interest is
\nto invest in
\nA.U.S.
\nTreasury bonds, notes, and bills with diverse maturities.
\nB.a
\nstate-specific municipal bond fund.
\nC.a
\ncombination of state and local bonds plus bonds issued by foreign governments.
\nD.money
\nmarket mutual funds and U.S. Treasury bills.<\/p>\n
12. What is the key
\ndistinction between Series EE bonds and Treasury bills?
\nA.Series EE
\nbonds pay interest every six months.
\nB.Series EE
\nbonds aren\u00e2\u0080\u0099t backed by the full faith and credit of the federal government.
\nC.Treasury
\nbills are deeply discounted bonds with all interest paid upon maturity.
\nD.Treasury
\nbills can be traded in the secondary market.<\/p>\n
13. Why do bond
\nissuers attach a call feature to their bonds?
\nA.Increases
\nthe marketability of the bond
\nB.Increases
\nthe likelihood of issuing bonds at face value or higher
\nC.Presents
\nan opportunity to capitalize on rising interest rates
\nD.Frees the
\norganization from high-interest debt if interest rates drop<\/p>\n
14. If you were CEO
\nand decided to finance retirement of a bond issue, you would bemost
\nlikely to
\nA.issue
\ncollateral serial bonds, the proceeds of which would fund the bond retirement.
\nB.rewrite
\nthe debenture to include an option to exchange bonds for shares of stock.
\nC.set up a
\npayment arrangement with a trustee to fund an account designated for
\nbond retirement.
\nD.sell
\nproduction assets and apply the proceeds to bond retirement.<\/p>\n
15. If you owned bonds
\nissued by a corporation that announced expectations for a protracted
\nperiod of cash flow
\ndifficulties, what kind of risk would concern youmost?
\nA.Default
\nriskC.Reinvestment rate risk
\nB.Interest rate riskD.
\nPrice fluctuation
\n16. When an investor
\npurchases a 12-month T-bill with the intention of selling it after a period
\nof time, he\u00e2\u0080\u0099s
\nA.riding
\nthe yield curve and selling on a secondary market.
\nB.minimizing
\nhis return on a short-term investment.
\nC.ensuring
\nthat the sale is at maximum discount.
\nD.maximizing
\nhis return on a long-term investment.<\/p>\n
17. Which of the
\nfollowing measures would increase the duration of a bond issue?
\nA.Exercising
\na call option
\nB.Offering
\nbondholders early retirement of bonds
\nC.Prepaying
\ninterest
\nD.Exercising
\nan extendible option<\/p>\n
18. If a bond issuer
\nfailed to honor terms of the indenture prohibiting the corporation from
\nmerging with another
\ncorporation,
\nA.the bond
\nissue would be considered a fallen angel.
\nB.the
\nbond issue would be considered in default.
\nC.the
\ncorporation would be obliged to exercise an extendible option.
\nD.bondholders
\ncould exchange their bonds for stock of the issuing corporation.<\/p>\n
19. Periods of a
\nnegatively sloped yield curve have also been times of
\nA.rising
\ninterest rates and inflation.
\nB.a bull
\nmarket in stocks.
\nC.rapid
\neconomic growth that reduced the cost of long-term debt.
\nD.
\nlow
\ncommodity prices.<\/p>\n
20. The impact of
\ninflation as it relates to a bonding arrangement ismostdevastating
\nto
\nA.
\nborrowers.C.
\ncorporations and governments.
\nB.lenders.D.
\ntrustees.
\n1. You own a stock,
\nand you\u00e2\u0080\u0099re concerned that the price of the
\nstock may decline.
\nWhat might you do to minimize risk of loss
\non the stock?
\nA.Buy a putC.Write a put
\nB.Buy a callD.
\nBuy a warrant
\n2. At a single time, a
\nstock\u00e2\u0080\u0099s price is $10 and the premium for a call option on the stock is $3.
\nThe strike price on
\nthe option is $8. How should you explain the additional value of the
\npremium over the
\ndifference between strike price and stock price?
\nA.The stock
\nprice and option price may have been quoted at different times when stock
\nvalues were different.
