1.In an efficient market, the only means of achieving high returns is to invest in high-risk securities.
2. Flag this Question The efficient market hypothesis means that trades can be executed quickly, easily, and inexpensively.
3. Flag this Question If a company's revenues and earnings are highly predictable, it's stock price will also be highly predictable.
4.Flag this Question Historically higher returns on the stocks of small companies can be completely explained by their higher risk.
Flag this Question 5. Even if the semi-strong form of the efficient market hypothesis is true, trading on illegal insider information may lead to abnormal profits.
6.The bond market is considered bearish when
| market interest rates are low or falling. |
| market interest rates are high or rising. |
| the risk-free rate of return exceeds the required rate of return. |
| more bonds are called than issued over a given period of time. |
7. Under normal economic conditions, the major source of risk faced by investors who purchase investment grade bonds is
Flag this Question 8. Debentures are secured by
| earnings from the project the debentures were issued to finance. |
| financial assets held in trust by a third party. |
| physical assets like real estate. |
Flag this Question 9. Which of the following firms would be expected to need the most cash to conduct its daily operations?
| a retail grocery store that sells on a cash only basis |
| an aircraft manufacturer with large inventory and long development and sales cycles |
| an airline that has many of its fares pre-paid by cash or credit card |
| an electronics manufacturer that only assemble its goods once they have been paid for |
Flag this Question 10. Under which bond provision is the issuer required to retire portions of the bond issue prior to maturity?
11.The real rate of interest is the risk free rate minus the inflation premium.
Flag this Question 12.Municipal bonds usually have higher yields than bonds issued by the U. S. Government.
Flag this Question 13.The risk premium component of a bond's market interest rate is related to the characteristics of the particular bond and its issuer.
Flag this Question 14. The higher a bond's Moody's or Standard & Poor's rating, the higher its yield.
Flag this Question 15. Changes in the inflation rate have a direct and pronounced effect on market interest rates.
Flag this Question 16. One drawback of investing in mutual funds is the
| lack of liquidity of fund shares. |
| amount required for the initial investment. |
| lack of information on the performance of the fund. |
Flag this Question 17. Which one of the following statements is correct concerning players in the mutual fund industry?
| Security analysts and traders work for the management company. |
| Normally a bank serves as the custodian. |
| The management company maintains the shareholder records. |
| The mutual fund shareholders are the owners of the management company. |
Flag this Question 18. Nearly all mutual funds operate as regulated investment companies. This means that
| portfolio decisions are mandated by government authorities. |
| they do not pay taxes on their income. |
| their investments are guaranteed by the FDIC. |
Flag this Question 19. An open-end investment company
| is involved in all trades of its shares. |
| sells shares at a discounted NAV price. |
| trades like a stock on the exchanges. |
| has a set number of shares. |
Flag this Question 20. Closed-end funds are
| less liquid than open-end funds. |
| best purchased when they are selling at a premium. |
| purchased directly from the funds' manager. |
