1. Which of the following events could cause the stock market to soar?

The average price of home resales accelerated last month, which is not forecast by the National Association of Realtors.

The GDP estimate for last quarter was revised upward slightly due to stronger consumer spending

The Fed announced a surprise rate cut. Most analysts expected the Fed to hold rates steady.

The U.S. unemployment rate declined strongly, matching market expectations

2. John purchased ABC Stock at $40 per share. The stock is now trading at $50. He placed a trailing stop (sell) order with a trail amount of $5. If the stock moves up to $53 and then moves down to $47, how much will be his profit (ignoring commissions)?

$7/share

$6/share

$8/share

$5/share

3. You are given the expected return and beta of 4 companies in the table below. If the risk-free rate is 3% and the Market Risk Premium is 7% , which of these firms is considered OVERVALUED according to the CAPM in a fundamental analysis?

	A	B	C	D
Exp. Return	7.5%	8.5%	13.2%	20.5%
Beta	0.7	0.3	1.2	1.6

4. Which of the following events could cause the stock market to soar?

The average price of home resales accelerated last month, which is not forecast by the National Association of Realtors.
		The GDP estimate for last quarter was revised upward slightly due to stronger consumer spending
		The Fed announced a surprise rate cut. Most analysts expected the Fed to hold rates steady.
		The U.S. unemployment rate declined strongly, matching market expectations

5. John purchased BAC Stock at $40 per share. The stock is now trading at $50. He placed a trailing stop (sell) order with a trail amount of 10%. If the stock moves up to $60 and then moves down to $52, how much will be his profit (ignoring commissions)?

$10/share

$5/share

$12/share

$14/share

6. In an efficient market, prices appear to move randomly because

only new information affects stock prices.
		the number of investors who can forecast prices correctly is too small to have any effect.
		insider trading has an unpredictable effect on stock prices.
		investors do not process new information correctly.

7. Joseph bought a contract for future delivery of 5000 bushels of corn at $2.80 per bushel and sold a later contract at $2.90 a bushel. A month later, corn prices were rising and Joseph sold his long contract for $3.20 per bushel and covered his short by purchasing the same contract for $3.25 per bushel. Ignoring trading costs, Joseph

made $500.

lost $750.

made $250.

broke even.