\nB.The market
\nvalue of the option premium equals the difference between the strike price
\nand the market value
\nof the stock.
\nC.The
\nmarket value of the option premium equals the difference between the stock
\nmarket value and the
\nstrike price plus a time premium.
\nD.The
\nhypothetical price of the option is less than the time premium.<\/p>\n
3. Which of the
\nfollowing strategies offers the greatest potential to maximize rate of return
\non
\na stock if the stock
\nprice rises after you implement the strategy?
\nA.Purchase a
\nstock and supplement your return by purchasing a call option on the stock.
\nB.Assume
\na naked position in the stock with a call option.
\nC.Write a
\ncovered put on the stock.
\nD.Write a
\nnaked put on the stock.<\/p>\n
4. You speculate that
\nthe value of a stock won\u00e2\u0080\u0099t drop, and you\u00e2\u0080\u0099re unwilling to purchase the
\nstock or pay a premium
\nfor an option. What position would you take to profit by the stock\u00e2\u0080\u0099s
\nprice not dropping?
\nA.Write
\na put.C.
\nWrite a call.
\nB.Purchase a
\ncall.D.Employ a covered position.<\/p>\n
5. What is your profit
\nor loss under the following circumstances when the stock price rises?
\nYou buy a stock at $15
\nand simultaneously buy a put. The strike price on the put is $12,
\nand you pay a $5
\npremium. The stock price rises to $16.
\nA.$5 lossC.
\n$2 profit
\nB.$4
\nlossD.
\n$3 profit<\/p>\n
6. What is your loss
\nin the following situation? You write a naked put when the stock price is
\n$50. The strike price
\nis $55, and the stock price drops to $40. Assume the option is near
\nexpiration and the
\nmarket doesn\u00e2\u0080\u0099t assign any additional value to the option\u00e2\u0080\u0099s intrinsic value.
\nA.$10C.
\n$20
\nB.$15D.
\n$35<\/p>\n
7. What is your profit
\nor loss under the following circumstances? You buy a stock for $30, and
\nits price suddenly
\ndrops to $25. To avoid the risk of further losses, you buy a put with a
\n$30 strike price for
\n$6. Subsequently, the stock price rises to $35, the option expires, and
\nyou sell the stock.
\nA.$1 profitC.
\n$6 loss
\nB.
\n$1 lossD.
\n$15 loss
\n8. What is your profit
\nor loss under the following circumstances? You buy a stock for $25, and
\nsimultaneously write a
\ncovered call with a $20 strike price and $7 premium. The stock
\nprice rises to $28,
\nand the buyer exercises the option and you sell your ownership in
\nthe stock.
\nA.$3 lossC.$2 profit
\nB.$2 lossD.
\n$3 profit<\/p>\n
9. Which of the
\nfollowing positions would ordinarily minimize potential loss in terms of
\npercentage of
\ninvestment? Assume the loss would be realized during the term of
\nthe option.
\nA.Purchase a
\nstock at $25.
\nB.Purchase a
\nstock at $25 and a call on the stock for a $5 premium with a $21
\nstrike price.
\nC.Purchase a
\ncall option for $4.
\nD.Purchase
\na stock at $25, and a put on the stock for a $5 premium with a $29
\nstrike price.<\/p>\n
10. The risk of
\nshorting a stock is greater than the risk of buying a put because
\nA.the stock
\nprice can fall to zero, while the put limits risk to the amount of the premium.
\nB.a stock
\nprice change results in a relatively smaller change in an option on that stock.
\nC.the
\nmaximum risk of a put is the premium, while the maximum risk of shorting is
\nunlimited because price
\ncan rise without limit.
\nD.options
\nprovide unlimited hedging opportunities that render option positions less risky
\nthan short stock
\npositions.<\/p>\n
11. Although arbitrage
\npresents potential profit opportunities, the likelihood of individual
\ninvestors finding
\narbitrage opportunities is limited by
\nA.the
\ntendency for stock values to fall away from the efficient frontier.
\nB.hedge
\nstrategies that combine option and stock purchases all but eliminate
\narbitrage
\nopportunities.
