Question 1

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 2

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

Question 3

If stock prices reflect their approximate fair value after transactions costs are taken into account, this is known as:

Accepted Answer

A)  after-cost efficiency. 
B)  economic efficiency. 
C)  a market in equilibrium. 
D)  an efficient market. 
A)  after-cost efficiency. 
B)  economic efficiency. 
C)  a market in equilibrium. 
D)  an efficient market.

Question 4

For adequately diversified common stock portfolios, market effects often account for -------- percent and more of the variability of the portfolio's return.

Accepted Answer

A)  60 
B)  70 
C)  80 
D)  90 
A)  60 
B)  70 
C)  80 
D)  90

Question 5

What are the major reasons investing in index funds works, according to Burton Malkiel?

Accepted Answer

Securities markets are very efficient; I

Question 6

----------- shifts the weights of securities in the portfolio to take advantage of areas 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 7

Under new SEC rules adopted in 2002, price targets for stocks are to be shown.

Accepted Answer

A) True 
 B)False

Question 8

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-sensit

Question 9

What is usually considered the biggest risk of market timing?

Accepted Answer

A)  getting out of the market too soon 
B)  high transactions costs 
C)  failing to adjust for short-term corrections 
D)  not being in the market at critical times 
A)  getting out of the market too soon 
B)  high transactions costs 
C)  failing to adjust for short-term corrections 
D)  not being in the market at critical times

Question 10

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

Accepted Answer

A)  investing in a sector ETF. 
B)  investing in a 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 a S&P 500 index mutual fund. 
C)  investing in a multi-strategy hedge fund. 
D)  investing in a Russell 2000 index mutual fund.

Question 11

Individual investors consider the investment decision:

Accepted Answer

A)  based on market and economic conditions as consisting of asset allocation. 
B)  based on market and economic conditions as consisting of asset allocation and security selection. 
C)  based on objectives, constraints, and preferences, as consisting of asset allocation. 
D)  based on objectives, constraints, and preferences, as consisting of asset allocation and security selection. 
A)  based on market and economic conditions as consisting of asset allocation. 
B)  based on market and economic conditions as consisting of asset allocation and security selection. 
C)  based on objectives, constraints, and preferences, as consisting of asset allocation. 
D)  based on objectives, constraints, and preferences, as consisting of asset allocation and security selection.

Question 12

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 13

All of the following represent requirements for conducting effective sector rotation, EXCEPT

Accepted Answer

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

Question 14

If security prices fully reflect all the relevant information that is available and usable, then a securities market is considered to be efficient.

Accepted Answer

A) True 
 B)False

Question 15

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 lower 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 lower transactions and search costs.

Question 16

The -------------- provides investors with a method of calculating a required return for a stock.

Accepted Answer

A)  dividend discount model 
B)  risk-free rate 
C)  Fisher model 
D)  Capital Asset Pricing Model 
A)  dividend discount model 
B)  risk-free rate 
C)  Fisher model 
D)  Capital Asset Pricing Model

Question 17

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 18

Compare and contrast the passive strategies of buy-and-hold and buying index funds.

Accepted Answer

One must choose which stocks to buy-and-

Question 19

In an upward trending market, what sectors might investors consider to increase absolute returns?

Accepted Answer

Investors should have high bet

Question 20

Commodity ETF's are mainly used as speculative plays by:

Accepted Answer

A)  hedge fund traders. 
B)  conservative investors. 
C)  mutual fund managers. 
D)  value investors. 
A)  hedge fund traders. 
B)  conservative investors. 
C)  mutual fund managers. 
D)  value investors.

Exam 11: Managing a Stock Portfolio: a Worldwide Issue

Passive common stock strategies attempt to minimize:

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

If stock prices reflect their approximate fair value after transactions costs are taken into account, this is known as:

For adequately diversified common stock portfolios, market effects often account for -------- percent and more of the variability of the portfolio's return.

What are the major reasons investing in index funds works, according to Burton Malkiel?

----------- shifts the weights of securities in the portfolio to take advantage of areas expected to do relatively better than others.

Under new SEC rules adopted in 2002, price targets for stocks are to be shown.

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.

What is usually considered the biggest risk of market timing?

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

Individual investors consider the investment decision:

The Coffeehouse Portfolio suggests investors hold:

All of the following represent requirements for conducting effective sector rotation, EXCEPT

If security prices fully reflect all the relevant information that is available and usable, then a securities market is considered to be efficient.

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

The -------------- provides investors with a method of calculating a required return for a stock.

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

Compare and contrast the passive strategies of buy-and-hold and buying index funds.

In an upward trending market, what sectors might investors consider to increase absolute returns?

Commodity ETF's are mainly used as speculative plays by:

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

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