Question 1

The central focus of a security analyst's job is to:

Accepted Answer

A)  ascertain the accuracy of financial statements of selected companies. 
B)  find growth stocks. 
C)  forecast a specific company's return. 
D)  determine the market demand for a specific company's stock. 
A)  ascertain the accuracy of financial statements of selected companies. 
B)  find growth stocks. 
C)  forecast a specific company's return. 
D)  determine the market demand for a specific company's stock.

Question 2

Which of the following is not considered a passive equity investment:

Accepted Answer

A)  investing in a sector ETF. 
B)  investing in an S&P 500 index mutual fund. 
C)  investing in a multi-strategy hedge fund. 
D)  investing in a Russell 2000 index mutual fund. 
A)  investing in a sector ETF. 
B)  investing in an S&P 500 index mutual fund. 
C)  investing in a multi-strategy hedge fund. 
D)  investing in a Russell 2000 index mutual fund.

Question 3

When building a portfolio, what are the two basic components of an investor's investment decision?

Accepted Answer

A)  Risk and return 
B)  Buying and selling 
C)  Cash flows and capital gains 
D)  Asset allocation and security selection 
A)  Risk and return 
B)  Buying and selling 
C)  Cash flows and capital gains 
D)  Asset allocation and security selection

Question 4

The required return for a common stock is defined as the:

Accepted Answer

A)  expected return based on probabilities assigned to different scenarios. 
B)  maximum expected return based on estimates of its cash flows. 
C)  minimum expected return necessary to induce an investor to purchase the stock. 
D)  mean return for the stock over the past ten years. 
A)  expected return based on probabilities assigned to different scenarios. 
B)  maximum expected return based on estimates of its cash flows. 
C)  minimum expected return necessary to induce an investor to purchase the stock. 
D)  mean return for the stock over the past ten years.

Question 5

Buy-side analysts will more likely have a potential conflict of interest in a stock than a sell-side analyst.

Accepted Answer

A) True 
 B)False

Question 6

Mortgage REITs are generally considered to be interest rate sensitive.

Accepted Answer

A) True 
 B)False

Question 7

If security markets are fully efficient, the best common stock strategy is:

Accepted Answer

A)  a rotation strategy. 
B)  a buy low, sell high strategy. 
C)  an active strategy. 
D)  a passive strategy. 
A)  a rotation strategy. 
B)  a buy low, sell high strategy. 
C)  an active strategy. 
D)  a passive strategy.

Question 8

As evidence about the efficiency of stock markets has grown, so have index funds.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements regarding defensive stocks is true?

Accepted Answer

A)  They are often expected to have above-average future growth. 
B)  They often have high P/E multiples. 
C)  They are expected to be adversely affected by high interest rates. 
D)  They often produce necessary items such as food and prescription drugs. 
A)  They are often expected to have above-average future growth. 
B)  They often have high P/E multiples. 
C)  They are expected to be adversely affected by high interest rates. 
D)  They often produce necessary items such as food and prescription drugs.

Question 10

What tends to happen to the risk profile for an investor that follows a buy-and-hold strategy?

Accepted Answer

The risk of the investor's portfolio ten

Question 11

Market risk is the single most important risk affecting the price movements of common stocks.

Accepted Answer

A) True 
 B)False

Question 12

Sector rotation would be very successful in a truly efficient market.

Accepted Answer

A) True 
 B)False

Question 13

One of the major benefits of employing a buy and hold strategy is the savings on trading costs.

Accepted Answer

A) True 
 B)False

Question 14

In an upward trending market, what sectors might investors over weight to increase absolute returns?

Accepted Answer

Investors should hold high bet

Question 15

Commodity ETF's are mainly used as speculative plays by:

Accepted Answer

A)  hedge fund traders. 
B)  conservative investors. 
C)  mutual fund managers. 
D)  value investors. 
A)  hedge fund traders. 
B)  conservative investors. 
C)  mutual fund managers. 
D)  value investors.

