Question 1

The most widely used monetary tool is

Accepted Answer

A) altering the discount rate. 
B) altering the reserve requirements. 
C) open-market operations. 
D) altering marginal tax rates. 
A) altering the discount rate. 
B) altering the reserve requirements. 
C) open-market operations. 
D) altering marginal tax rates.

Question 2

If the economy is growing, firms with high operating leverage will experience

Accepted Answer

A) higher increases in profits than firms with low operating leverage. 
B) similar increases in profits as firms with low operating leverage. 
C) smaller increases in profits than firms with low operating leverage. 
D) no change in profits. 
A) higher increases in profits than firms with low operating leverage. 
B) similar increases in profits as firms with low operating leverage. 
C) smaller increases in profits than firms with low operating leverage. 
D) no change in profits.

Question 3

A declining GDP indicates a(n) ______ economy with ______ opportunity for a firm to increase sales.

Accepted Answer

A) stagnant; little 
B) stagnant; ample 
C) expanding; little 
D) expanding; ample 
A) stagnant; little 
B) stagnant; ample 
C) expanding; little 
D) expanding; ample

Question 4

The process of estimating the dividends and earnings that can be expected from the firm based on determinants of value is called

Accepted Answer

A) business-cycle forecasting. 
B) macroeconomic forecasting. 
C) technical analysis. 
D) fundamental analysis. 
A) business-cycle forecasting. 
B) macroeconomic forecasting. 
C) technical analysis. 
D) fundamental analysis.

Question 5

If the currency of your country is depreciating, the result should be to ______ exports and to _______ imports.

Accepted Answer

A) increase; increase 
B) increase; decrease 
C) decrease; increase 
D) decrease; decrease 
A) increase; increase 
B) increase; decrease 
C) decrease; increase 
D) decrease; decrease

Question 6

In recent years, P/E multiples for S&P 500 companies have

Accepted Answer

A) ranged from -1 to -10. 
B) ranged from 1 to 8. 
C) ranged from 6 to 10. 
D) ranged from 12 to 25. 
A) ranged from -1 to -10. 
B) ranged from 1 to 8. 
C) ranged from 6 to 10. 
D) ranged from 12 to 25.

Question 7

If a firm's sales decrease by 15%, and profits decrease by 20% during a recession, the firm's operating leverage is

Accepted Answer

A) 1.33. 
B) 0.75. 
C) 5. 
D) -5. 
A) 1.33. 
B) 0.75. 
C) 5. 
D) -5.

Question 8

Two firms, A and B, both produce widgets.The price of widgets is $1 each.Firm A has total fixed costs of $500,000 and variable costs of 50' per widget.Firm B has total fixed costs of $240,000 and variable costs of 75' per widget.The corporate tax rate is 40%.If the economy is strong, each firm will sell 1,200,000 widgets.If the economy enters a recession, each firm will sell 1,100,000 widgets. If the economy enters a recession, the after-tax profit of Firm A will be

Accepted Answer

A) $0. 
B) $6,000. 
C) $30,000. 
D) $60,000. 
A) $0. 
B) $6,000. 
C) $30,000. 
D) $60,000.

Question 9

The stock market exhibiting the highest U.S.dollar return in 2015 was

Accepted Answer

A) Japan. 
B) Singapore. 
C) Greece. 
D) South Korea. 
A) Japan. 
B) Singapore. 
C) Greece. 
D) South Korea.

Question 10

The industry with the highest ROE in 2015-2016 was

Accepted Answer

A) major airlines. 
B) trucking. 
C) business software. 
D) computer systems. 
A) major airlines. 
B) trucking. 
C) business software. 
D) computer systems.

Question 11

Two firms, A and B, both produce widgets.The price of widgets is $1 each.Firm A has total fixed costs of $500,000 and variable costs of 50'per widget.Firm B has total fixed costs of $240,000 and variable costs of 75' per widget.The corporate tax rate is 40%.If the economy is strong, each firm will sell 1,200,000 widgets.If the economy enters a recession, each firm will sell 1,100,000 widgets. If the economy is strong, the after-tax profit of Firm A will be

Accepted Answer

A) $0. 
B) $6,000. 
C) $36,000. 
D) $60,000. 
A) $0. 
B) $6,000. 
C) $36,000. 
D) $60,000.

Question 12

Two firms, C and D, both produce coat hangers.The price of coat hangers is $1.20 each.Firm C has total fixed costs of $750,000 and variable costs of 30' per coat hanger.Firm D has total fixed costs of $400,000 and variable costs of 50' per coat hanger.The corporate tax rate is 40%.If the economy is strong, each firm will sell 2,000,000 coat hangers.If the economy enters a recession, each firm will sell 1,400,000 coat hangers. If the economy is strong, the before-tax profit of firm C will be

Accepted Answer

A) $1,680,000. 
B) $1,050,000. 
C) $510,000. 
D) $204,000. 
A) $1,680,000. 
B) $1,050,000. 
C) $510,000. 
D) $204,000.

