Question 1

Fundamental analysis top-down approach considers how the directors of the company affect its share performance.

Accepted Answer

A) True 
 B)False

Question 2

High levels of economic growth in developing countries may not be sustainable in the long term and may lead to depreciation of those countries' exchange rates and rises in interest rates.

Accepted Answer

A) True 
 B)False

Question 3

A graph of average price series constructed over time is called a:

Accepted Answer

A)  chart. 
B)  average time series. 
C)  moving average. 
D)  technical line. 
A)  chart. 
B)  average time series. 
C)  moving average. 
D)  technical line.

Question 4

Why should an investor consider the issue of interest rates when analysing share investments?
 Explain the impact a change in interest rates might have on the performance of a corporation and its share price.

Accepted Answer

The majority of companies are exposed to

Question 5

One of the theories on the determination of,and change in the value of,shares and other securities is the random walk hypothesis.Which of the following statements in relation to the random walk hypothesis is correct?

Accepted Answer

A)  The trend of new information into the market may be consistently good or consistently bad over time. 
B)  If the price of a share rose in one period, there is a higher probability that it will rise again in the next period. 
C)  Share price reflects the share's intrinsic value, based on the latest information set relevant to current and future prospects. 
D)  The history of previous price movements contains valuable information on likely future price movements. 
A)  The trend of new information into the market may be consistently good or consistently bad over time. 
B)  If the price of a share rose in one period, there is a higher probability that it will rise again in the next period. 
C)  Share price reflects the share's intrinsic value, based on the latest information set relevant to current and future prospects. 
D)  The history of previous price movements contains valuable information on likely future price movements.

Question 6

The semi-strong form of the efficient market hypothesis states that:

Accepted Answer

A)  future share prices are predictable. 
B)  all available information is reflected in the price of securities. 
C)  security prices reflect all publicly available information. 
D)  None of the given choices are correct. 
A)  future share prices are predictable. 
B)  all available information is reflected in the price of securities. 
C)  security prices reflect all publicly available information. 
D)  None of the given choices are correct.

Question 7

If investors _______ a company's shares,the _______ supply is likely to lead to a _______ in the share price.

Accepted Answer

A)  buy; increased; rise 
B)  buy; decreased; fall 
C)  sell; increased; fall 
D)  sell; decreased; rise 
A)  buy; increased; rise 
B)  buy; decreased; fall 
C)  sell; increased; fall 
D)  sell; decreased; rise

Question 8

An important belief underlying the use of technical analysis techniques is that:

Accepted Answer

A)  security prices react rapidly to new information. 
B)  security prices react gradually to new information. 
C)  there are sufficient investors in the market to provide enough liquidity to keep price changes relatively small. 
D)  all investors have immediate and relatively low-cost access to information. 
A)  security prices react rapidly to new information. 
B)  security prices react gradually to new information. 
C)  there are sufficient investors in the market to provide enough liquidity to keep price changes relatively small. 
D)  all investors have immediate and relatively low-cost access to information.

Question 9

The weak form of the efficient market hypothesis denies the use of:

Accepted Answer

A)  technical analysis, but supports fundamental analysis as valid. 
B)  fundamental analysis, but supports technical analysis as valid. 
C)  both technical analysis and fundamental analysis. 
D)  technical analysis, but is silent on the possibility of successful fundamental analysis. 
A)  technical analysis, but supports fundamental analysis as valid. 
B)  fundamental analysis, but supports technical analysis as valid. 
C)  both technical analysis and fundamental analysis. 
D)  technical analysis, but is silent on the possibility of successful fundamental analysis.

Question 10

If you believe that share prices reflect all relevant information including information that is available only to insiders,which form of the efficient market hypothesis do you believe in?

Accepted Answer

A)  Weak. 
B)  Semi-strong. 
C)  Strong. 
D)  Informational. 
A)  Weak. 
B)  Semi-strong. 
C)  Strong. 
D)  Informational.

Question 11

At which level of market efficiency does the efficient market hypothesis support the technical analysis approach to future share price determination?

