Unit 21 Series 65

C) A stock with an above-average price-to-earnings ratio

If an investor practices value investing, which of the following stock types is the investor least likely to purchase? A) A stock with negative earnings in the most recent quarter B) A stock that is presently selling for ⅔ of net tangible assets C) A stock with an above-average price-to-earnings ratio D) A stock that has exhibited a high dividend yield in the past

D) I and III

An advantage of dollar cost averaging is that it results in an average cost per share that is less than the stock's average price, assuming which of the following? The price of the underlying shares fluctuates. A set number of shares is purchased regularly. A set dollar amount is invested regularly. A set dollar amount of investments is maintained. A) II and IV B) III and IV C) I and II D) I and III

C) the dividend discount model

An analytical tool used to project the current value of a common stock using projected future dividends is A) the price-to-earnings ratio B) the dividend payout ratio C) the dividend discount model D) the future value computation

B) Index funds

An individual who is a proponent of the efficient market hypothesis (EMH) will likely invest in which of the following? A) Growth mutual funds B) Index funds C) Balanced mutual fund D) Sector mutual funds

B) Strategic asset management

An investment adviser has the practice of rebalancing client portfolios on an annual basis. This would be an example of which management style? A) Market timing. B) Strategic asset management C) Tactical asset management D) Churning

C) value.

An investment adviser is doing some research on a company and notices that the current market price is $21 per share. The most recently reported earnings per share is $3, and the company is paying a $0.26 quarterly dividend. On the balance sheet, the company is carrying a significant amount of cash. This company would probably be attractive to this adviser if his investment style was A) passive. B) contrarian. C) value. D) growth.

B) $11.80 per share

An investor begins contributing $600 on the third day of each month to a purchase plan for the KAPCO Total Return Fund. For the first six months, the per share prices were: $10 $12 $15 $20 $12 $8 What is this investor's breakeven point? A) $12.50 per share B) $11.80 per share C) $12.83 per share D) $8.00 per share

A) Technical analysis

An investor believes that he can study the history of security trades and security markets in order to identify buying opportunities. Furthermore, he prepares and studies charts on the past prices of the securities he is most interested in purchasing for his portfolio. He uses these charts to try to predict the future activity of a particular stock. What type of strategy is this investor using to make his investment decisions? A) Technical analysis B) Fundamental analysis C) Ratio analysis D) Tactical asset allocation

B) 200-day moving averages

A technical analyst would be most interested in which of the following? A) Price-to-earnings ratios B) 200-day moving averages C) Capitalization ratios D) Working capital

D) 9%

An investment adviser representative is evaluating DEF stock to see if it is a good fit for a client's portfolio. Using the security market line (SML), what is the expected return for DEF when the return on the market is 8%, the 91-day Treasury bill is yielding 6%, DEF's beta is 1.50, and the inflation rate, as measured by the CPI, is 4%? A) 12% B) 5% C) 8% D) 9%

D) reducing transaction costs.

Diversifying a portfolio could be expected to provide all of the following benefits except A) reducing overall risk. B) improving returns. C) dampening volatility. D) reducing transaction costs.

C) low P/E ratios

Growth companies tend to have all of the following characteristics except A) potential investment return from capital gains rather than income B) low dividend payout ratios C) low P/E ratios D) high earnings retention ratio

B) 11.30%

If the risk-free rate of return is 3.5%, the expected market return is 9.5%, and the beta of a stock is 1.3, what is the required return on the stock according to the capital asset pricing model? A) 12.35% B) 11.30% C) 7.80% D) 8.85%

D) asset allocation

The process of determining how a portfolio's funds will be apportioned among different categories of investments is known as A) buying and holding B) insuring the portfolio C) growth investing D) asset allocation

C) the company's stock price trend.

All the following factors support fundamental analysis while assessing a wide range of qualitative factors except A) the company's competitive position. B) the company's business model. C) the company's stock price trend. D) the company's management team's quality and experience.