\nC.stock and
\noption exchange managers, who are required to notify market makers when
\narbitrage
\nopportunities present themselves.
\nD.market
\nmakers, who are in a better position to detect and quickly capitalize before
\ngaps narrow.<\/p>\n
12. You know that
\nleverage increases risk because
\nA.leverage
\nincreases the opportunity for greater profits and losses.
\nB.when you
\nlend money to businesses, you increase your exposure to default risk.
\nC.leverage magnifies the potential return on
\nan investment.
\nD.leverage brings with
\nit downside risk caused by the time-limited feature of options.
\n13. If you owned the
\nstock of a company that had also issued a warrant on its stock, how
\ncould you use the
\nwarrant to limit your risk in the stock?
\nA.Buy the
\nwarrant and write a put on the stock.
\nB.Sell the warrant short.
\nC.Buy a put
\non the stock.
\nD.Buy a put
\non the stock, and buy the warrant.<\/p>\n
14. Suppose that
\nyou\u00e2\u0080\u0099re a corn farmer preparing to plant. You want to reduce the risk that corn
\nprices will drop below
\n$2.20 per bushel next September when you harvest. What is the
\nbeststrategy to
\nreduce your risk?
\nA.Enter a
\nlong position in corn futures to accept in September to enhance your profit if
\ncorn prices rise.
\nB.Enter a
\nfutures contract to deliver September corn at a price under $2.20.
\nC.Enter a
\nlong position in corn for futures contracts to accept corn in July.
\nD.Enter a futures contract to deliver September corn at
\na price above $2.20.<\/p>\n
15. Which of the
\nfollowing ismostlikely to use currency
\nfutures to reduce risk?
\nA.Foreign
\ncurrency speculators
\nB.Corporations that accept and make payments in foreign
\ncurrencies
\nC.Households
\nlocated near international borders
\nD.Wheat
\nfarmers who sell to U.S. exporters developing markets in China<\/p>\n
16. You have a long
\nposition in soybean futures at $4.75 per bushel. The contract is for 5,000
\nbushels, and initial
\nmargin is $1,215. Maintenance margin is $900. An unexpected late
\nfrost destroys newly
\nplanted crops in the Midwestern United States, and the futures price
\nrises to $5.20 per
\nbushel over the next few trading days. Which of the following results is
\nmost likely?
\nA.You receive
\na margin call from your broker.
\nB.The futures
\nexchange imposes a temporary hold on trading in soybean futures.
\nC.The
\ncontract value rises to $25,000.
\nD.The contract value rises $2,250.<\/p>\n
17. You enter a short
\nposition in an oats futures contract. The trading unit is 5,000 bushels,
\nthe futures price is
\n$1.08 per bushel, initial margin is $270, and maintenance margin is
\n$200. The futures
\nprice rises $.02 to $1.10 on project ( help with nursing paper writing from experts with MSN & DNP degrees)ions of poor yields. What is the
\nmostlikely
\nresult?
\nA.You
\nconsider closing your position to capitalize on a $100 profit.
\nB.You get a
\nmargin call for $70.
\nC.You get a margin call for $100.
\nD.The long position
\nexercises the futures contract.
\n18. Which of the
\nfollowing investors would reduce risk by shorting municipal bonds
\nwith futures?
\nA.Someone who owns a large portfolio of municipal bonds
\nB.An investor
\nwho has entered a contract to deliver municipal bonds
\nC.Someone who
\nhas entered a futures contract to accept Treasury notes
\nD.A city that
\nhas issued municipal bonds<\/p>\n
19. If you were CFO of
\na U.S.-based international corporation with significant operations
\nin Switzerland, which
\nof the following would be thebestway to
\nreduce currency risk
\nthrough derivatives?
\nA.Enter a
\nshort position in the Swiss franc.
\nB.Purchase
\nSwiss francs and invest them in Swiss certificates of deposit.
\nC.Enter a
\nswap agreement so that U.S. operating expenses are paid on behalf of a
\ncorporation based in
\nSwitzerland.
\nD.Enter a swap agreement so that Swiss operating
\nexpenses are paid by a corporation
\nbased in Switzerland.<\/p>\n
20. Which of the
\nfollowing events would increase a futures price?
