If a portfolio regularly falls twice as much as a benchmark index rises, the portfolio's beta coefficient is __________.

• a) 0.5%
• b) -0.5%
• c) -2.0%
• d) 2.0%

Calculate a company's total leverage given the following information:

• Change in sales = 5.5%
• Change in earnings = 7%

• a) Cannot calculate without ROE data
• b) Cannot calculate without EBIT data
• c) 1.27
• d) 0.79

What is the effect on the stock price of a company that announces it earned higher-than-expected quarterly profits?

• a) The stock price will likely go up because it's a clear indication that the financial health of the company is strong.
• b) The stock price will likely go down because analysts do not like unexpected surprises from company financial reporting.
• c) The stock price will likely go up because the announcement suggests that the company is undervalued.
• d) The effect depends on what generated the profits and how analysts forecast this information.

You invest $1,000 in a stock that has a 15% chance of a 1% return, a 60% chance of a 5% return and a 25% chance of a 7% return.

What is your expected return after one year?

• a) 5.3%
• b) 4.9%
• c) 4.5%
• d) 4.3%

The discounted cash flow approach is useful for __________.

• a) determining the value of future profits (or losses) in today's terms
• b) graphing an asset's position on the security market line
• c) determining the value of a company's publicly traded equity
• d) evaluating whether an asset is over-valued, under-valued or correctly priced