Multiple Choice Questions: 1. The random walk theory suggests? a. That stock prices fluctuate in highly predictable

Question:

Multiple Choice Questions:
1. The random walk theory suggests?
a. That stock prices fluctuate in highly predictable ways.
b. That it is extremely difficult without inside information to consistently pick winners in the stock market.
c. That if stock price fluctuations are scrutinized carefully, one can consistently pick winners in the stock market.
d. That information filters sufficiently slowly that one can consistently profit by trading on newly released information.
2. A relatively high P/E ratio?
a. May indicate that investors expect future earnings to rise.
b. May indicate that investors expect future earnings to fall.
c. Indicates that a stock is undervalued.
d. Indicates that the stock is trading at a price that is low relative to earnings.
3. A stock€™s P/E ratio?
a. Is calculated by dividing the 52-week high price by the earnings per share of the firm over the past year.
b. Is calculated by dividing the 52-week low price by the earnings per share over the past year.
c. Indicates that the stock is overvalued if the P/E ratio is relatively low.
d. Indicates that investors may expect future earnings to fall if the P/E ratio is relatively low.
Use the following stock table to answer the next three questions (4€“6).

4. If a typical P/E ratio for companies that supply services and products comparable to General Electric is 20, then?
a. Purchasing General Electric stock at this time cannot possibly be a wise decision.
b. GE€™s P/E ratio suggests that its stock may be overvalued at this time.
c. GE€™s P/E ratio suggests that its stock may be undervalued at this time.
d. GE€™s P/E ratio suggests that investors may expect the stock price to rise in the near future.
e. Either b or d could be indicated by the information in the table.
5. If a typical P/E ratio for companies that supply services and products comparable to Hewlett-Packard is 40, then?
a. Purchasing Hewlett-Packard stock at this time cannot possibly be a wise decision.
b. Hewlett-Packard€™s P/E ratio suggests that its stock may be overvalued at this time.
c. Hewlett-Packard€™s P/E ratio suggests that its stock may be undervalued at this time.
d. Hewlett-Packard€™s P/E ratio suggests that investors may expect the stock price to rise in the near future.
e. Either c or d is indicated by the information in the table.
6. Based on the information in the preceding table, which of the following is true?
a. Both General Electric and Hewlett-Packard stocks increased in price compared to the previous day€™s close.
b. Both General Electric and Hewlett-Packard stocks decreased in price compared to the previous day€™s close.
c. General Electric stock decreased in price from the previous day€™s close, while Hewlett-Packard€™s stock increased in
price from the previous day€™s close.
d. Both General Electric and Hewlett-Packard stocks are trading near their 52-week highs.
7. When the government runs a budget deficit, which of the following would have to be negative?
a. Public saving
b. Private saving
c. National saving
d. Investment
8. Other things equal, if the government runs a budget surplus, it will tend to?
a. Increase national saving.
b. Decrease the real interest rate.
c. Increase the amount of investment.
d. Increase economic growth.
e. Do all of theabove.

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...