Question 1

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

Accepted Answer

Investors should hold high beta stocks if they expect an "up market",which would typically include emerging markets,small caps,and growth sectors like technology.

Question 2

What are the major reasons investing in index funds works,according to Burton Malkiel?

Accepted Answer

Securities markets are very efficient;Index funds are cost efficient and have low expense and low trading costs;and index funds have a tax advantage since they defer the realization of capital gains.

Question 3

Under new SEC rules adopted in 2002,price targets for stocks are to be shown.

Accepted Answer

A) True 
 B)False  True

Question 4

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) there is not enough information to answer the question. 
A) decrease. 
B) increase. 
C) stay the same. 
D) there is not enough information to answer the question.

Question 5

Compare and contrast the passive strategies of buy-and-hold and buying index funds.

Accepted Answer

One must choose which stocks to buy-and-

Question 6

If security prices fully reflect all the relevant information that is available and usable,then the security market is considered to be efficient.

Accepted Answer

A) True 
 B)False

Question 7

A significant advantage of index funds is their:

Accepted Answer

A) lower market price than other types of funds. 
B) superior sector rotation approach. 
C) tax efficiency. 
D) minimization of risk. 
A) lower market price than other types of funds. 
B) superior sector rotation approach. 
C) tax efficiency. 
D) minimization of risk.

Question 8

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 9

The most important decision when building a diversified stock portfolio is:

Accepted Answer

A) individual security selection. 
B) asset allocation. 
C) minimization of risk. 
D) maximization of expected return. 
A) individual security selection. 
B) asset allocation. 
C) minimization of risk. 
D) maximization of expected return.

Question 10

An analyst employed by a pension fund to identify stocks to be purchased is referred to as:

Accepted Answer

A) a sell-side analyst. 
B) a buy-side analyst. 
C) an institutional analyst. 
D) a money manager. 
A) a sell-side analyst. 
B) a buy-side analyst. 
C) an institutional analyst. 
D) a money manager.

Question 11

A fund that uses futures to hold the S&P 500 Index and invests the remainder in bonds would be an example of:

Accepted Answer

A) a value index fund. 
B) a derivatives index fund. 
C) an enhanced index fund. 
D) an active index fund. 
A) a value index fund. 
B) a derivatives index fund. 
C) an enhanced index fund. 
D) an active index fund.

Question 12

Which of the following types of funds is especially popular with investors following a momentum strategy?

Accepted Answer

A) Sector funds 
B) Managed funds 
C) Global funds 
D) Index 
A) Sector funds 
B) Managed funds 
C) Global funds 
D) Index

Question 13

From 1989 to 2015,the Japanese stock market lost what percent of its value?

Accepted Answer

A) 20 
B) 30 
C) 40 
D) 50 
A) 20 
B) 30 
C) 40 
D) 50

Question 14

How could one invest indirectly in sectors and practice sector rotation?

Accepted Answer

There are sector funds that invest in st

Question 15

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 16

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 17

What is usually considered the biggest risk of market timing?

Accepted Answer

A) Getting out of the market too soon 
B) Generating high transactions costs 
C) Failing to adjust for short-term corrections 
D) Being out of the market at critical times 
A) Getting out of the market too soon 
B) Generating high transactions costs 
C) Failing to adjust for short-term corrections 
D) Being out of the market at critical times

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements concerning index funds and actively managed funds is true?

Accepted Answer

A) Their performance is about equal. 
B) They tend to have an inverse relationship. 
C) Actively managed funds tend to outperform index funds. 
D) Index funds tend to outperform actively managed funds. 
A) Their performance is about equal. 
B) They tend to have an inverse relationship. 
C) Actively managed funds tend to outperform index funds. 
D) Index funds tend to outperform actively managed funds.

Question 20

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.

Exam 11: Common Stocks: Analysis and Strategy

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

What are the major reasons investing in index funds works,according to Burton Malkiel?

Under new SEC rules adopted in 2002,price targets for stocks are to be shown.

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

Compare and contrast the passive strategies of buy-and-hold and buying index funds.

If security prices fully reflect all the relevant information that is available and usable,then the security market is considered to be efficient.

A significant advantage of index funds is their:

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

The most important decision when building a diversified stock portfolio is:

An analyst employed by a pension fund to identify stocks to be purchased is referred to as:

A fund that uses futures to hold the S&P 500 Index and invests the remainder in bonds would be an example of:

Which of the following types of funds is especially popular with investors following a momentum strategy?

From 1989 to 2015,the Japanese stock market lost what percent of its value?

How could one invest indirectly in sectors and practice sector rotation?

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

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

What is usually considered the biggest risk of market timing?

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

Which of the following statements concerning index funds and actively managed funds is true?

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

Understanding Investments

Investment Alternatives

Indirect Investing

Securities Markets and Market Indexes

How Securities Are Traded

The Risks and Returns From Investing

Portfolio Theory

Portfolio Selection

Asset Pricing Models

Common Stock Valuation

Market Efficiency

Economy Market Analysis

Industry Analysis

Company Analysis

Technical Analysis

Bond Yields

Bonds: Analysis and Strategy

Options

Futures

Portfolio Management

Evaluation of Investment Performance

Filters