UTA FINA 3315 -INVESTMENTS FINAL EXAM
QUESTIONS AND VERIFIED ANSWERS
Which of the following is not a weighting scheme commonly used in creating
equity market indexes?
Price-weighted
Value-weighted
Industry-weighted - ANSWER Industry-weighted
A stock's beta value is a measure of
A.
systematic risk.
B.
total risk.
C.
interest rate risk.
D.
diversifiable risk. - ANSWER systematic risk.
Cash dividends are taxed at the same rate as ordinary income.
True
False - ANSWER False
To calculate the interest rate or growth rate using a spreadsheet or financial
calculator, the present value and the future value most have opposite signs.
True
False - ANSWER True
Systematic risks
A.
can be eliminated by investing in a variety of economic sectors.
,B.
result from random firm−specific events.
C.
are unique to certain types of investment.
D.
are forces that affect all investment categories. - ANSWER are forces that
affect all investment categories.
Both modern portfolio theory and traditional portfolio management result in
diversified portfolios, but they take different approaches to diversification.
True
False - ANSWER True
A sell signal is indicated by a security's price
A.
running parallel to the moving average.
B.
rising above the moving average.
C.
falling below the moving average.
D.
equaling the moving average. - ANSWER falling below the moving average.
The stock valuation process reflects a firm's:
A.
past dividends and capital gains.
B.
historic earnings record.
C.
historic dividend growth rate.
D.
expected future dividends and capital gains. - ANSWER expected future
dividends and capital gains.
The primary market tends to be more active when
,A.
the economy is slowing and stock prices are falling.
B.
early in the calendar year.
C.
interest rates are rising.
D.
the economy is expanding and stock prices are rising. - ANSWER the
economy is expanding and stock prices are rising.
The returns on the stock of DEF and GHI companies over a 4 year period are
shown below:
DEF: 8%, 12%, -5%, 6%
GHI: 11%, 9%, -9%, 13%
From this limited data you should conclude that returns on
A.
DEF and GHI are uncorrelated.
B.
DEF and GHI are negatively correlated.
C.
DEF and GHI are perfectly positively correlated.
D.
DEF and GHI are somewhat positively correlated. - ANSWER DEF and GHI
are somewhat positively correlated.
For which one of the following situations will the
dividend−growth
models work especially well?
A.
a company that is widely viewed as an attractive takeover target
B.
mature firm with a policy of increasing its earnings and dividends at an average
rate of 5% per year
, C.
a company that intends to pay out all of its earnings as dividends
D.
a company with highly variable earnings and a policy of maintaining a constant
50% payout ratio - ANSWER mature firm with a policy of increasing its
earnings and dividends at an average rate of 5% per year
Over the long term, which one of the following has historically had the lowest
risk and lowest average annual rate of return?
A.
long−term
government bonds
B.
real−estate
C.
common stock
D.
corporate bonds - ANSWER long−term
government bonds
The dominant options exchange is the
A.
Chicago Board Options Exchange.
B.
American Stock Exchange.
C.
Philadelphia Options Exchange.
D.
Pacific Stock Exchange. - ANSWER Chicago Board Options Exchange.
The stock of Plomb Co. falls sharply on news that its CEO has drowned in a
boating accident while on vacation. This is an example of
A.
event risk.
B.
QUESTIONS AND VERIFIED ANSWERS
Which of the following is not a weighting scheme commonly used in creating
equity market indexes?
Price-weighted
Value-weighted
Industry-weighted - ANSWER Industry-weighted
A stock's beta value is a measure of
A.
systematic risk.
B.
total risk.
C.
interest rate risk.
D.
diversifiable risk. - ANSWER systematic risk.
Cash dividends are taxed at the same rate as ordinary income.
True
False - ANSWER False
To calculate the interest rate or growth rate using a spreadsheet or financial
calculator, the present value and the future value most have opposite signs.
True
False - ANSWER True
Systematic risks
A.
can be eliminated by investing in a variety of economic sectors.
,B.
result from random firm−specific events.
C.
are unique to certain types of investment.
D.
are forces that affect all investment categories. - ANSWER are forces that
affect all investment categories.
Both modern portfolio theory and traditional portfolio management result in
diversified portfolios, but they take different approaches to diversification.
True
False - ANSWER True
A sell signal is indicated by a security's price
A.
running parallel to the moving average.
B.
rising above the moving average.
C.
falling below the moving average.
D.
equaling the moving average. - ANSWER falling below the moving average.
The stock valuation process reflects a firm's:
A.
past dividends and capital gains.
B.
historic earnings record.
C.
historic dividend growth rate.
D.
expected future dividends and capital gains. - ANSWER expected future
dividends and capital gains.
The primary market tends to be more active when
,A.
the economy is slowing and stock prices are falling.
B.
early in the calendar year.
C.
interest rates are rising.
D.
the economy is expanding and stock prices are rising. - ANSWER the
economy is expanding and stock prices are rising.
The returns on the stock of DEF and GHI companies over a 4 year period are
shown below:
DEF: 8%, 12%, -5%, 6%
GHI: 11%, 9%, -9%, 13%
From this limited data you should conclude that returns on
A.
DEF and GHI are uncorrelated.
B.
DEF and GHI are negatively correlated.
C.
DEF and GHI are perfectly positively correlated.
D.
DEF and GHI are somewhat positively correlated. - ANSWER DEF and GHI
are somewhat positively correlated.
For which one of the following situations will the
dividend−growth
models work especially well?
A.
a company that is widely viewed as an attractive takeover target
B.
mature firm with a policy of increasing its earnings and dividends at an average
rate of 5% per year
, C.
a company that intends to pay out all of its earnings as dividends
D.
a company with highly variable earnings and a policy of maintaining a constant
50% payout ratio - ANSWER mature firm with a policy of increasing its
earnings and dividends at an average rate of 5% per year
Over the long term, which one of the following has historically had the lowest
risk and lowest average annual rate of return?
A.
long−term
government bonds
B.
real−estate
C.
common stock
D.
corporate bonds - ANSWER long−term
government bonds
The dominant options exchange is the
A.
Chicago Board Options Exchange.
B.
American Stock Exchange.
C.
Philadelphia Options Exchange.
D.
Pacific Stock Exchange. - ANSWER Chicago Board Options Exchange.
The stock of Plomb Co. falls sharply on news that its CEO has drowned in a
boating accident while on vacation. This is an example of
A.
event risk.
B.