Question 13

Two firms, A and B, both produce widgets.The price of widgets is $1 each.Firm A has total fixed costs of $500,000 and variable costs of 50' per widget.Firm B has total fixed costs of $240,000 and variable costs of 75'per widget.The corporate tax rate is 40%.If the economy is strong, each firm will sell 1,200,000 widgets.If the economy enters a recession, each firm will sell 1,100,000 widgets. Calculate firm B's degree of operating leverage.

Accepted Answer

A) .714 
B) 9.09 
C) 7.86 
D) 7.14 
A) .714 
B) 9.09 
C) 7.86 
D) 7.14

Question 14

The stock price index and new orders for nondefense capital goods are

Accepted Answer

A) leading economic indicators. 
B) coincidental economic indicators. 
C) lagging economic indicators. 
D) not useful as economic indicators. 
A) leading economic indicators. 
B) coincidental economic indicators. 
C) lagging economic indicators. 
D) not useful as economic indicators.

Question 15

A top-down analysis of a firm starts with

Accepted Answer

A) the relative value of the firm. 
B) the absolute value of the firm. 
C) the domestic economy. 
D) the global economy. 
A) the relative value of the firm. 
B) the absolute value of the firm. 
C) the domestic economy. 
D) the global economy.

Question 16

Monetary policy is determined by

Accepted Answer

A) government budget decisions. 
B) Prime minister's mandates. 
C) the Governing Council of the Bank of Canada 
D) congressional actions. 
A) government budget decisions. 
B) Prime minister's mandates. 
C) the Governing Council of the Bank of Canada 
D) congressional actions.

Question 17

Fiscal policy is difficult to implement quickly because

Accepted Answer

A) it requires political negotiations. 
B) much of government spending is nondiscretionary and cannot be changed. 
C) increases in tax rates affect consumer spending gradually. 
D) it requires political negotiations, and much of government spending is nondiscretionary and cannot be changed. 
A) it requires political negotiations. 
B) much of government spending is nondiscretionary and cannot be changed. 
C) increases in tax rates affect consumer spending gradually. 
D) it requires political negotiations, and much of government spending is nondiscretionary and cannot be changed.

Question 18

The industry life cycle is described by which of the following stage(s)?

Accepted Answer

A) Start-up 
B) Consolidation 
C) Absolute decline 
D) Start-up and consolidation 
A) Start-up 
B) Consolidation 
C) Absolute decline 
D) Start-up and consolidation

Question 19

Two firms, C and D, both produce coat hangers.The price of coat hangers is $1.20 each.Firm C has total fixed costs of $750,000 and variable costs of 30'per coat hanger.Firm D has total fixed costs of $400,000 and variable costs of 50' per coat hanger.The corporate tax rate is 40%.If the economy is strong, each firm will sell 2,000,000 coat hangers.If the economy enters a recession, each firm will sell 1,400,000 coat hangers. If the economy is strong, the total revenue of firm C will be

Accepted Answer

A) $1,680,000. 
B) $1,400,000. 
C) $2,000,000. 
D) $2,400,000. 
A) $1,680,000. 
B) $1,400,000. 
C) $2,000,000. 
D) $2,400,000.

Question 20

Two firms, A and B, both produce widgets.The price of widgets is $1 each.Firm A has total fixed costs of $500,000 and variable costs of 50' per widget.Firm B has total fixed costs of $240,000 and variable costs of 75' per widget.The corporate tax rate is 40%.If the economy is strong, each firm will sell 1,200,000 widgets.If the economy enters a recession, each firm will sell 1,100,000 widgets. Calculate firm A's degree of operating leverage.

Accepted Answer

A) 11.0 
B) 2.86 
C) 9.09 
D) 1.00 
A) 11.0 
B) 2.86 
C) 9.09 
D) 1.00

Exam 17: Macroeconomic and Industry Analysis

The most widely used monetary tool is

If the economy is growing, firms with high operating leverage will experience

A declining GDP indicates a(n) ______ economy with ______ opportunity for a firm to increase sales.

The process of estimating the dividends and earnings that can be expected from the firm based on determinants of value is called

If the currency of your country is depreciating, the result should be to ______ exports and to _______ imports.

In recent years, P/E multiples for S&P 500 companies have

If a firm's sales decrease by 15%, and profits decrease by 20% during a recession, the firm's operating leverage is

The stock market exhibiting the highest U.S.dollar return in 2015 was

The industry with the highest ROE in 2015-2016 was

The stock price index and new orders for nondefense capital goods are

A top-down analysis of a firm starts with

Monetary policy is determined by

Fiscal policy is difficult to implement quickly because

The industry life cycle is described by which of the following stage(s)?

The Investment Environment

Financial Markets, Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioural Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters

A declining GDP indicates a(n) economy with opportunity for a firm to increase sales.

If the currency of your country is depreciating, the result should be to exports and to _ imports.