1.Some investment analysts believe that the market processes new information so well and so quickly that securities trade very close to theor intrinsic values at all times. These analysts are said to be advocates of

A. fundamental analysis B. sector analysis C. the efficient market hypothesis D. the prevailing price hypothesis

2. A weak dollar tends to have a _________effect on financial markets and a ___________effect on our exports.

A. positive; positive B. positive; negative C. negative; positive D. negative; negative

3. Investors who conduct industry analyses typically favor companies with strong market positions over companies with less secure market position because firms with strong market positions tend to

1. be price leaders. 2. benefit more from economies of scale. 3. have better R&D programs. 4. have lower production costs.

A. 2 and 4 only B. 1, 2 and 4 only C. 1, 2 and 3 only D. 1, 23 and 4

4. A company has sales of $640,000, net profit after taxes of $23,000, and a total asset turnover of 2.5. What is the return on assets?

A. 3.6% B. 4.5% C. 8.1% D. 9.0%

5. A company has annual sales of $160 million, a net profit margin of 4%, and total assets of $90 million. It carries $10 million in accounts receivable, $25 million in inventory, has $55 million in total debt, and 5 million shares of common stock outstanding. Based on this information, the company's return on equity (ROE) is

A. 4.4% B. 7.1% C. 11.5% D. 18.3%

6. Marco's just reported an EPS of $1.68 on revenues of $440 million. The company has 12 million shares outstanding. Total assets are $280 million, current liabilities equal $48 million, and long-term debt is $112 million. Net fixed assets are worth $230 million. Give this information, which one of the following statements is correct?

A. Marco's debt-equity ratio is 0.75. B. Marco's current ratio os 1.75. C. Marco's total asset turnover is 3.67. D. Marco's net working capital is $2 million.

7. A company has 2 million shares of common stock outstanding. Annual sales are $26 million. The net profit margin is 8% and the dividend payout ratio is 40%. Currently the stock trades at $17.68 per share. Given this information, the company has a P/E ratio of

A. 16 and a dividend yield of 2.35% B. 16 and a dividend yield of 3.20% C. 17 and a dividend yield of 2.35% D. 17 and a dividend yield of 3.20%

8. JJ Industries has a P/E ratio of 18 and an EPS of $0.93. This means that JJ's stock is currently selling for

A. $16.74 per share B. $17.07 per share C. $18.00 per share D. $19.35 per share

9. The PEG ratio

A. preferred by investors is equal to 2.0 or higher B. Compares the price/earnings ratio to the rate of growth of the company's earnings.

C. is a measure of a firm's liquidity D. measures the ability of a firm's assets to generate growth for the firm

10. Which of the following variables affect the P/E ratio?

1. capital structure of a firm 2. amount of dividends paid 3. inflation rate 4. earnings rate of growth

A. 1, 2 and 3 only B. 1, 2 and 4 only 4. 1, 3 and 4 only D. 1, 2, 3 and 4

11. Sam is the type of stock market investor who focuses on factors such as a company's book value, debt load, return on equity, and cash flow. In searching for stock investments, he looks at a company's historical performance and attempts to find undervalued stocks. This information indicates that Sam is the type of investor known as

A. a growth investor B. a premium investor C. an earnings investor D. a value investor

12. Lindell, Inc. has 8%, $100 per value preferred stock outstanding. To earn 12% on an investment in this stock, you need to purchase the shares at a per share price of

A. $9.60 B. $66.67 C. $96.00 D. $150.00

13. ABC Company stock currently has a market value equivalent to its intrinsic value. Marco percrives that ABC Company is increasing its level of risk and therefore Marco increases his required rate of return on ABC stock. This change in the required rate of return

A. will reduce the intrinsic value of ABC stock to Marco. B. will increase the intrinsic value of ABC stock Marco.

C. will change the intrinsic value but the direction of the change cannot be determined. D. is a signal to Marco that he should buy more ABC Company stock.

14. In applying the variable-growth dividend valuation model to a company's stock, analysts frequently define the growth rate, g, as equal to

A. ROE multiplied by the firm's retention rate. B. ROE divided by the dividend payout ratio. C. the dividend payout ratio multiplied by the firm's retention rate. D. P/E multiplied by the dividend payout ratio.

15. Technical analysts consider the stock market to be strong when volume___________in a rising market and ____________during a declining market.

A. increases; increases B. increases; decreases C. decreases; increases D. decreases; secreases

16. The weak from of the efficient market theory contends that

A. past price performance is useless in predicting future price movements. B. past performance can help determine the general direction of future price movements. C. any publicly available information is useless in predicting future price movements. D. price movements are not random but follow a general trend over a period of time.

17. Based on the semi-strong form of the efficient market theory, an investor reacting immediately to a news flash on the television generally

A. can make an abnormal profit. B. is guaranteed to make a reasonable profit. C. is too late to make an exceptional profit.

D. will suffer a loss.

18. The strong form of the efficient market hypothesis contends that

A. a select few institutional investors can earn abnormal profits. B. abnormal profits are randomly distributed. C. no one can consistently earn a profit

D. no one can consistently earn abnormal profits.

19. One of the calendar effect market anomalies indicates that ___________ in value during January.

A. large cap stocks tend to decline B. equities in general tend to decline C. small cap stockd tend to increase D. equities in general tend to increase

20. Which of the following statements correctly recommendations based on behavioral finance?

1. Don't hesitate to sell a losing stock 2. Trade frequently 3. Chase performance 4. Be humble and open-minded

A. 1 and 2 only B. 1 and 4 only C. 2 and 3 only D. 3 and 4 only

21. Dr. Zweibel's portfolio consists of four stocks: AZMN, 35%, beta 2.4; MKR, 20%, beta 1.6; ABDE, 2.5%, beta 1.8; and SBUK, 20%, beta 2.1. Compute Dr. Z's portfolio beta. Does he seem to be a conservative or aggressive investor?

22. Assume that an investor generates the following income stream and can be purchased at the beginning of 2009 for $1000 and sold at the end of 2015 for $1200. Estimate the yield for this investment. If a minimum return of 9% is required, would you recommend this investment? Explain.