Question 1

What is meant by the term "defensive stocks?"Give some examples.

Accepted Answer

Defensive stocks are those tha

Question 2

A common asset allocation for a number of institutional investors using only two asset classes is 60 percent equities and 40 percent bonds.

Accepted Answer

A) True 
 B)False

Question 3

What is the paradox regarding fundamental analysis in regard to the efficient market hypothesis (EMH)?

Accepted Answer

The EMH implies that securities are at o

Question 4

According to the general consensus of investment managers,what percentage of a typical investor's portfolio should be invested in international markets?

Accepted Answer

A) 5 to 10 
B) 10 to 20 
C) 20 to 30 
D) 30 to 50 
A) 5 to 10 
B) 10 to 20 
C) 20 to 30 
D) 30 to 50

Question 5

A bear market is characterized by a decline of:

Accepted Answer

A) 10% or more in the stock market. 
B) 20% or more in the stock market. 
C) 40% or more in the stock market. 
D) 50% or more in the stock market. 
A) 10% or more in the stock market. 
B) 20% or more in the stock market. 
C) 40% or more in the stock market. 
D) 50% or more in the stock market.

Question 6

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 7

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 8

What evidence,gathered during the 1990s,about analysts was instrumental in motivating changes in market regulations?

Accepted Answer

A) They were paid too much. 
B) They were unable to accurately pinpoint earnings. 
C) They gave buy recommendations to win investment banking business. 
D) They shared private information about companies with investors. 
A) They were paid too much. 
B) They were unable to accurately pinpoint earnings. 
C) They gave buy recommendations to win investment banking business. 
D) They shared private information about companies with investors.

Question 9

One of the most famous investment advisory services since 1965 is:

Accepted Answer

A) the Wall Street Journal. 
B) Standard and Poor's Corporate Records. 
C) Moody's. 
D) the Value Line Investment Survey. 
A) the Wall Street Journal. 
B) Standard and Poor's Corporate Records. 
C) Moody's. 
D) the Value Line Investment Survey.

Question 10

Historically,sell-side equity research has tended to assign:

Accepted Answer

A) very unfavorable ratings to target companies. 
B) unfavorable ratings to target companies. 
C) favorable ratings to target companies. 
D) neutral ratings to target companies. 
A) very unfavorable ratings to target companies. 
B) unfavorable ratings to target companies. 
C) favorable ratings to target companies. 
D) neutral ratings to target companies.

Question 11

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 12

Passive common stock strategies attempt to minimize:

Accepted Answer

A) capital losses. 
B) transactions costs,including time spent managing the portfolio. 
C) market risk. 
D) company and industry risk. 
A) capital losses. 
B) transactions costs,including time spent managing the portfolio. 
C) market risk. 
D) company and industry risk.

Question 13

Which strategy involves shifting the weights of securities in a portfolio to take advantage of security groups expected to do relatively better than others?

Accepted Answer

A) Portfolio management 
B) Technical analysis 
C) Momentum strategy 
D) Sector rotation 
A) Portfolio management 
B) Technical analysis 
C) Momentum strategy 
D) Sector rotation

Question 14

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 15

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

Accepted Answer

A) True 
 B)False

Question 16

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 17

What are the four broad stock sectors?What is sector rotation?Explain what changes in the business cycle would prompt one to rotate from one sector to another.

Accepted Answer

The four sectors are (1)interest-sensiti

Question 18

Which of the following does not represent a requirement for conducting effective sector rotation?

Accepted Answer

A) Developing an accurate assessment of current economic conditions. 
B) Having a knowledge and understanding of the phases of the business cycle. 
C) Having an understanding of the political environment. 
D) Having expertise in technical analysis. 
A) Developing an accurate assessment of current economic conditions. 
B) Having a knowledge and understanding of the phases of the business cycle. 
C) Having an understanding of the political environment. 
D) Having expertise in technical analysis.

Question 19

An investor using the buy-and-hold strategy will receive dividends to reinvest.What dividend option do many companies offer that would make this strategy even more passive?

Accepted Answer

Many companies offer dividend reinvestme

Question 20

The nominal risk-free rate is calculated by subtracting an expected inflation premium from the real risk-free rate.

Accepted Answer

A) True 
 B)False

Exam 11: Common Stocks: Analysis and Strategy

What is meant by the term "defensive stocks?"Give some examples.

A common asset allocation for a number of institutional investors using only two asset classes is 60 percent equities and 40 percent bonds.

What is the paradox regarding fundamental analysis in regard to the efficient market hypothesis (EMH)?

According to the general consensus of investment managers,what percentage of a typical investor's portfolio should be invested in international markets?

A bear market is characterized by a decline of:

Which of the following statements regarding defensive stocks is true?

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

What evidence,gathered during the 1990s,about analysts was instrumental in motivating changes in market regulations?

One of the most famous investment advisory services since 1965 is:

Historically,sell-side equity research has tended to assign:

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

Passive common stock strategies attempt to minimize:

Which strategy involves shifting the weights of securities in a portfolio to take advantage of security groups expected to do relatively better than others?

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

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

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

What are the four broad stock sectors?What is sector rotation?Explain what changes in the business cycle would prompt one to rotate from one sector to another.

Which of the following does not represent a requirement for conducting effective sector rotation?

An investor using the buy-and-hold strategy will receive dividends to reinvest.What dividend option do many companies offer that would make this strategy even more passive?

The nominal risk-free rate is calculated by subtracting an expected inflation premium from the real risk-free rate.

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