Question 1

____________ funds are especially popular with momentum investors.

Accepted Answer

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

Question 2

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

Accepted Answer

A)  the dividend discount model. 
B)  Fisher model. 
C)  current market price. 
D)  current earnings per share. 
A)  the dividend discount model. 
B)  Fisher model. 
C)  current market price. 
D)  current earnings per share. C

Question 3

If investors in the market become more pessimistic, it is expected that 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. B

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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 6

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

Accepted Answer

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

Question 7

The Merrill Lynch case in 2002 confirmed that many analysts:

Accepted Answer

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

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)  expected return given an assumed set of probabilities and expected cash flows on the stock. 
B)  maximum expected return based on estimates of expected cashflows from the stock. 
C)  minimum expected return necessary to induce an investor to purchase the stock. expected return after evaluation of the risk on the stock has been taken. 
A)  expected return given an assumed set of probabilities and expected cash flows on the stock. 
B)  maximum expected return based on estimates of expected cashflows from the stock. 
C)  minimum expected return necessary to induce an investor to purchase the stock. expected return after evaluation of the risk on the stock has been taken.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Sector rotation would be very successful in a truly efficient market.

Accepted Answer

A) True 
 B)False

Question 13

How can investors reasonably justify buy actively managed funds instead of index funds?

Accepted Answer

A)  higher management fees usually suggests better performance 
B)  the fund consistently outperformed the market, net of fees, and is expected to continue to do so 
C)  the fund outperformed the S&P 500 by 4% last year 
D)  the portfolio manager is new and considered a star analyst 
A)  higher management fees usually suggests better performance 
B)  the fund consistently outperformed the market, net of fees, and is expected to continue to do so 
C)  the fund outperformed the S&P 500 by 4% last year 
D)  the portfolio manager is new and considered a star analyst

Question 14

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

Accepted Answer

Defensive stocks are those tha

Question 15

A general consensus of analysts is that a typical investor should have between ___ and ______ percent of his/her portfolio in international markets.

Accepted Answer

A)  5: 10 
B)  10: 20 
C)  20: 30 
D)  30: 40 
A)  5: 10 
B)  10: 20 
C)  20: 30 
D)  30: 40

Question 16

Sector rotation is

Accepted Answer

A)  one form of passive investing. 
B)  an active strategy similar to stock selection. 
C)  an attempt to earn excess returns by varying the percentage of assets in the portfolio. 
D)  not dependent on an accurate assessment of current economic conditions. 
A)  one form of passive investing. 
B)  an active strategy similar to stock selection. 
C)  an attempt to earn excess returns by varying the percentage of assets in the portfolio. 
D)  not dependent on an accurate assessment of current economic conditions.

Question 17

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 18

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

Accepted Answer

The required rate of return is the minim

Question 19

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

Accepted Answer

There are sector funds that invest in st

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 11: Managing a Stock Portfolio: a Worldwide Issue

____________ funds are especially popular with momentum investors.

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

If investors in the market become more pessimistic, it is expected that the required return will ----------.

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

Which of the following statements regarding defensive stocks is true?

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

The Merrill Lynch case in 2002 confirmed that many analysts:

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

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

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

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

Sector rotation would be very successful in a truly efficient market.

How can investors reasonably justify buy actively managed funds instead of index funds?

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

A general consensus of analysts is that a typical investor should have between ___ and ______ percent of his/her portfolio in international markets.

Sector rotation is

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?

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

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

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

Investing Is an Important Activity Worldwide

Investment Alternatives: Generic Principles All Investors Must Know

Indirect Investing: a Global Activity

Securities Markets Matter to All Investors

All Financial Markets Have Regulations and Trading Practices

Return and Risk: the Foundation of Investing Worldwide

Portfolio Theory Is Universal

Portfolio Selection for All Investors

Asset Pricing Principles

Common Stock Valuation Lessons for All Investors

What Happens If Markets Are Efficient or Not?

Economy/ market Analysis Must Be Considered by All Investor

Sector/ industry Analysis

Company Analysis

Technical Analysis

Fixed Income Securities Are Available Worldwide

Managing Bond Portfolios: Some Issues Affect All Investors

Understanding Derivative Securities: Options

Understanding Derivative Securities: Futures

All Investors Must Consider Portfolio Management

Evaluation of Investment Performance: a Global Concept

Filters

A general consensus of analysts is that a typical investor should have between _ and ____ percent of his/her portfolio in international markets.