Question 1

An increase in the required rate of return k will increase the P/E ratio.

Accepted Answer

A) True 
 B)False

Question 2

If,for the S&P Industrials Index,the profit margin was 0.30 and the equity turnover ratio was 11,the ROE would be:

Accepted Answer

A)  0.033% 
B)  3.300% 
C)  33.00% 
D)  36.70% 
E)  333.00% 
A)  0.033% 
B)  3.300% 
C)  33.00% 
D)  36.70% 
E)  333.00%

Question 3

The economic factor assumed to be closely related to stock prices is productivity.

Accepted Answer

A) True 
 B)False

Question 4

There is a negative relationship between the capacity utilization rate and the profit margin.

Accepted Answer

A) True 
 B)False

Question 5

All of the following factors affect the required rate of return except

Accepted Answer

A)  The economy's risk free rate. 
B)  Corporate business risk. 
C)  Return on equity. 
D)  Country risk. 
E)  Expected rate of inflation. 
A)  The economy's risk free rate. 
B)  Corporate business risk. 
C)  Return on equity. 
D)  Country risk. 
E)  Expected rate of inflation.

Question 6

Which of the following economic series is not included in the National Bureau of Economic Research (NBER)coincident economic indicator group?

Accepted Answer

A)  Total value of commercial loans 
B)  Employees on nonagricultural payrolls 
C)  Personal income less transfer payments 
D)  Industrial production 
E)  Manufacturing and trade sales 
A)  Total value of commercial loans 
B)  Employees on nonagricultural payrolls 
C)  Personal income less transfer payments 
D)  Industrial production 
E)  Manufacturing and trade sales

Question 7

A main limitation of the NBER indicator series is false signals.

Accepted Answer

A) True 
 B)False

Question 8

The first step in the Goldman Sachs analysis of world markets examines a country's aggregate economy and its components that relate to the valuation of securities.

Accepted Answer

A) True 
 B)False

Question 9

Diffusion indexes indicate the spread in interest rates between major economies.

Accepted Answer

A) True 
 B)False

Question 10

If,for the S&P Industrials Index,the profit margin was 0.20 and the equity turnover ratio was 13,the ROE would be:

Accepted Answer

A)  0.026% 
B)  2.600% 
C)  6.500% 
D)  26.00% 
E)  65.00% 
A)  0.026% 
B)  2.600% 
C)  6.500% 
D)  26.00% 
E)  65.00%

Question 11

Stock prices move coincidentally with the economy.

Accepted Answer

A) True 
 B)False

Question 12

The best known monetary variable is the level of taxes.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following economic series is not included in the National Bureau of Economic Research (NBER)lagging indicator group?

Accepted Answer

A)  Average duration of unemployment 
B)  Ratio of manufacturing and trade inventories to sales 
C)  Number of employees on nonagricultural payrolls 
D)  Percentage change in the labor cost per unit of output in manufacturing 
E)  All of the above are included in the NBER lagging indicator group 
A)  Average duration of unemployment 
B)  Ratio of manufacturing and trade inventories to sales 
C)  Number of employees on nonagricultural payrolls 
D)  Percentage change in the labor cost per unit of output in manufacturing 
E)  All of the above are included in the NBER lagging indicator group

Question 14

Exhibit 12.9
Use the Information Below for the Following Problem(S)
The aggregate market currently has a retention ratio of 60 percent, a required rate of return of 12 percent, and an expected growth rate for dividends of 4 percent.
-Refer to Exhibit 12.9.Starting with the initial conditions,you expect the retention ratio to be constant,the rate of inflation to increase by 2 percent,and the growth rate to increase by 1 percent.What is the expected P/E?

Accepted Answer

A)  4.44 
B)  5.00 
C)  5.71 
D)  6.67 
E)  8.00 
A)  4.44 
B)  5.00 
C)  5.71 
D)  6.67 
E)  8.00

Question 15

The index of leading indicators includes all of the following,except:

Accepted Answer

A)  M2 money supply. 
B)  S & P 500 index. 
C)  Orders for plant and equipment. 
D)  Changes in the sensitive materials price. 
E)  Index of industrial production. 
A)  M2 money supply. 
B)  S & P 500 index. 
C)  Orders for plant and equipment. 
D)  Changes in the sensitive materials price. 
E)  Index of industrial production.

