Question 1

Which of the following statements about analysts' earnings forecasts is correct?Analysts' long-term forecasts tend to be too:

Accepted Answer

A) high,whereas their near-term forecasts tend to be too low. 
B) high,and their near-term forecasts also tend to be too high. 
C) low,whereas their near-term forecasts tend to be too high. 
D) low,and their near-term forecasts also tend to be too low. 
A) high,whereas their near-term forecasts tend to be too low. 
B) high,and their near-term forecasts also tend to be too high. 
C) low,whereas their near-term forecasts tend to be too high. 
D) low,and their near-term forecasts also tend to be too low.

Question 2

A general guideline is that investors should probably have at least 20 percent of their portfolio invested in emerging markets.

Accepted Answer

A) True 
 B)False

Question 3

How is the required rate of return utilized in stock analysis?

Accepted Answer

The required rate of return is the minim

Question 4

Which of the following is the biggest factor explaining the variation in returns to individual stocks and stock portfolios?

Accepted Answer

A) Aggregate market movements 
B) Beta 
C) Standard deviation 
D) Financial risk 
A) Aggregate market movements 
B) Beta 
C) Standard deviation 
D) Financial risk

Question 5

Sector rotation:

Accepted Answer

A) is a form of passive investing. 
B) is an active strategy similar to stock selection. 
C) varies the percentage of equities in the portfolio in order to earn abnormal returns. 
D) is not dependent on an accurate assessment of current economic conditions. 
A) is a form of passive investing. 
B) is an active strategy similar to stock selection. 
C) varies the percentage of equities in the portfolio in order to earn abnormal returns. 
D) is not dependent on an accurate assessment of current economic conditions.

Question 6

Index funds are considered relatively tax efficient since they rarely have short-term gains.

Accepted Answer

A) True 
 B)False

Question 7

Due to advances in technology and better understanding of stocks and financial markets,security analysts' estimates have become more accurate.

Accepted Answer

A) True 
 B)False

Question 8

The Coffeehouse Portfolio suggests investors hold:

Accepted Answer

A) 50% bonds,50% equities (including the S&P 500,Large Cap Value,International,Small Cap,and Small Cap Value stocks). 
B) 40% bonds,60% equities (including the S&P 500,Large Cap Value,International,Small Cap,Small Cap Value,and REITs). 
C) 60% bonds,40% equities (in two index funds). 
D) 40% bonds,60% equities (in two index funds). 
A) 50% bonds,50% equities (including the S&P 500,Large Cap Value,International,Small Cap,and Small Cap Value stocks). 
B) 40% bonds,60% equities (including the S&P 500,Large Cap Value,International,Small Cap,Small Cap Value,and REITs). 
C) 60% bonds,40% equities (in two index funds). 
D) 40% bonds,60% equities (in two index funds).

Question 9

Which of the following statements regarding a buy-and-hold strategy are true?

Accepted Answer

A) There are no selection choices to be made under this strategy. 
B) This strategy is applicable only to large portfolios. 
C) There is no reinvestment decision to make under this strategy. 
D) This strategy produces relatively low transactions and search costs. 
A) There are no selection choices to be made under this strategy. 
B) This strategy is applicable only to large portfolios. 
C) There is no reinvestment decision to make under this strategy. 
D) This strategy produces relatively low transactions and search costs.

Question 10

A utility stock is likely to have a beta lower than the overall market.

Accepted Answer

A) True 
 B)False

Question 11

A passive investment strategy attempts to:

Accepted Answer

A) achieve returns available in various market sectors at minimum risk. 
B) achieve maximum returns available in various market sectors. 
C) achieve minimum risk in various market sectors. 
D) achieve returns available in various market sectors at minimum cost. 
A) achieve returns available in various market sectors at minimum risk. 
B) achieve maximum returns available in various market sectors. 
C) achieve minimum risk in various market sectors. 
D) achieve returns available in various market sectors at minimum cost.

Question 12

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 13

The primary emphasis in fundamental security analysis is on expected sales of the company.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following models provides investors with a method of calculating a required return for a stock?

Accepted Answer

A) DuPont model 
B) Risk premium model 
C) Fisher model 
D) Capital asset pricing model 
A) DuPont model 
B) Risk premium model 
C) Fisher model 
D) Capital asset pricing model

Question 15

What condition is supported if,after considering transactions costs,stock prices reflect their approximate fair value?

Accepted Answer

A) After-cost efficiency 
B) Economic efficiency 
C) Market equilibrium 
D) Mean-variance efficiency 
A) After-cost efficiency 
B) Economic efficiency 
C) Market equilibrium 
D) Mean-variance efficiency

Question 16

Investors following a passive strategy use which of the following as the best estimate of a security's value?

Accepted Answer

A) The value derived from the dividend discount model 
B) The value derived from the Fisher model 
C) The current market price 
D) The estimated EPS multiplied by the appropriate P/E multiple 
A) The value derived from the dividend discount model 
B) The value derived from the Fisher model 
C) The current market price 
D) The estimated EPS multiplied by the appropriate P/E multiple

Question 17

If security prices fully reflect all relevant available information,the security market is said to be:

Accepted Answer

A) rational. 
B) in equilibrium. 
C) effective. 
D) efficient. 
A) rational. 
B) in equilibrium. 
C) effective. 
D) efficient.

Question 18

Security analysts receive all of their information from the management of the company.

Accepted Answer

A) True 
 B)False

Question 19

For adequately diversified common stock portfolios,what percent of the variability in returns is accounted for by market effects?

Accepted Answer

A) 30 
B) 50 
C) 70 
D) 90 
A) 30 
B) 50 
C) 70 
D) 90

Question 20

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.

Exam 11: Common Stocks: Analysis and Strategy

Which of the following statements about analysts' earnings forecasts is correct?Analysts' long-term forecasts tend to be too:

A general guideline is that investors should probably have at least 20 percent of their portfolio invested in emerging markets.

How is the required rate of return utilized in stock analysis?

Which of the following is the biggest factor explaining the variation in returns to individual stocks and stock portfolios?

Sector rotation:

Index funds are considered relatively tax efficient since they rarely have short-term gains.

Due to advances in technology and better understanding of stocks and financial markets,security analysts' estimates have become more accurate.

The Coffeehouse Portfolio suggests investors hold:

Which of the following statements regarding a buy-and-hold strategy are true?

A utility stock is likely to have a beta lower than the overall market.

A passive investment strategy attempts to:

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

The primary emphasis in fundamental security analysis is on expected sales of the company.

Which of the following models provides investors with a method of calculating a required return for a stock?

What condition is supported if,after considering transactions costs,stock prices reflect their approximate fair value?

Investors following a passive strategy use which of the following as the best estimate of a security's value?

If security prices fully reflect all relevant available information,the security market is said to be:

Security analysts receive all of their information from the management of the company.

For adequately diversified common stock portfolios,what percent of the variability in returns is accounted for by market effects?

Market timers attempt to earn abnormal returns by:

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