Question 30 2 pts Investors following a passive strategy use which of the following as the best estimate of a security's value? current market price. Fisher model. the dividend discount model. O current earnings per share. Question 14 2 pts Which of the following types of industries is likely to be least affected in a recession? Countercyclical Interest-rate sensitive Defensive Expansionary Question 32 2 pts Generally speaking, if interest rates fall and other factors remain constant, the P/E ratio of most companies company will: increase. decrease. Obecome negative. become more volatile. Question 40 2 pts How can investors reasonably justify buy actively managed funds instead of index funds? the fund consistently outperformed the market, net of fees, and is expected to continue to do so the portfolio manager is new and considered a star analyst the fund outperformed the S&P 500 by 4% last year O higher management fees usually suggests better performance Question 49 2 pts If a certain stock has a beta greater than 1.0, it means that O an investor will earn a higher return on his stock than that on the market portfolio. an investor can eliminate the risk by combining it with another stock that has a negative beta. the stock's return is more volatile than that of the market portfolio. the stock is less risky than the market portfolio. Question 50 2 pts The single-index model implies stocks covary only because of their common: O relationship to each other relationship to the market O desire to make a profit O currency Question 51 2 pts Market timers attempt to earn excess returns by: adjusting the ratio of primary market securities to capital market securities. shifting the mix of short-term securities to long-term securities. varying the percentage of portfolio assets in equity securities. adjusting the ratio of aggressive equity securities to defensive equity securities. Question 52 2 pts Which of the following might be used as a factor in an APT factor model? Expected inflation Loss by fire at a company's manufacturing plant The risk-free rate Unanticipated deviations from expected inflation Question 44 2 pts The period from a peak to a trough is: a recession. O an inflection point. a cycle. O a depression. Question 20 2 pts Which of the following is not one of the reasonable conclusions of the CAPM reached by a consensus of the empirical results? The SML appears to be non-linear. CAPM is an imperfect model for the explanation of the cross section of security returns. The intercept term is generally higher than the RF. The slope of the CAPM is generally less steep than suggested by the theory. Question 28 2 pts Which of the following is not true regarding the Markowitz theory? The Markowitz model is cumbersome to work with due to the large variance-covariance matrix needed for a set of stocks Under the Markowitz model, no portfolio on the efficient frontier dominates any other portfolio on the efficient frontier Markowitz portfolio theory is considered a three-parameter model Markowitz portfolio theory is a multi-period model generates an entire set, or efficient frontier, of portfolios