Q&A Hero

Investments & Securities

Q: a publicly held bond has a trustee who enforces the terms of the indenture.
Q: default means the failure to meet any of the terms of a bond's indenture.
Q: the indenture specifies the terms of a bond.
Q: since bonds are legal obligations, there is little risk associated with purchasing these securities.
Q: the current yield and the yield to maturity are equal if a bond sells for its par value.
Q: bonds pay a flow of income called interest.
Q: empirical evidence a. does not support efficient markets b. does not support the use of technical analysis c. cannot be applied to technical analysis d. only supports head-and-figure charts
Q: the dogs of the dow strategy a. forecasts the direction of dow jones averages b. suggests buying the dow stocks with the highest dividend yields c. outperforms the s&p 500 d. suggests buying the lowest priced dow stocks
Q: according to behavioral finance, investors often select investment data that confirms a preconceived position.
Q: behavioral finance asserts that emotional investing produces higher returns.
Q: being familiar with a company often results in individuals buying stock (e.g., buying the stock in the company for which they work).
Q: behavior financial suggests that investors may fail to sell losing positions since these investors feel the pain of regret.
Q: behavior finance explains dramatic price changes in securities markets as a tendency for investors to herd.
Q: acknowledging traits that affect investment behavior should lead to better investment decisions.
Q: the adaptive market hypothesis suggests that investors lack the ability to adapt and continue to repeat mistakes.
Q: few investors believe they are smarter than other investors and hence are not overconfident.
Q: technical analysis stresses historical information and suggests that patterns of securities prices repeat.
Q: technical analysts use financial statements as the basis for making investment decisions.
Q: the dow theory considers price movements in the dow jones industrial and transportation averages.
Q: a point-and-figure chart such as an x-o chart tracks dividends and earnings.
Q: individuals who do the opposite of what investment analysts are suggesting are "contrarians."
Q: if a 200-day moving average equals the current market price of a stock, that suggests the stock's price will stagnate.
Q: "resistance" for a stock suggests that supply will blunt further price increases.
Q: a "head and shoulder" pattern suggests that a stock's price will fall.
Q: a price increase on small volume is more bullish than a price increase on large volume since fewer investors bought the stock.
Q: if investors believe technical analysis, its predictions may become self-fulfilling.
Q: evidence supporting technical analysis is the lack of serial correlation between stock prices.
Q: insider purchases of stock are considered bullish.
Q: the dogs of the dow strategy suggests buying the lowest dividend yields of the dow stocks.
Q: even if technical analysis accurately predicted the direction of stock prices, commissions from frequent trading may consume any excess return the investor earns.
Q: if a stock meets a resistance level and penetrates that level, the implication is avoid the stock.
Q: if technical analysis cannot be demonstrated to produce higher returns, that is evidence supporting efficient markets.
Q: behavioral finance suggests that a. investors are not informed b. individuals make rational investment decisions c. investors may be subject to bias which leads to excessive buying or selling of stocks d. emotion plays only a minor role in security selection
Q: which of the following is a fundamental principle of behavior finance? a. the use of p/e ratios b. the tendency to avoid acknowledging investment errors c. selling stocks at a loss for tax purposes d. constructing a diversified portfolio
Q: which of the following human emotions tend to affect investments decisions? 1> the pain of regret 2> following the crowd or herding 3> selective memory a. 1 and 2 b. 1 and 3 c. 2 and 3 d. all of the above
Q: the technical approach suggests that future stock prices are forecasted by a. past stock prices b. financial ratios c. accounting statements d. monetary policy
Q: which of the following is not used in technical analysis? a. moving averages b. bar graphs c. pointandfigure charts d. p/e ratios
Q: if a moving average of the dow jones industrial average crosses the dow jones industrial average, a. the direction of security prices has changed b. stock prices will stabilize c. stock prices will go through a period of fluctuation d. the investor should take profits
Q: long dark candlesticks suggests a. stock prices changed dramatically b. stock prices rose c. the daily price change was small d. an investor should sell short
Q: the moving average convergence divergence indicator uses a. the difference in yields on stocks and bonds b. the difference in yields between high and low quality stocks c. the difference in a short-term moving average and a longer term moving average d. the difference in the number of shares sold short and the number purchased
Q: one means to invest in anticipation of inflation is to a. sell stocks short b. buy fixed income securities c. acquire etfs specializing in commodities d. hoard money
Q: large increases in the money supply may be associated with a. increased inflation b. decreased inflation c. increased employment d. increased unemployment
