Price Information - Investment Theory - Past Solved Exam , Exams of Investment Management and Portfolio Theory

Download Price Information - Investment Theory - Past Solved Exam and more Exams Investment Management and Portfolio Theory in PDF only on Docsity! INVESTMENT THEORY MULTIPLE CHOICE QUESTIONS (100 pts, 1 pt ea) 1. The Internet is apt to make price information: a. more expensive. > b. less expensive. c. obsolete. d. none of these. 2. The Internet is apt to: a. reduce the geographic scope of markets. > b. constrain profit margins. c. increase barriers to entry. d. slow new product introductions. 3. Firms with important competitive advantages in the pre-Internet environment can use Internet technology to: a. reduce product quality information. > b. communicate more effectively with customers. c. preclude competitor entry. d. reduce regulatory burdens. 4. The Internet is the enemy of: a. consumers. b. employees. c. employers. > d. none of these. 5. Stock trading on the Internet is: a. often slower than broker-assisted trades. b. less efficient than broker-assisted trades. c. more costly than broker-assisted trades. > d. a prime contributor to the recent increase in stock-price volatility. 6. Anonymous tips communicated on Internet message boards rooms are prone to reflect: a. bullish sentiment. b. bearish sentiment. c. the market consensus. > d. manipulation and bias. 1. The firm=s quarterly financial report to the SEC is called the: a. proxy statement. b. 13D. > c. 10Q. d. 10K. 2. Comprehensive information about insider stock holdings is available on the: > a. proxy statement. b. 13D. c. 10Q. d. 144 report. 3. Stock message boards are Web sites where anonymous individuals post information about individual companies or investment styles, and are sponsored by: a. the SEC. b. listed companies. c. Nasdaq and the NYSE. > d. none of these. docsity.com 2 4. In Wall Street terminology, a hold recommendation is: > a. negative. b. neutral. c. positive. d. none of these. 5. In Wall Street terminology, a bull is: a. negative. b. neutral. > c. positive. d. none of these. 6. Market-beating results are made difficult because Wall Street research is: a. of uniformly low quality. > b. inexpensive. c. of uniformly high quality. d. expensive. 7. Bearish analyst recommendations tend to: a. drive stock prices up. > b. drive stock prices down. c. help investment banking opportunities. d. cause trading volume to decline. 8. The rarest security analyst recommendation is: > a. a strong sell. b. a weak sell. c. to hold. d. to buy. 9. Who among the following finance professionals is not required to pass a certification exam? a. brokers. > b. portfolio managers. c. chartered financial analysts. d. certified financial planners. 10. A trusted source of SEC report information on the Internet: a. is the reporting company. > b. is EDGAR. c. are various Internet news organizations. d. are message boards. 11. High insider net buy activity reported on 13D filings is: a. bearish. b. evidence of illegal corporate activity. > c. bullish. d. none of these. 12. The highest quoted price an investor is willing to pay to buy a security is called the: a. ask. b. market. > c. bid. d. none of these. 13. Bid size is the number of: a. shared represented on the buy side of the market. > b. round lots represented on the buy side of the market. c. round lots represented on the sell side of the market. docsity.com 5 33. By definition, growth stocks in the S&P/BARRA Value and Growth Indexes have high: a. dividend yields. > b. price-book ratios. c. dividend payout ratios. d. earnings per share growth rates. 34. Value investors are often attracted to companies with: a. potentially valuable intangible assets with attractive growth prospects. > b. entrenched management that is woefully inefficient. c. the potential for growing government regulation. d. high stock prices tied to investor euphoria. 35. Value investors are often attracted to companies with high: > a. dividend yields. b. P/E ratios. c. P/B ratios. d. revenue growth. 36. When using S&P/BARRA Value and Growth criteria, a long-term investor should expect: a. lower volatility for growth versus value stocks. b. much lower P/E ratios for value versus growth stocks. c. many more growth stock investment choice alternatives. > d. none of these. 37. A long-term investor should expect to receive: a. lower rates of return on value versus growth stocks. b. higher rates of return on value versus growth stocks. > c. similar rates of return on value and growth stocks. d. none of these. 38. Following the investment experience of the late-1990s, reversion to the mean theory predicts: a. higher stock prices due to falling dividend yields in the new millennium. b. higher stock prices due to rising P/B ratios in the new millennium. c. higher stock prices due to rising economic growth in the new millennium. > d. none of these. 39. Following the investment experience of the late-1990s, reversion to the mean theory predicts: a. higher rates of return for growth stock investors in the new millennium. > b. higher stock market dividend yields in the new millennium. c. lower rates of return for value stock investors in the new millennium. d. higher stock market P/E ratios in the new millennium. 40. Holding all else equal, EBITDA will rise with: a. the prime rate. > b. net income. c. capital spending. d. tangible assets. 41. Holding all else equal, EBITDA will fall with a rise in: a. sales. > b. the average collection period. c. capital spending. d. the awarding of managerial stock options. 42. A contrarian investment philosophy tends to rely upon rapid: a. earnings growth. b. dividend growth. c. P/E expansion. docsity.com 6 > d. changes in investor psychology. 43. The value of ROE is defined as: > a. ROE ) P/E. b. ROE ) P/B. c. profit margin Η total asset turnover Η leverage. d. profit margin ) total asset turnover ) leverage. 44. According to the value of ROE criteria: a. If VRE #1, the stock may be worthy of investment attention and possible purchase. b. If 2 # VRE # 3, the stock is apt to represent an extraordinarily attractive investment opportunity. c. If VRE # 3, the stock is definitely worthy of investment attention and may represent a very attractive investment. > d. none of these. 