Question 53

Cyclical vs. Defensive Industries. Cyclical industries have an above average sensitivity to the

business cycle while defensive industries have below average sensitivity.

True

False

Question 54

European vs. American style options. European style options can be exercised early (i.e., at any

time over the life of the contract) while American style can be exercised on at the maturity date of

the contract.

True

False

Question 55

Financial Cost of Carry: The financial cost of carry is determined by the relative costs of buying a

stock with deferred delivery in the futures market versus buying it in the spot market with

immediate delivery and carrying it in inventory. The financial cost of carry is depicted as F = S

(1 + RF D)^T where the latter term in parenthesis is the cost of carry.

True

False

Question 56

Market Value Added: MVA and EVA are usually inversely related. In general, when EVA rises,

MVA falls. Conceptually, a positive MVA is a byproduct of a high or positive EVA (or

series of EVAs).

True

False