18.Which of the following investment strategy is likely the most relevant in the decision to short sell a particular stock?

____

A)Market timing

B)Asset allocation

C)Security selection

D)Tax strategy

19.You plan to buy a common stock and hold it for one year.You expect to receive both $1.50 from dividends and $26 from the sale of the stock at the end of the year.To earn a 15% rate of return, what is the maximum price you would pay for the stock today?

____

A)$28.82

B)$23.91

C)$25.50

D)$21.16

20.Which of the following investment constraint is expected to have the most fundamental impact on the investment decision process for a typical investor?

____

A)Investor's tax status

B)Investor's time horizon

C)Investor's need for liquidity

D)Investor's attitude toward risk

21.YYZ has an expected return of 25% and YQR has an expected return of 20%.What is the likely investment decision for a risk-averse investor?

____

A)Invest all funds in YYZ

B)Invest all funds in YQR

C)Do not invest any fund in YYZ and YQR

D)Invest funds partly in YYZ and partly in YQR

22.Four factors are identified.Its sensitivity () to each factor and the risk-free premium associated (RP) are given.GDP growth: = 0.6, RP = 4%.Inflation rate: = 0.8, RP = 2%.Gold prices: = -0.7, RP = 5%.S&P 500 Index return: = 1.3, RP = 9%.Risk-free rate = 3%.Based on APT formula, the expected return of a stock approximately is

____

A)10.4%

B)15.2%

C)12.1%

D)None of the above

23.Efficient market hypothesis concludes that investors are ____ choosing an appropriate asset allocation and investing in a well-diversified portfolio of ____ managed funds.

_____

A)Better off; passively

B)Worse off; passively

C)Better off; actively

D)Worse off; actively

24.An investor with a portfolio located on the capital market line to the left of the market portfolio has

_____

A)A lending portfolio

B)A borrowing portfolio

C)Lower nonsystematic risk than the market portfolio

D)Higher nonsystematic risk than the market portfolio

25.You purchase a stock for $26 and hold it for five years.The annual dividend per share for this stock is $2.50.If you sell the stock at the end of the fifth year for $24, what is your corresponding annual holding period yield on this stock?

_____

A)40.38%

B)20.19%

C)-16.59%

D)None of the above