\nA.Inflation
\ndeclines during the term of the contract.
\nB.Spot price
\ndeclines because of excess volume in the commodity.
\nC.The broker
\nincreases the maintenance margin.
\nD.
\nInterest rates rise
\nfaster than expected.<\/p>\n
1. Base your answer to this question on contents of
\nExhibit 22.4
\non page 821 of your textbook. Use the January
\n1991\u00e2\u0080\u0093December
\n1995 data only. Strictly on the basis of the correlation
\nof returns,
\ninvestments in which three countries would yield thegreatest
\ndiversification?
\nA.Brazil,
\nHungary, Indonesia
\nB.Turkey,
\nKorea, Chile
\nC.Turkey,
\nIndia, Colombia please provide exhibit
\nD.Turkey, Brazil, Malaysia
\n2. What special
\nadvantage do mutual funds confer for investing in emerging markets?
\nA.Emerging
\nmarkets typically yield higher rates of returns for a given investment period
\nbecause risk is
\nrelatively high.
\nB.The
\ncorrelation coefficients of returns between emerging and established markets
\nare
\ngenerally negative.
\nC.Emerging
\nfunds allow investors to invest in specific markets even though they aren\u00e2\u0080\u0099t
\nfamiliar with
\ncorporations, laws, and particulars of investing in those markets.
\nD.Emerging
\nmarket mutual funds provide diversification not available in global or
\ninternational funds.<\/p>\n
3. Which of the
\nfollowing investments would certainly increase your risk exposure if most of
\nyour portfolio is
\ndominated by U.S. investments?
\nA.International
\ninvestments characterized by a correlation with U.S. investments near zero
\nB.International
\ninvestments with high historical rates of return and, therefore, to the right
\nside of the security
\nmarket line
\nC.A mix of
\nEuropean and Pacific Basin stocks purchased through an international
\nmutual fund
\nD.International
\ninvestments in countries where the exchange rate fluctuates excessively<\/p>\n
4. If you were
\nsupervisor of a mutual fund investment manager working for an international
\ngrowth fund, how would
\nyou interpret the following situation? The manager recommends
\npurchase of stock in
\nGeneral Electric, a New York\u00e2\u0080\u0093based corporation. Her rationale for the
\npurchase is based on
\nthe fact that General Electric\u00e2\u0080\u0099s operations and revenue are truly
\ninternational,
\nwith a substantial
\nproportion of operations and revenue from over a dozen countries.
\nA.If the
\nmanager were permitted to make the purchase, it would violate the fund\u00e2\u0080\u0099s
\ninvestment policy.
\nB.General
\nElectric\u00e2\u0080\u0099s international exposure would enhance the fund\u00e2\u0080\u0099s diversification.
\nC.General
\nElectric would add to the fund\u00e2\u0080\u0099s diversification, but the corporation\u00e2\u0080\u0099s large
\nsize
\nis contrary to the
\ngrowth objective for the fund.
\nD.General
\nElectric\u00e2\u0080\u0099s diverse operations are a favorable attribute, and the company\u00e2\u0080\u0099s
\ngrowth would enhance
\nthe fund\u00e2\u0080\u0099s growth objective.<\/p>\n
5. If you wanted
\ninternational diversification but wanted to decide which countries you would
\ninvest in, which
\nstrategy would you use?
\nA.Invest through iShares country-specific
\nexchange-traded funds.
\nB.Invest through
\na global mutual fund.
\nC.Invest
\nthrough World Equity Benchmark shares.
\nD.Invest in euros.<\/p>\n
6. Of the reasons
\nlisted below, which is themostimportant reason to
\ninvest internationally?
\nA.The overall
\nreturn on international investments exceeds the return on most domestic
\ninvestments, thereby
\nincreasing total return.
\nB.International
\ninvestments may be riskier than domestic investments, but their diversifying
\neffect can reduce the
\nrisk of the entire portfolio.
\nC.International
\ninvestments reduce total portfolio risk because returns on international
\ninvestments typically
\nhave a lower standard deviation than domestic investments.