Question 16

Growth stocks generally have relatively:

Accepted Answer

A)  low dividend yields and relatively high price multiples. 
B)  high dividend yields and relatively low price multiples. 
C)  low dividend yields and relatively low price multiples. 
D)  high dividend yields and relatively high price multiples. 
A)  low dividend yields and relatively high price multiples. 
B)  high dividend yields and relatively low price multiples. 
C)  low dividend yields and relatively low price multiples. 
D)  high dividend yields and relatively high price multiples.

Question 17

Historical evidence indicates that the greatest proportion of analyst recommendations are hold recommendations.

Accepted Answer

A) True 
 B)False

Question 18

The so-called "global settlement" negotiated by the SEC, NYSE, and NASD with a number of brokerage firms was intended to:

Accepted Answer

A)  ensure more disclosure of relevant information to investors. 
B)  separate investment banking from analyst research. 
C)  stop the practice of buy, sell, or hold recommendations in analysts' reports. 
D)  stop the practice of trading on inside information. 
A)  ensure more disclosure of relevant information to investors. 
B)  separate investment banking from analyst research. 
C)  stop the practice of buy, sell, or hold recommendations in analysts' reports. 
D)  stop the practice of trading on inside information.

Question 19

Market timers attempt to earn abnormal returns by:

Accepted Answer

A)  adjusting the ratio of aggressive equity securities to defensive equity securities. 
B)  shifting the mix of short-term securities to long-term securities. 
C)  varying the percentage of portfolio assets in equity securities. 
D)  adjusting the ratio of money market securities to capital market securities. 
A)  adjusting the ratio of aggressive equity securities to defensive equity securities. 
B)  shifting the mix of short-term securities to long-term securities. 
C)  varying the percentage of portfolio assets in equity securities. 
D)  adjusting the ratio of money market securities to capital market securities.

Question 20

If investors become more pessimistic about market conditions, what impact is anticipated for the required return on equities? The required return will:

Accepted Answer

A)  decrease. 
B)  increase. 
C)  stay the same. 
D)  increase in the short-term but decrease in the long-term. 
A)  decrease. 
B)  increase. 
C)  stay the same. 
D)  increase in the short-term but decrease in the long-term.

Exam 11: Common Stocks: Analysis and Strategy

The central focus of a security analyst's job is to:

Which of the following is not considered a passive equity investment:

When building a portfolio, what are the two basic components of an investor's investment decision?

The required return for a common stock is defined as the:

Buy-side analysts will more likely have a potential conflict of interest in a stock than a sell-side analyst.

Mortgage REITs are generally considered to be interest rate sensitive.

If security markets are fully efficient, the best common stock strategy is:

As evidence about the efficiency of stock markets has grown, so have index funds.

Which of the following statements regarding defensive stocks is true?

What tends to happen to the risk profile for an investor that follows a buy-and-hold strategy?

Market risk is the single most important risk affecting the price movements of common stocks.

Sector rotation would be very successful in a truly efficient market.

One of the major benefits of employing a buy and hold strategy is the savings on trading costs.

In an upward trending market, what sectors might investors over weight to increase absolute returns?

Commodity ETF's are mainly used as speculative plays by:

Growth stocks generally have relatively:

Historical evidence indicates that the greatest proportion of analyst recommendations are hold recommendations.

The so-called "global settlement" negotiated by the SEC, NYSE, and NASD with a number of brokerage firms was intended to:

Market timers attempt to earn abnormal returns by:

If investors become more pessimistic about market conditions, what impact is anticipated for the required return on equities? The required return will:

Understanding Investments

Investment Alternatives

Indirect Investing

Securities Markets and Market Indexes

How Securities Are Traded

The Risk and Return From Investing

Portfolio Theory

Portfolio Selection and Asset Allocation

Capital Market Theory and Asset Pricing Models

Common Stock Valuation

Market Efficiency

Economymarket Analysis

Sectorindustry Analysis

Company Analysis

Technical Analysis

Bond Yields and Prices

Bonds: Analysis and Strategy

Options

Futures Contracts

Managing Your Financial Assets

Evaluation of Investment Performance

Filters