Question 39

A hedge strategy known as a collar agreement involves the simultaneous

		Purchase of an in-the money put and purchase of an out-of-the-money call on the same underlying asset with same expiration date and market price.
		Sale of an out-of-the money put and sale of an out-of-the-money call on the same underlying asset with same expiration date and market price.
		Purchase of an in-the money put and purchase of an in-the-money call on the same underlying asset with same expiration date and market price.
		Purchase of an out-of-the money put and sale of an out-of-the-money call on the same underlying asset with same expiration date and market price.
		Sale of an in-the money put and purchase of an in-the-money call on the same underlying asset with same expiration date and market price.

Question 30

General obligation bonds are

		U.S. Treasury bonds backed by the full faith and credit of the issuer.
		U.S. Treasury bonds backed by income generated form specific projects.
		Municipal bonds backed by the full faith and credit of the issuer.
		Municipal bonds backed by income generated from specific projects.
		A type of U.S. agency security.

Question 29

The growth rate of equity earnings without external financing is equal to

		Retention rate plus return on equity.
		Retention rate minus return on equity.
		Retention rate divided by return on equity.
		Retention rate times return on equity.
		Return on equity divided by retention rate.

Question 28

Growth rates of the (1) labor force, (2) average number of hours worked and (3) labor productivity are the main determinants of a foreign country's

		Dividend payout ratio.
		Beta.
		Real risk free rate.
		Nominal risk free rate.
		Risk premium.

Question 26

According to the dividend growth model, if a company were to declare that it would never pay dividends, its value would be

		Based on earnings.
		Based on expectations regarding.
		Higher than similar firms since it could reinvest a greater amount in new projects.
		Zero.
		Based on the capital asset pricing model.

Question 16

Cyclical companies are firms where

		Sales, earnings and cash flows are extremely uncertain and not necessarily related to the economy.
		Sales, earnings and cash flows are likely to withstand changes caused by the economic environment.
		Sales, earnings and cash flows are heavily influenced by aggregate business activity.
		Sales, earnings and cash flows are growing exponentially.
		None of the above.

Question 15

The franchise P/E is a function of

		Relative rate of return on new business opportunities
		Size of superior return opportunities.
		Duration of earnings growth.
		a and b
		a, b and c

Question 14

The financial risk for the retail store industry is difficult to judge because of

		Convertible debt.
		Numerous building leases.
		Warrants.
		Variable operating profits.
		Extensive use of preferred stock.

Question 13

Which of the following statements concerning the competitive environment is true?

		High fixed costs encourage firms to produce at a low level of capacity, in order to minimize fixed cost per unit produced.
		Low current prices relative to costs in an industry indicate low barriers to entry.
		Substantial economies of scale do not give a current industry member an advantage over a new firm.
		The ability to substitute another product limits the industry's profit potential.
		Buyers and suppliers do not influence the profitability of an industry.

Question 12

Which of the following is not a competitive force suggested by Porter?

		Rivalry among existing competitors
		Threat of new entrants
		Threat of substitute products
		Government and regulatory influences
		None of the above (that is, all are competitive forces)

Question 11

At what stage in the industrial life cycle is there an influx of competition?

		Early pioneering development
		Rapid accelerating growth
		Acquisition and consolidation
		Mature growth
		Stabilization and market maturity

Question 10

All of the following factors affect the required rate of return except

		The economy's risk free rate.
		Corporate business risk.
		Return on equity.
		Country risk.
		Expected rate of inflation.

Question 9

Aggregate return on equity increases as

		Profit margins increase.
		Total asset turnover increases.
		Financial leverage increases.
		Equity turnover decreases.
		All of the above.

Question 8

The dividend payout ratio, the required rate of return on common equity, and the expected growth rate of stock dividends are the major variables that affect

		The profit margin for the S&P Industrials Index.
		The earnings multiplier for common stock.
		Aggregate tax revenues.
		Capital gains tax revenues.
		Aggregate GDP.

Question 7

Expected earnings per share estimates requires all of the following except

		A sales per share estimate.
		A GDP estimate.
		An aggregate operating profit margin estimate
		An estimate of the real risk-free rate.
		A tax rate estimate.

Which of the following is not normally associated with cyclical indicators?

		The Securities and Exchange Commission (SEC)
		The National Bureau of Economic Research (NBER)
		Business Week
		Center for International Business Cycle Research (CIBCR)
		All of the above

Question 3

Excess liquidity is defined as

		The year-to year percentage change in the M2 money supply less the year-to-year percentage change in the nominal GNP.
		The growth rate in M2 money supply less the growth rate in M1 money supply.
		The year-to-year percentage change in the M1 money supply less the year-to-year percentage.
		The year-to-year percentage change in the "real" GNP less the year-to-year percentage change in the nominal GNP.
		None of the above

Question 2

Which of the following is not an analytical measure used by the NBER to examine behavior within a series?

		Diffusion indexes
		Rates of change
		Direction of change
		Ratios among series
		Comparison with previous cycles