\nD.Although
\ndomestic investments offer some growth opportunities, the mature domestic
\nmarket lacks the
\nnumber of growth opportunities in emerging economies.<\/p>\n
7. If you lived in a
\nnation that didn\u00e2\u0080\u0099t use the Swiss currency for exchange and were invested
\nin securities issued
\nby the government of Switzerland, you might expect the value of your
\ninvestment to rise if
\nA.you hedged your
\ninvestment with currency futures.
\nB.the value
\nof the Euro dropped in relation to the Swiss franc.
\nC.political
\nuncertainty in France resulted in a decline in your domestic stock market.
\nD.your
\ndomestic currency fell in relation to the Swiss franc.<\/p>\n
8. Use Figure 22.4, on page 819, to answer the following
\nquestion: How would you interpret
\nobservations in the lower-left quadrant?Please provide figure
\nA.When
\none country\u00e2\u0080\u0099s return fell below \u00e2\u0080\u009320 percent, the S&P 500 return was
\nslightly
\nbelow zero.
\nB.After
\na year that the S&P 500 yielded a return slightly below zero, the EAFE lost
\nmore
\nthan 20 percent.
\nC.Roughly
\nevery 20 years, you should expect a negative relationship between EAFE
\nreturns and returns in the S&P 500.
\nD.Lines
\nAB and CD are nearly equidistant from the observation, exemplifying how
\ndiversification can benefit a portfolio.<\/p>\n
9. The importance of
\nmarket efficiency and its contribution to international investing is that
\nA.obtaining
\ninformation on which to base foreign investment information may be difficult.
\nB.the rapid
\ndissemination of new information and the intense competition among
\ninvestors produces
\nefficient U.S. financial markets.
\nC.foreign
\nfirms with securities traded on U.S. exchanges meet SEC disclosure
\nrequirements.
\nD.inefficiencies
\nin international markets may present opportunities for excess returns.<\/p>\n
10. You might expect a
\ndomestic currency dAssessment if
\nA.exports
\nincrease, resulting in a flood of foreign currency into the country.
\nB.significant
\ndomestic productivity declines decrease the attractiveness of
\ndomestic investments.
\nC.demand for
\ndomestic currency by foreign investors increases the supply of
\ndomestic currency.
\nD.domestic equity market
\nvalues rise on news of project ( help with nursing paper writing from experts with MSN & DNP degrees)ed interest rate decreases.
\n11. The cash budget is
\ncritical to financial planning because it
\nA.enumerates
\nreceipts and disbursements necessary to project ( help with nursing paper writing from experts with MSN & DNP degrees) asset allocation.
\nB.aids the
\ninvestor when deciding to purchase small cap stocks.
\nC.helps
\nestimate social security payments.
\nD.is the best
\nmeans for establishing one\u00e2\u0080\u0099s financial position.<\/p>\n
12. Which of the
\nfollowingshouldbe part of a balance
\nsheet?
\nA.Bank
\ndeposits, salary, and royalties
\nB.IRA
\ndistributions, insurance, and maintenance
\nC.Pension,
\nmoney market funds, and Keogh accounts
\nD.Certificates of deposit, cash value of life
\ninsurance, and real estate<\/p>\n
13. Before investing,
\nit\u00e2\u0080\u0099s essential that the investor first
\nA.determine
\nhis or her net worth.
\nB.thoroughly
\nresearch and hire a professional planner.
\nC.construct a
\nfinancial plan.
\nD.define his or her goal.<\/p>\n
14. If a U.S. investor
\nbuys the stock of a corporation in Mexico, the investor will certainly sustain
\na loss if the stock
\nprice
\nA.falls and
\nthe value of the peso rises.
\nB.rises and
\nthe value of the peso rises.
\nC.falls and the value of the peso falls.
\nD.rises and
\nthe value of the dollar rises.<\/p>\n
15. When an investor
\nbuys an ETF, he or she
\nA.knows the
\nreturn will be based on the movement of dollar cost of the currency purchased.
\nB.
\nis sure of little fluctuation in the value of his or her
\ncurrency.
\nC.physically
\nholds the currency purchased.
