34. Which of the following is an example of idiosyncratic risk? * (1 Punto)

The Fed's current policy could push the economy into a recesssion.

Higher interest rates may make all companies underperform vs. their earnings estimates.

A recession may cause consumers to buy only basic necessities.

A firm recalls a product that accounts for 80% of its sales

35. Inflation rose to 7%. Most economists expected 8%. Holding everything else constant, How do you think the bond market would react to this news? * (1 Punto)

Market Rally (prices up/ rates down)

Market Sell-Off (prices down / rates up)

no change expected

not enough information provided

37. Of the investments listed below, which security is generally expected to perform best in time of high inflation?* (1 Punto) Commodities

Fixed Income

Equities

Currencies

38. When the money supply increases, market rates generally move. to make loans. (1 Punto) higher | disincentivized

higher | incentivized

lower | disincentivized

lower |incentivized

39. In 2020, the total market value of global equity markets was of global fixed income markets. the total market value (1 Punto)

larger than

smaller than

about the same size as

40. An option provides the owner with the ____ to purchase or sell a specified asset at a specified price on or before a specified date.

ability

financing

right

obligation

41. A flight to quality would involve (1 Punto)

the sale of US Treasuries and purchase of junk bonds

the sale of senior debt and purchase of stocks

the sale of junk bonds and purchase of US Treasuries

the sale of preferred stocks and purchase of common stocks

42. You purchased $5,000 worth of an ETF that mimics the return of the S&P 500 equities. Your brother purchased $5,000 worth of a mutual fund that invests in long term debt of S&P 500 companies. Which investment would you expect to earn a higher total return over the long term considering historical returns as a guide?

S&P 500 Equities ETF

S&P 500 Corporate Bond Fund

both should have the same return

not enough Information provided

43. The maximum gain of a short call position is equal to (1 Punto)

the exercise price

the strike price

strike price - market price

call premium

44.You purchased $5,000 worth of an ETF that mimics the return of the S&P 500 equities. Your brother purchased $5,000 worth of a mutual fund that invests in long term debt of S&P 500 companies. Which investment would you expect to earn the higher total return during a period when the economy experiences a deep recession? (1 Punto)

S&P 500 Equities ETF

S&P 500 Corporate Bond Fund

both should have the same price

not enough information provided

1. Considering the "Present Value of Future Cash Flows" valuation model, what explains lower returns of growth stocks (vs. value stocks) in an environment of rising interest rates? *
2. Value stocks have greater uncertainty of future cash flows
3. Growth stocks are discounted using a lower required rate of return
4. A greater proportion of cash flows of value stocks are front loaded (come in earlier years) than growth stock! whose cash flows come in later years.
5. Inflation affects the margins of growth stocks more than those of value stocks