Accepted Answer

A)  Weak-form efficiency 
B)  Semi-strong form efficiency 
C)  Strong-form efficiency 
D)  None of the given answers 
A)  Weak-form efficiency 
B)  Semi-strong form efficiency 
C)  Strong-form efficiency 
D)  None of the given answers

Question 12

An investor seeks to compare the financial characteristics of four companies that are investment possibilities.Based solely on the data provided in the following ratios,which company would provide the lowest investment risk? \[\begin{array} { | l | l | l | l | l l } 
\hline { \text { Ratio } } & { \text { Company A } } &  { \text { Company B } } &  { \text { Company C } } & { \text { Company D } } \
\hline \text { Current } & 1.80 & 1.55 & 1.85 & 1.10 & \
\hline \text { Proprietorship } & 65.00 \% & 45.75 \% & 71.00 \% & 31.50 \% \
\hline \text { EBIT/long-term funds } & 18.50 \% & 14.60 \% & 17.00 \% & 15.50 \% \
\hline \text { Return on shareholders funds } & 14.50 \% & 11.50 \% & 14.50 \% & \
\hline \text { Debt/gross cash flow } & 4.91 \text { (years) } & 2.80 \text { (years) } & 2.91 \text { (years) } & 3.85 \text { (years) } \
\hline \text { Interest cover } & 3.00 \text { (times) } & 2.10 \text { (times) } & 3.10 \text { (times) } & 2.30 \text { (times) } \
\hline \text { P/E } & 19.50 \text { (times) } & 7.70 \text { (times) } & 5.21 \text { (times) } & 12.10 \text { (times) } \
\hline \text { NTA/price } & 1.02 \text { (times) } & 0.96 \text { times) } & 1.00 \text { (times) } & 0.99 \text { (times) } \
\hline
\end{array}\]

Accepted Answer

A)  Company A 
B)  Company B 
C)  Company C 
D)  Company D 
A)  Company A 
B)  Company B 
C)  Company C 
D)  Company D

Question 13

If the weak form of the efficient market hypothesis holds:

Accepted Answer

A)  share prices follow a random walk. 
B)  share prices reflect all information contained in past prices. 
C)  technical analysis is useless. 
D)  all of the given answers are correct. 
A)  share prices follow a random walk. 
B)  share prices reflect all information contained in past prices. 
C)  technical analysis is useless. 
D)  all of the given answers are correct.

Question 14

The investment approach that focuses on the underlying determinants of future profitability rather than on past price movements of a company's stock is:

Accepted Answer

A)  credit analysis. 
B)  fundamental analysis. 
C)  systems analysis. 
D)  technical analysis. 
A)  credit analysis. 
B)  fundamental analysis. 
C)  systems analysis. 
D)  technical analysis.

Question 15

In technical analysis,when the lower points of a rising price series are connected this is a:

Accepted Answer

A)  downward trend line. 
B)  moving average. 
C)  upward trend line. 
D)  weighted moving average. 
A)  downward trend line. 
B)  moving average. 
C)  upward trend line. 
D)  weighted moving average.

Question 16

When investors cannot make superior profits on a continual basis based on past prices,public or private information,the market is said to be:

Accepted Answer

A)  weak-form efficient. 
B)  semi-strong form efficient. 
C)  strong-form efficient. 
D)  fundamentally efficient. 
A)  weak-form efficient. 
B)  semi-strong form efficient. 
C)  strong-form efficient. 
D)  fundamentally efficient.

Question 17

A support/resistance pattern plotted by chartists in the stock markets is the rectangle,which consists of sideways price fluctuations contained within horizontal support and resistance levels.Which of the following statements in relation to indicators given by support and resistance rectangles is incorrect?

Accepted Answer

A)  Rectangles tend to be characterised by increasing volumes, except for a few days before the breakout when there are strong decreases in volumes of trade in the share(s). 
B)  If the last bottom does not touch the support level (beginning the formation of an ascending triangle) and if prices then rise rapidly on increasing volume, it is likely that there will be a topside breakout. 
C)  If the tops fail to reach resistance levels, beginning the formation of a descending triangle, a downside breakout is likely. 
D)  When a break occurs from a rectangle, the extent of the breakout is likely to equal the height of the price rectangle. 
A)  Rectangles tend to be characterised by increasing volumes, except for a few days before the breakout when there are strong decreases in volumes of trade in the share(s). 
B)  If the last bottom does not touch the support level (beginning the formation of an ascending triangle) and if prices then rise rapidly on increasing volume, it is likely that there will be a topside breakout. 
C)  If the tops fail to reach resistance levels, beginning the formation of a descending triangle, a downside breakout is likely. 
D)  When a break occurs from a rectangle, the extent of the breakout is likely to equal the height of the price rectangle.

Question 18

In relation to share trading,a dedicated system that operates within an exchange allowing some institutional investors to place large buy or sell orders without having to disclose the whole trade to the exchange are:

Accepted Answer

A)  high frequency trading. 
B)  intraday trading. 
C)  program trading. 
D)  dark pools. 
A)  high frequency trading. 
B)  intraday trading. 
C)  program trading. 
D)  dark pools.

