161. Stock returns are generally expected to be independent across weekdays, but a number of studies have found returns on Monday to be lower than in the rest of the week. This departure from market efficiency is also sometimes called the ___ effect.
A. Monday-Friday
B. Weekday
C. Monday
D. Weekend
Answer
D. Weekend
162. Fundamental analysis focuses on predicting the future price of a security and Technical analysis on estimating the intrinsic value of a security.
A. False
B. True
C. none
D. all
Answer
A. False
163. Under ___ EMH investors cannot earn abnormal/superior profits on securities on a consistent basis.
A. Weak-form efficient
B. Strong form efficient
C. Semi-strong form efficient
D. all
Answer
C. Semi-strong form efficient
164. Which are the popular types of orders placed through an online trading account?
A. Limit orders
B. Market orders
C. Stop loss order
D. All of the above
Answer
D. All of the above
165. What are the features of line charts?
A. It connects closing prices from one period to the next
B. It connects low prices from one period to the next
C. It connects high prices from one period to the next
D. None of the above
Answer
A. It connects closing prices from one period to the next
166. What is the art of technical analysis?
A. To identify trend changes at an early stage and maintain investment posture till the trend has reversed
B. To know the type of security to invest in.
C. To know the under and over priced shares.
D. None of the above
Answer
A. To identify trend changes at an early stage and maintain investment posture till the trend has reversed
167. What is Bottom-Up approach also known as?
A. Company-industry-economy approach
B. Economy -industry-Company approach
C. Industry-economy-Company approach
D. Company -economy-industry approach
Answer
A. Company-industry-economy approach
168. ___ ratio is the ratio of net profit to the sales.
A. Net Profit
B. Gross profit
C. Operating profit
D. Expense
Answer
A. Net Profit
169. A security is said to be ___ if its current market price is over its intrinsic value.
A. Under priced
B. Over priced
C. Rightly priced
D. all
Answer
B. Over priced
170. The objective of fundamental analysis for a security in a market is to identify either it is:
A. Under priced
B. Over priced
C. Both under priced and over priced
D. None of the above
Answer
C. Both under priced and over priced
171. ___ measures the percentage of net income not paid to the shareholders in the form of dividends.
A. Withholding ratio
B. Retention ratio
C. Preservation ratio
D. Maintenance ratio
Answer
B. Retention ratio
172. Which of the following patterns is the most reliable and widely used for indicating trend reversal?
A. Gap Analysis
B. Stochastics
C. Moving Averages
D. Head and Shoulders
Answer
D. Head and Shoulders
173. Prices of stocks usually move in trends.
A. False
B. True
C. none
D. all
Answer
B. True
174. The ability of the investor to convert an investment into cash in a short period of time is called
A. Short-term orientation
B. Low investment risk
C. Liquidity
D. Capital appreciation
Answer
C. Liquidity
175. Wealthy investors may prefer the favorable tax treatment of investments such as
A. Corporate bonds
B. Municipal bonds
C. Common stock
D. Preferred stock
Answer
B. Municipal bonds
176. What is the rate of return on a share of common stock that increased in value from $40 to $50?
A. 5%
B. 10%
C. 20%
D. 25%
Answer
D. 25%
177. What would the rate of return for a stock that increased in value from $60 per share to $63 per share and paid a $3.00 dividend?
A. 12%
B. 11%
C. 10%
D. 1.5%
Answer
C. 10%
178. An investment in common stock carries a higher return than a bank certificate of deposit. The difference in returns is called
A. The risk-free rate
B. The real rate of return
C. The risk premium
D. The beta
Answer
C. The risk premium
179. What are the components in determining the real rate of return?
A. The risk premium
B. The inflation factor
C. The required rate of return
D. Neither a) nor b)
Answer
D. Neither a) nor b)
180. What is the risk-free rate in an environment where the real rate is 3% and inflation is running at 3%? Use either method found in chapter one.
A. 14.5% or just 14%
B. 10.21% or just 10%
C. 6.09% or just 6%
D. 9.09% or just 9%
Answer
C. 6.09% or just 6%
181. Which of the following investments would theoretically always carry the highest risk premium?
A. U.S. treasury bill
B. Common stock
C. Preferred stock
D. Corporate bond
Answer
B. Common stock
182. ___ , because of increasing replacement value and scarcity, perform best in periods of high inflation.