Q: which of the following is not a leading indicator? a. initial claims for unemployment insurance b. building permits for new home construction c. changes in manufacturers' unfilled orders for durable good d. the level of unemployment
Q: inflation is a period of a. rising stock prices b. rising prices of consumer goods c. declining interest rates d. rising confidence in the dollar
Q: recession is a period of a. declining unemployment b. rising unemployment c. falling prices d. rising prices
Q: deflation is a period of a. rising unemployment b. declining unemployment c. rising prices d. falling prices
Q: the anticipation of inflation suggests that the investor should a. buy bonds b. anticipate higher interest rates c. avoid real estate investments d. sell stocks of gold companies
Q: if the federal reserve lowers the target federal funds rate, a. the discount rate rises b. liquidity in the banking system is increased c. securities prices fall d. required reserves are decreased
Q: the fiscal policy of the federal government excludes a. expenditures b. taxation c. the money supply d. debt management
Q: the sum of cash, currency, and demand deposits is a. m1 b. m2 c. m3 d. m4
Q: a federal government deficit may be financed by 1> the general public buying government bonds 2> commercial banks buying treasury bills 3> the federal reserve selling securities a. 1 and 2 b. 1 and 3 c. 2 and 3 d. all of the above
Q: monetary policy affects securities prices by 1> affecting investors' required return 2> increasing the federal deficit 3> affecting firms' capacity to generate earnings a. 1 and 2 b. 1 and 3 c. 2 and 3 d. all of the above
Q: when the federal reserve seeks to contract the money supply, it may a. sell securities and raise the targeted federal funds rate b. sell securities and lower the targeted federal funds rate c. buy securities and raise the targeted federal funds rate d. buy securities and lower the targeted federal funds rate
Q: when the federal reserve seeks to expand the money supply, it a. sells securities b. buys securities c. runs a deficit d. runs a surplus
Q: the economic goals of the federal reserve include 1> prosperity 2> full employment 3> stable prices a. 1 and 2 b. 1 and 3 c. 2 and 3 d. all of the above
Q: an increase in the targeted federal funds rate implies that the fed is buying securities.
Q: changes in the price of gold are often related to the anticipation of inflation.
Q: the price of gold tends to rise during inflationary periods.
Q: an increase in the expected rate of inflation suggests that investors should sell the stocks of natural resource companies (e.g., gold and silver).
Q: deflation is a period of rising employment.
Q: monetary and fiscal policy may affect stock prices through their impact on corporate earnings.
Q: if the country's exports increase, gdp declines.
Q: the federal funds rate is the rate banks charge each other when they borrow reserves.
Q: gross domestic product (gdp) is the sum of spending on consumer goods, government spending, and investing in stocks and bonds.
Q: an increase in stock prices is a lagging indicator of economic activity.
Q: a tight monetary policy should generate a higher required return for common stock.
Q: if the federal reserve sells securities, that reduces commercial banks' capacity to lend.
Q: m2 is a narrower definition of the money supply and excludes savings accounts in commercial banks.
Q: the money supply, defined as m1, includes currency, coins, and checking accounts.
Q: an easy monetary policy increases the cost of credit.
Q: open market operations is the buying and selling of securities by the federal reserve.
Q: the federal funds rate is the rate federal government pays when it borrows funds.
Q: a recession is a period of rising employment.
Q: the federal reserve is the central bank of the united states.
Q: economies go through regular, identifiable cycles that can be forecasted with accuracy.
Q: you sold 200 shares of woof short for $24. after three years you closed your position at $17. woof paid an annual dividend of $1, what was the annualized (compound) return on the trade?
Q: the market consists of the following stocks. their prices and number of shares are as follows: stock price number of shares outstanding a $10 100,000 b 20 10,000 c 30 200,000 d 40 50,000 a. the price of stock c doubles to $60. what is the percentage increase in the market if a s&p 500 type of measure of the market is used? b. repeat question (a) but use a value line type of measure of the market (i.e., a geometric average) to determine the percentage increase. c. suppose the price of stock b doubled instead of stock c. how would the market have fared using the aggregate measures employed in (a) and (b)? why are your answers different?
Q: given the following information concerning three stocks, answer the following questions: stock price shares outstanding a $10 1,000,000 b $14 3,000,000 c $21 10,000,000 b. what are averages if each price rises to $11, $17, and $35, respectively? c. what is the percentage increase in each average?
Q: you bought a stock for $28.29 that paid the following dividends year 1 2 3 dividend $1.00 $1.50 $1.80 after the third year, you sold the stock for $35. what was the annual rate of return?
Q: you bought a stock for $20 and sold it for $59.72 after six years. what was the annual rate of return?
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