Question 1

If inflation occurs and the Dow Jones industrial average is unchanged,that implies

Accepted Answer

A)  security prices rose 
B)  security prices fell 
C)  investors' purchasing power diminished 
D)  investors' purchasing power increased 
A)  security prices rose 
B)  security prices fell 
C)  investors' purchasing power diminished 
D)  investors' purchasing power increased

Question 2

Dollar-cost averaging is

Accepted Answer

A)  periodically buying a round lot of stock 
B)  periodically investing a specified dollar amount in a stock 
C)  a means to increase the average cost basis 
D)  a means to insure a positive return 
A)  periodically buying a round lot of stock 
B)  periodically investing a specified dollar amount in a stock 
C)  a means to increase the average cost basis 
D)  a means to insure a positive return

Question 3

According to studies of rates of return,yields on treasury bills approximated the rate of inflation.

Accepted Answer

A) True 
 B)False

Question 4

The market consists of the following stocks.Their prices and number of shares are as follows:
   a.If the price of Stock C doubles to $60,what is the percentage increase in the market if an S&P 500 type of measure of the market is used?
b.Repeat question (a)but use a Value Line type of measure of the market (i.e.,a geometric average)to determine the percentage increase.
c.Suppose the price of stock B doubled instead of stock C.How would the market have fared using the aggregate measures employed in (a)and (b)? Why are your answers different?

Accepted Answer

a. @#IMG-DLM& 
b.Value Line uses a geometric avera

Question 5

The rate of return on a stock considers the price change but not dividend income.

Accepted Answer

A) True 
 B)False

Question 6

According to the Ibbotson Associates studies of investment returns,larger stocks in the S&P earned higher returns than the smaller companies.

Accepted Answer

A) True 
 B)False

Question 7

Studies of realized rates of return assume that investors do not reinvest dividend income.

Accepted Answer

A) True 
 B)False

Question 8

The S&P 500 stock index is value-weighted.

Accepted Answer

A) True 
 B)False

Question 9

Studies of rates of return on large stocks suggest

Accepted Answer

A)  the average return is about 7.4 percent annually 
B)  over a period of years, the rate is approximately 10 percent 
C)  equity investors rarely sustain losses 
D)  dividends account for over half the return 
A)  the average return is about 7.4 percent annually 
B)  over a period of years, the rate is approximately 10 percent 
C)  equity investors rarely sustain losses 
D)  dividends account for over half the return

Question 10

You bought a stock for $20 and sold it for $59.72 after six years.What was the annual rate of return?

Accepted Answer

The answer of You bought a stock for $20 and...

Question 11

Movements in individual stock prices tend to be

Accepted Answer

A)  positively correlated 
B)  positively correlated with inflation 
C)  negatively correlated 
D)  positively correlated with changes in interest rates 
A)  positively correlated 
B)  positively correlated with inflation 
C)  negatively correlated 
D)  positively correlated with changes in interest rates

Question 12

The realized return includes both dividends and price changes.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is the least broad-based measure of stock prices?

Accepted Answer

A)  Nasdaq market index 
B)  Dow Jones industrial average 
C)  S&P 500 stock index 
D)  AMEX market value index 
A)  Nasdaq market index 
B)  Dow Jones industrial average 
C)  S&P 500 stock index 
D)  AMEX market value index

Question 14

Studies of investment returns suggest that the stocks of small companies generate higher returns than the stocks of larger companies.

Accepted Answer

A) True 
 B)False

Question 15

The S&P 500 stock index is more sensitive to changes in the prices of small stocks than the stocks of large companies.

Accepted Answer

A) True 
 B)False

Question 16

If a stock increased from $25 to $50 in five years,the annual rate of return was 20 percent.

Accepted Answer

A) True 
 B)False

Question 17

A strategy of averaging down will be profitable if

Accepted Answer

A)  the price of the stock continues to fall 
B)  the firm pays more dividends 
C)  the firm retains earnings 
D)  the price of the stock subsequently rises 
A)  the price of the stock continues to fall 
B)  the firm pays more dividends 
C)  the firm retains earnings 
D)  the price of the stock subsequently rises

Question 18

Averaging down will prove to be profitable only if the price of the stock subsequently rises.

Accepted Answer

A) True 
 B)False

Question 19

Aggregate securities prices may be measured by value-weighted or geometric averages.

Accepted Answer

A) True 
 B)False

Question 20

The calculation of a rate of return assumes dividend income is reinvested at the current dividend yield.

Accepted Answer

A) True 
 B)False

Exam 10: Investment Returns and Aggregate Measures of Stock Markets

If inflation occurs and the Dow Jones industrial average is unchanged,that implies

Dollar-cost averaging is

According to studies of rates of return,yields on treasury bills approximated the rate of inflation.

The rate of return on a stock considers the price change but not dividend income.

According to the Ibbotson Associates studies of investment returns,larger stocks in the S&P earned higher returns than the smaller companies.

Studies of realized rates of return assume that investors do not reinvest dividend income.

The S&P 500 stock index is value-weighted.

Studies of rates of return on large stocks suggest

You bought a stock for $20 and sold it for $59.72 after six years.What was the annual rate of return?

Movements in individual stock prices tend to be

The realized return includes both dividends and price changes.

Which of the following is the least broad-based measure of stock prices?

Studies of investment returns suggest that the stocks of small companies generate higher returns than the stocks of larger companies.

The S&P 500 stock index is more sensitive to changes in the prices of small stocks than the stocks of large companies.

If a stock increased from $25 to $50 in five years,the annual rate of return was 20 percent.

A strategy of averaging down will be profitable if

Averaging down will prove to be profitable only if the price of the stock subsequently rises.

Aggregate securities prices may be measured by value-weighted or geometric averages.

The calculation of a rate of return assumes dividend income is reinvested at the current dividend yield.

An Introduction to Investments

The Creation of Financial Assets

Securities Markets

The Time Value of Money

The Tax Environment

Risk and Portfolio Management

Investment Companies: Mutual Funds

Closed-End Investment Companies

The Valuation of Common Stock

Dividends: Past, present, and Future

The Macroeconomic Environment for Investment Decisions

Analysis of Financial Statements

Behavioral Finance and Technical Analysis

The Bond Market

The Valuation of Fixed-Income Securities

Government Securities

Convertible Bonds and Convertible Preferred Stock

An Introduction to Options

Option Valuation and Strategies

Commodity and Financial Futures

Investing in Foreign Securities

Investing in Nonfinancial Assets: Collectibles, resources, and Real Estate

Portfolio Planning and Management in an Efficient Market Context

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