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4 points QUESTION 2 Question 2: A decline in market risk taking giving rise to a higher cost of equity a. starts at the same

4 points

QUESTION 2

Question 2: A decline in market risk taking giving rise to a higher cost of equity

	a.	starts at the same point on the security market line but rises more sharply.
	b.	starts at the same point as before but declines more sharply.
	c.	doesn't affect the security market line.
	d.	affects the risk free rate only.
	e.	prevents the security market line from rising.

4 points

QUESTION 3

Question 3: The following are all characteristics of a good marketplace except

	a.	timely and accurate information
	b.	liquid
	c.	a few large investors who provide funds and influence security prices
	d.	low transaction cost
	e.	quick reflection of new information

4 points

QUESTION 4

Question 4: The best definition of an investment banker is

	a.	an advisor to individuals on their personal investments.
	b.	an advisor to businesses on their internal operating efficiencies.
	c.	an advisor to the government on their business matters with foreign countries.
	d.	an advisor to corporations on their financial matters including acquisitions and raising new funds.
	e.	a trader in securities on the stock exchange.

4 points

QUESTION 5

Question 5: The only secondary market to have people instead of a computerized system is

a.
an IPO

b.
New York Stock Exchange

c.
The Futures Exchange

d.
NASDAQ

e.
Ebay

4 points

QUESTION 6

Question 6: Under life cycle planning the spending phase refers to

	a.	spending while young and accumulating assets.
	b.	spending while in midlife.
	c.	spending when retired.
	d.	spending when very old.
	e.	spending when young and just starting a household.

4 points

QUESTION 7

Question 7: The Dow Jones Index reported market performance figures in an example of what type of index?

a.
value weighted

b.
unweighted

c.
sales weighted

d.
earnings weighted

e.
price weighted

4 points

QUESTION 8

Question 8: Using the S&P Index methodology for weighting which is the right answer for the change in the index?

Company Price Per Share Total Shares Outstanding % Change in Stock Price

Company A $12.00 2,500,000 10%

Company B $ 2.50 4,000,000 25%

Company C $40.00 2,000,000 5%

a.
5.7%

b.
9.9%

c.
7.3%

d.
3.2%

e.
7.9%

4 points

QUESTION 9

Question 9: Ethics in finance best refers to

	a.	don't get caught breaking the law.
	b.	you can get caught breaking the law as long as you make a lot of money.
	c.	acting correctly as long as the result for breaking the law is below your required rate of return.
	d.	acting correctly without regard to the impact on profitability.
	e.	making a decision on how to act after inputting the cost of a possible prison sentence into the decision matrix.

4 points

QUESTION 10

Question 10: A top down analytical process is given by

a.
economy, industry, company

b.
company, industry, economy

c.
industry, economy, company

d.
industry, company, economy

e.
economy only

4 points

QUESTION 11

Question 11: The following is true about the S&P 500 as an indicator of the economy

	a.	it is a poor indicator.
	b.	it follows the turnup in the economy.
	c.	it always leads the economy and never gives exterior false signals
	d.	it always leads the economy, but sometimes gives false signals.
	e.	it turns up when the economy turns up.

4 points

QUESTION 12

Question 12: Concerning an industry life cycle, which one about its characteristics isn't true?

	a.	pioneering development - high profits
	b.	accelerating growth - great demand
	c.	mature growth - competitors come in seeking high profits
	d.	stabilization and market maturing - normal economic growth
	e.	slower than market growth - lower return on equity

4 points

QUESTION 13

Question 13: The following are all true of the benefits of financial statement analysis except

	a.	analyst gets better understanding of operating and financial strategy.
	b.	helps predict the future.
	c.	helps in determining the P/E multiple.
	d.	useful in comparing one company with another.
	e.	can be relied on in all cases as an exact representation of profits because it is in writing.

4 points

QUESTION 14

Question 14: C company has EPS of $3.00, DPS of $1.50, ROA of 30%, ROE of 20% and cash flow per share of $4.00. Its sustainable growth rate is

a.
15%

b.
20%

c.
12%

d.
7.5%

e.
10%

4 points

QUESTION 15

Question 15: Which one of the following isn't true in a comparison of P/E multiples vs. the dividend discount model (DDM)?

	a.	P/E is more complex.
	b.	DDM is a purer method.
	c.	P/E based on earnings provides more updating points.
	d.	dividends have more informative content, when company changes it there is more meaning than in a quarterly earnings report.
	e.	P/E is used more by Wall Street.

4 points

QUESTION 16

Question 16: In comparing what is called a growth company vs. a value company

	a.	a growth company may have below average growth as long as it is of high quality.
	b.	a value company may be highly pop;ular and sell at high P/E and price to book.
	c.	a growth company is generally less popular than a value company
	d.	a value company tends to place more emphasis on price considerations.
	e.	a growth company can't be called one if its growth rate slows from 30% a year to 25% a year.

4 points

QUESTION 17

Question 17: A company's projected growth rate moves up. Its P/E multiple will

a.
decline

b.
increase

c.
stays the same

d.
cannot be determined

e.
will stay the same until the actual reported earnings

4 points

QUESTION 18

Question 18: The relative strength (momentum) style of investing says

	a.	the lower the P/E the more attractive the stocks.
	b.	high movement in the price of the shares as compared with that for the market makes a stock attractive.
	c.	a stock is attractive when it pierces a support level.
	d.	a stock is attractive when it pierces a resistance level.
	e.	buy a stock when your close relative, an uncle, who is very strong, buys it.