Question 19

With the top-down approach to fundamental analysis,the balance of payments current account deficit is not considered because it is a country factor.

Accepted Answer

A) True 
 B)False

Question 20

In technical analysis,a price level below which the market price is temporarily unlikely to rise is a:

Accepted Answer

A)  trend channel. 
B)  resistance line. 
C)  support line. 
D)  trend line. 
A)  trend channel. 
B)  resistance line. 
C)  support line. 
D)  trend line.

Fundamental analysis top-down approach considers how the directors of the company affect its share performance.

High levels of economic growth in developing countries may not be sustainable in the long term and may lead to depreciation of those countries' exchange rates and rises in interest rates.

A graph of average price series constructed over time is called a:

Why should an investor consider the issue of interest rates when analysing share investments? Explain the impact a change in interest rates might have on the performance of a corporation and its share price.

One of the theories on the determination of,and change in the value of,shares and other securities is the random walk hypothesis.Which of the following statements in relation to the random walk hypothesis is correct?

The semi-strong form of the efficient market hypothesis states that:

If investors ___ a company's shares,the _ supply is likely to lead to a _____ in the share price.

An important belief underlying the use of technical analysis techniques is that:

The weak form of the efficient market hypothesis denies the use of:

If you believe that share prices reflect all relevant information including information that is available only to insiders,which form of the efficient market hypothesis do you believe in?

At which level of market efficiency does the efficient market hypothesis support the technical analysis approach to future share price determination?

If the weak form of the efficient market hypothesis holds:

The investment approach that focuses on the underlying determinants of future profitability rather than on past price movements of a company's stock is:

In technical analysis,when the lower points of a rising price series are connected this is a:

When investors cannot make superior profits on a continual basis based on past prices,public or private information,the market is said to be:

In relation to share trading,a dedicated system that operates within an exchange allowing some institutional investors to place large buy or sell orders without having to disclose the whole trade to the exchange are:

With the top-down approach to fundamental analysis,the balance of payments current account deficit is not considered because it is a country factor.

In technical analysis,a price level below which the market price is temporarily unlikely to rise is a:

A Modern Financial System: An Overview

Commercial Banks

Non-Bank Financial Institutions

The Share Market and the Corporation

Corporations Issuing Equity in the Share Market

Investors in the Share Market

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

International Debt Markets

Government Debt, monetary Policy and the Payments System

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Future Contracts and Forward Rate Agreements

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

Filters

Exam 7: Forecasting Share Price Movements

Fundamental analysis top-down approach considers how the directors of the company affect its share performance.

High levels of economic growth in developing countries may not be sustainable in the long term and may lead to depreciation of those countries' exchange rates and rises in interest rates.

A graph of average price series constructed over time is called a:

Why should an investor consider the issue of interest rates when analysing share investments? Explain the impact a change in interest rates might have on the performance of a corporation and its share price.

One of the theories on the determination of,and change in the value of,shares and other securities is the random walk hypothesis.Which of the following statements in relation to the random walk hypothesis is correct?

The semi-strong form of the efficient market hypothesis states that:

If investors _______ a company's shares,the _______ supply is likely to lead to a _______ in the share price.

An important belief underlying the use of technical analysis techniques is that:

The weak form of the efficient market hypothesis denies the use of:

If you believe that share prices reflect all relevant information including information that is available only to insiders,which form of the efficient market hypothesis do you believe in?

At which level of market efficiency does the efficient market hypothesis support the technical analysis approach to future share price determination?

If the weak form of the efficient market hypothesis holds:

The investment approach that focuses on the underlying determinants of future profitability rather than on past price movements of a company's stock is:

In technical analysis,when the lower points of a rising price series are connected this is a:

When investors cannot make superior profits on a continual basis based on past prices,public or private information,the market is said to be:

In relation to share trading,a dedicated system that operates within an exchange allowing some institutional investors to place large buy or sell orders without having to disclose the whole trade to the exchange are:

With the top-down approach to fundamental analysis,the balance of payments current account deficit is not considered because it is a country factor.

In technical analysis,a price level below which the market price is temporarily unlikely to rise is a:

A Modern Financial System: An Overview

Commercial Banks

Non-Bank Financial Institutions

The Share Market and the Corporation

Corporations Issuing Equity in the Share Market

Investors in the Share Market

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

International Debt Markets

Government Debt, monetary Policy and the Payments System

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Future Contracts and Forward Rate Agreements

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

Filters

If investors ___ a company's shares,the _ supply is likely to lead to a _____ in the share price.