Question 16

The Goldman Sach analysis recommends an allocation of equity investments among countries in comparison to the country's normal weighting based on its relative market value.

Accepted Answer

A) True 
 B)False

Question 17

If,for the S&P Industrials Index,the profit margin was .25 and the equity turnover ratio was 12,the ROE would be:

Accepted Answer

A)  0.83% 
B)  0.48% 
C)  3.00% 
D)  30.00% 
E)  48.00% 
A)  0.83% 
B)  0.48% 
C)  3.00% 
D)  30.00% 
E)  48.00%

Question 18

Exhibit 12.3
Use the Information Below for the Following Problem(S)
Assume that the dividend payout ratio will be 55 percent when the rate on long-term government bonds falls to 9 percent. Since investors are becoming more risk averse, the equity risk premium will rise to 8 percent and investors will require a 7 percent return. The return on equity will be 13 percent.
-Refer to Exhibit 12.3.To what price will the market rise if the earnings expectation is $1.5?

Accepted Answer

A)  $138.42 
B)  $90.36 
C)  $71.74 
D)  $105.30 
E)  $85.14 
A)  $138.42 
B)  $90.36 
C)  $71.74 
D)  $105.30 
E)  $85.14

Question 19

Estimating net profit margin directly is difficult because it is so volatile.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 12.4
Use the Information Below for the Following Problem(S)
Assume that the dividend payout ratio will be 45 percent when the rate on long term government bonds falls to 9 percent. Since investors are becoming more risk averse, the equity risk premium will rise to 7 percent and investors will require a 16 percent return. The return on equity will be 14 percent.
-Refer to Exhibit 12.4.What is the expected sustainable growth rate?

Accepted Answer

A)  4.95 
B)  7.2 
C)  8.8 
D)  6.3 
E)  7.7 
A)  4.95 
B)  7.2 
C)  8.8 
D)  6.3 
E)  7.7

Exam 12: Macroanalysis and Microvaluation of the Stock Market

An increase in the required rate of return k will increase the P/E ratio.

If,for the S&P Industrials Index,the profit margin was 0.30 and the equity turnover ratio was 11,the ROE would be:

The economic factor assumed to be closely related to stock prices is productivity.

There is a negative relationship between the capacity utilization rate and the profit margin.

All of the following factors affect the required rate of return except

Which of the following economic series is not included in the National Bureau of Economic Research (NBER)coincident economic indicator group?

A main limitation of the NBER indicator series is false signals.

The first step in the Goldman Sachs analysis of world markets examines a country's aggregate economy and its components that relate to the valuation of securities.

Diffusion indexes indicate the spread in interest rates between major economies.

If,for the S&P Industrials Index,the profit margin was 0.20 and the equity turnover ratio was 13,the ROE would be:

Stock prices move coincidentally with the economy.

The best known monetary variable is the level of taxes.

Which of the following economic series is not included in the National Bureau of Economic Research (NBER)lagging indicator group?

The index of leading indicators includes all of the following,except:

The Goldman Sach analysis recommends an allocation of equity investments among countries in comparison to the country's normal weighting based on its relative market value.

If,for the S&P Industrials Index,the profit margin was .25 and the equity turnover ratio was 12,the ROE would be:

Estimating net profit margin directly is difficult because it is so volatile.

An Overview of the Investment Process

The Asset Allocation Decision

The Global Market Investment Decision

Securities Markets: Organization and Operation

Security-Market Indexes

Efficient Capital Markets

An Introduction to Portfolio Management

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Analysis of Financial Statements

Security Valuation Principles

Industry Analysis

Company Analysis and Stock Valuation

Equity Portfolio Management Stragtegies

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

Bond Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward and Futures Contracts

Option Contracts

Swap Contracts,convertible Securities,and Other Embedded Derivatives

Professional Money Management, alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Investment Return and Risk Analysis Questions

Investment and Retirement Plans

Calculating Covariance and Correlation Coefficient of Assets

Portfolio Variance and Stock Weight Calculations

Portfolio Optimization with Negative Correlation: Finding Minimum Variance and Weight Allocation

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