A. Real assets
B. Common stock
C. Preferred stock
D. Financial assets
Answer
A. Real assets
183. The two components that make up the risk-free rate are
A. Real rate of return and capital gains
B. Risk-free assets and capital gains
C. Real rate of return and the inflation factor
D. Real assets and the inflation factor
Answer
C. Real rate of return and the inflation factor
184. Which of the following terms represents an upper price limit for a stock, based on the quantity of willing sellers?
A. Support.
B. Channel.
C. Trendline.
D. Resistance.
Answer
D. Resistance.
185. The daily high price is represented on a candlestick chart by the:
A. channel.
B. trendline.
C. shadow.
D. real body.
Answer
C. shadow.
186. The daily opening price is represented on a candlestick chart by the:
A. channel.
B. real body.
C. trendline.
D. shadow.
Answer
B. real body.
187. Which of the following do technical analysts believe is a lower bound on a stock’s price?
A. Moving average.
B. Shadow.
C. Resistance.
D. Support.
Answer
D. Support.
188. Which of the following is a sentiment indicator?
A. Odd-lot trading.
B. Advance-decline line.
C. Trendline.
D. Relative strength ratio.
Answer
A. Odd-lot trading.
189. Which of the following is a breadth indicator?
A. Advance-decline line.
B. Put/call ratio.
C. Odd-lot trading.
D. Channel.
Answer
A. Advance-decline line.
190. On which of the following does a hammer sometimes appear?
A. Moving average chart.
B. Point-and-figure chart.
C. Candlestick chart.
D. Bar chart.
Answer
C. Candlestick chart.
191. The number of stocks hitting new 52-week highs is a(n):
A. intermediate trend indicator.
B. breadth indicator.
C. sentiment indicator.
D. primary trend indicator.
Answer
B. breadth indicator.
192. Which type of chart includes daily high price, low price, opening price, and closing price?
A. Bar chart.
B. Candlestick chart.
C. Point-and-figure chart.
D. Moving average chart.
Answer
B. Candlestick chart.
193. Which of the following contains the real body?
A. Point-and-figure chart.
B. Bar chart.
C. Moving average chart.
D. Candlestick chart.
Answer
D. Candlestick chart.
194. If you believe in the ___ form of the EMH, you believe that stock prices reflect all relevant information including historical stock prices and current public information about the firm, but not information that is available only to insiders.
A. Semi strong
B. strong
C. weak
D. semi strong, strong, and weak
Answer
A. Semi strong
195. When Maurice Kendall examined the patterns of stock returns in 1953 he concluded that the stock market was ___ Now, these random price movements are believed to be ___
A. inefficient; the effect of a well-functioning market
B. efficient; the effect of an inefficient market
C. inefficient; the effect of an inefficient market
D. efficient; the effect of a well-functioning market
Answer
A. inefficient; the effect of a well-functioning market
196. A hybrid strategy is one where the investor
A. uses both fundamental and technical analysis to select stocks.
B. selects the stocks of companies that specialize in alternative fuels.
C. selects some actively-managed mutual funds on their own and uses an investment advisor to select other actively-managed funds.
D. maintains a passive core and augments the position with an actively managed portfolio.
Answer
D. maintains a passive core and augments the position with an actively managed portfolio.
197. The difference between a random walk and a submartingale is the expected price change in a random walk is ___ and the expected price change for a submartingale is ___
A. positive; zero
B. positive; positive
C. positive; negative
D. zero; positive
Answer
D. zero; positive
198. If you believe in the ___ form of the EMH, you believe that stock prices only reflect all information that can be derived by examining market trading data such as the history of past stock prices, trading volume or short interest.
A. semistrong
B. strong
C. weak
D. semistrong, strong, and weak
Answer
C. weak
199. If you believe in the ___ form of the EMH, you believe that stock prices reflect all available information, including information that is available only to insiders.
A. semistrong
B. strong
C. weak
D. semistrong, strong, and weak
Answer
B. strong
200. ___ focus more on past price movements of a firm’s stock than on the underlying determinants of future profitability.
A. Credit analysts
B. Fundamental analysts
C. Systems analysts
D. Technical analysts
Answer
D. Technical analysts