45. The value of ROE criteria: a. is inconsistent with the Agrowth at a reasonable price@ concept. > b. can be biased upward in the case of firms with little book value per share. c. tends to be biased in favor of high P/E stocks. d. none of these. 46. Reversion (regression) to the mean theory argues that the potential of high profit-margin firms is amplified by: a. entry. b. imitation. c. exit. > d. none of these 47. High P/E ratios are typically associated with stocks that display: a. below-average risk. > b. below-average dividend payout ratios. c. below-average historical returns. d. below-average historical EPS growth. 48. In a Value Line regression, relevant X-variables might include: a. stock price. > b. earnings per share. c. stock-price beta. d. the prime lending rate. 49. If the predicted price in a Value Line regression is above the current market price, the stock is: > a. undervalued. b. fairly valued. c. overvalued. d. none of these. 50. Security analyst EPS forecasts tend to be most: > a. relevant for investors in high P/E stocks. b. relevant for investors in low P/E stocks. c. accurate for high P/E stocks. d. accurate for low P/E stocks. 51. Graham & Dodd investors tend to favor stocks with low: a. EBITDA. b. dividend yields. > c. capital spending. d. liquidity. 52. Portfolio management always involves: docsity.com 7 a. focusing on securities considered to be temporarily undervalued or unpopular for various reasons. b. seeking bargains described in terms of a market price that is below the economic value of assets in place. c. focusing on companies expected to have above-average rates of growth in earnings and dividends. > d. bargains selling at prices below their actual economic value. 53. Attractive growth stocks feature: a. rapid historical EPS growth. > b. rapid expected EPS growth. c. below average P/E ratios. d. below average P/B ratios. 54. Ideally, growth stocks are characterized by low: a. reliance on equity financing. > b. leverage. c. ROE. d. earnings retention. 55. Attractive value stocks feature: a. rapid historical EPS growth. > b. below average P/B ratios. c. rapid expected EPS growth. d. above average P/E ratios. 56. When compared with growth stock investors, value stock investors place a greater emphasis on: a. management quality. b. high profit margins. c. low dividend payout ratios. > d. tangible assets. 57. TROW has a current price of 25, an expected dividend per share of $0.65, expected EPS of $1.50, expected EPS growth of 15% per year, and a typical P/E ratio of 20. According to the Discounted Present Value Model, what is the expected price for TROW in five years? a. $26.15 b. $30 c. $50.28 > d. $60.34 58. TROW has a current price of 25, an expected dividend per share of $0.65, expected EPS of $1.50, expected EPS growth of 15% per year, and a typical P/E ratio of 20. According to the Discounted Present Value Model, what is the expected rate of return on TROW over the next five years? a. 2.6% b. 15% c. 17.6% > d. 21.9% 59. INTC has a current price of 18, an expected dividend per share of $0.10, expected EPS of $0.60, expected EPS growth of 5% per year, and a typical P/E ratio of 20. According to the Discounted Present Value Model, what is the expected price for INTC in five years? a. $23.58 b. $22.97 > c. $15.31 d. $18 60. INTC has a current price of 18, an expected dividend per share of $0.10, expected EPS of $0.60, expected EPS growth of 5% per year, and a typical P/E ratio of 20. According to the Discounted Present Value Model, what is the expected rate of return on INTC over the next five years? a. 20% b. 5.6% c. 5% > d. none of these. docsity.com 10 80. The fastest growing part of the U.S. debt market involves: a. municipal bonds. b. corporate debt. c. Treasury bonds. > d. asset backed securities. 81. Holding term to maturity constant, holding period risk is highest for: a. municipal bonds. > b. high-yield bonds. c. federal agency securities. d. corporate bonds. 82. The interest rate charged on loans made by the Federal Reserve is called the: a. fed funds rate. > b. discount rate. c. LIBOR rate. d. prime rate. 83. Annual trading activity in the U.S. bond market is: > a. a small fraction of trade volume in the U.S. equity market. b. roughly the same as trade volume in U.S. equity market. c. much larger than trade volume in the U.S. equity market. d. roughly equivalent to the par value of outstanding bonds. 84. Among the various types of publicly-traded debt, trading is most active for: a. junk bonds. b. municipal bonds. c. corporate bonds. > d. Treasury securities. 85. Annual corporate bond trading volume as a percentage of the value of outstanding corporate debt is roughly: > a. 0.1%. b. 5-10% c. 50%. d. 100%. 86. U.S. bond trading activity largely takes place on the: a. NYSE. > b. OTC market. c. AMEX. d. offshore market. 87. The percentage of Treasury securities held by foreign investors, largely foreign governments, is roughly: > a. 50%. b. 15-20%. c. 5%. d. 0% 88. A bond bid price of 97:9 means that a buyer was willing to pay: a. $979 > b. $972.8125 c. $97.90 d. none of these. 89. When a bond is selling at a discount to par: a. the yield to maturity is less than the current yield. b. the quoted price is more than the face amount. c. newly issued securities of a similar risk class offer a lower yield to maturity than the bond=s coupon rate. docsity.com 11 > d. none of these. 90. Treasury bonds have an initial term to maturity of: a. less than one year. b. one to ten years. > c. ten to thirty years. d. more than thirty years. 91. 100 basis points is equivalent to: > a. 1%. b. 100%. c. $1 million dollars of face amount. d. $1,000 of bond par value. 92. The probability of outperforming a portfolio of stocks with long-term bonds over a 30-year holding period is roughly: > a. 0%. b. 67%. c. 90%. d. 100%. 93. The probability of outperforming a portfolio of stocks with short-term bonds over a 5-year holding period is about: a. 0%. > b. 20%. c. 80%. d. 100%. 94. In a Value Line regression line, relevant X-variables might include: a. Roy Williams= win-loss percentage. > b. dividends per share. c. Roy Williams= age. d. Roy Williams= hair line. docsity.com