\nD.counts on impure play of one currency\u00e2\u0080\u0099s value versus
\nanother\u00e2\u0080\u0099s.<\/p>\n
16. A 30-year-old with
\na portfolio of $50,000 with project ( help with nursing paper writing from experts with MSN & DNP degrees)ed earnings of five percent per year
\ncan expect the
\nportfolio to be worth _______ at age 60.
\nA.$216, 097.12C.$132,195.27
\nB.$160,972.13
\nD.$108,049.16<\/p>\n
17. The singlemost
\ninfluential variable in determining investment returns is
\nA.heavy
\nreliance upon index mutual funds.
\nB.selection
\nof a fee-only investment advisor experienced in asset allocation.
\nC.selection
\nof low-cost, high-performing mutual funds.
\nD.asset
\nallocation decisions driven by investment policy.
\n18. What is themost
\nlikely explanation for discrepancies between targeted asset
\nallocations
\nand current asset
\nallocations if the portfolio\u00e2\u0080\u0099s allocations matched the target one year ago
\nand no money was added
\nto or subtracted from the portfolio?
\nA.Excessive
\nturnover adds costs to the portfolio that put downward pressure on
\nasset values.
\nB.The
\ninvestment policy may have assigned an over-weight to equity investments.
\nC.Some asset class values rise and fall faster than
\nothers, leading to an imbalance.
\nD.
\nThe portfolio performed much better than expected when
\ntargeted asset allocations
\nwere
\nestablished.<\/p>\n
19. The real benefit
\nof constructing a cash budget for investors is to
\nA.ensure that
\nspending doesn\u00e2\u0080\u0099t exceed income.
\nB.identify sources of cash flow for
\ninvestments.
\nC.aid balance
\nsheet construction.
\nD.identify
\nnet cash flow for determination of net worth.
\n20. A pro forma
\nfinancial statement identifies
\nA.what is
\nowed and what is owned.
\nB.balance
\nsheet and cash budget data.
\nC.one\u00e2\u0080\u0099s future or project ( help with nursing paper writing from experts with MSN & DNP degrees)ed financial
\nposition.
\nD.what the investor\u00e2\u0080\u0099s
\npresent-day \u00e2\u0080\u009cestate\u00e2\u0080\u009d looks like.<\/p>\n","protected":false},"excerpt":{"rendered":"
Securities and Investments 2. What is thebest reason to use the price-to-sales (P\/S) ratio instead of the price-to-earnings (P\/E) ratio in valuing stocks? A.The P\/S\u2026<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7641,8827,10535,10533,10534,10531,10529,6744,10532,10530,7741],"tags":[10553,10549,10616,10615,7687,10254,10627,10104,10247,8857,10552,10295,10900,2984,3903,10548,10622,8901,10551,8907],"class_list":["post-127116","post","type-post","status-publish","format-standard","hentry","category-australia-essay-writers","category-australia-essays","category-do-my-university-assignment-for-me","category-essay-pro-dissertation-writers","category-homework-help-services-best-websites","category-i-need-help-writing-a-page-paper-assignment","category-masters-essays","category-nursing-studybay","category-pay-someone-to-write-a-paper-for-you","category-website-that-writes-assignments","category-studybay","tag-1-assignment-help-online-service-for-students-in-the-usa","tag-ai-plagiarism-free-essay-writing-tool","tag-australian-best-tutors","tag-best-trans-tutors","tag-buy-essay-uk","tag-can-someone-write-my-assignment-for-me","tag-cheap-dissertation-writer","tag-essypro","tag-help-me-write-my-dissertation","tag-help-with-writing-an-essay","tag-help-write-my-paper-ai-free","tag-homework-for-you","tag-nursing-bay","tag-nursing-essay","tag-nursing-study-bay","tag-online-essay-writers","tag-phd-essays","tag-studbay","tag-write-my-assignment-help-for-college-students","tag-write-my-essay-for-me"],"_links":{"self":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/127116","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/comments?post=127116"}],"version-history":[{"count":0,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/127116\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/media?parent=127116"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/categories?post=127116"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/tags?post=127116"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}