C) growth investing

An investment strategy where a higher price is paid for a stock based on expected returns is A) return on investment. B) dollar cost averaging C) growth investing D) futures investing

D) buy an XYZ 35 call

An investor is short stock at 60. The current market price of the stock is 35, and he anticipates it will continue to decline. If he thinks the price will rise temporarily and if he does not wish to close out his short position, his best strategy to prevent a loss would be to A) sell an XYZ 35 put B) sell an XYZ 35 call C) buy an XYZ 35 put D) buy an XYZ 35 call

A) the bullet strategy.

An investor plans to fund the college education for her newborn child by purchasing $5,000 of investment-grade bonds on an annual basis. She is most likely using A) the bullet strategy. B) the 529 plan strategy. C) the laddering strategy. D) the barbell strategy.

A) lies on the efficient frontier.

An optimal portfolio is one that A) lies on the efficient frontier. B) works well in bull markets but suffers when there is a market reversal. C) offers the greatest reward for the highest risk. D) is diversified in such a manner as to nearly eliminate systematic risk.

A) buy a put on that stock

A client wishing to hedge a long stock position would be most likely to: A) buy a put on that stock. B) sell a call on that stock. C) sell a put on that stock. D) buy a call on that stock.

A) unsystematic risk.

As a technique in portfolio management, portfolio diversification reduces A) unsystematic risk. B) interest rate risk. C) market risk. D) systematic risk.

C) a small-cap stock.

High-tech Industries (HTI) went public 4 years ago by issuing 100 million shares of common stock at $1 per share. HTI's earnings have soared and the stock is now selling for $13 per share. HTI would be considered A) a mid-cap stock. B) a micro-cap stock. C) a small-cap stock. D) a large-cap stock.

A) rebalance his portfolio toward high quality, intermediate-term debt instruments to service the expected liquidity needs of his portfolio.

Jim Cantore is a 45-year-old client with a $1.5 million portfolio that is heavily weighted toward equities. Cantore will continue working for the next 20 years and has a substantial retirement portfolio through his current employer. Cantore's three children are now nearing college age and will all attend premiere universities in the U.S. which each cost $50,000 per year to attend. All college expenses will be paid out of Cantore's portfolio. Cantore should A) rebalance his portfolio toward high quality, intermediate-term debt instruments to service the expected liquidity needs of his portfolio. B) not rebalance his portfolio because his children should all pay their own way through school. C) rebalance his portfolio towards aggressive small-cap stocks because he needs to increase the return of his portfolio to cover the upcoming college expenses. D) rebalance his portfolio toward large-cap common stocks and international securities because education costs are highly correlated with the returns to these securities.

A) Tactical asset allocation

Market timing is normally associated with which of the following portfolio management styles? A) Tactical asset allocation B) Modern portfolio theory C) Strategic asset allocation D) Passive management

D) Preferred stock

One of the asset allocation classes is fixed income securities. When an investment adviser representative is determining which securities should fill that portion of the client's portfolio, which of the following would not be included? A) Municipal bonds B) Mortgage-backed securities C) Treasury bonds D) Preferred stock

D) expected return

The capital asset pricing model (CAPM) is most commonly used to determine an investor's A) risk-adjusted return B) time-weighted return C) holding period return D) expected return

D) portfolio optimization

The concept of creating a model portfolio, through asset allocation principles, that both increases return and reduces risk is known as A) corrective adaptation B) rebalancing C) risk reduction fundamentals D) portfolio optimization

D) an analytical tool used to value a common stock using the present value of future dividends.

The dividend discount model is A) based on the dividend payout ratio. B) primarily used by technical analysts. C) the inverse of the price-to-earnings ratio. D) an analytical tool used to value a common stock using the present value of future dividends.

C) publicly available information.

The semi-strong form of the efficient market hypothesis (EMH) is most accurately described as asserting that security prices fully reflect all A) market prices for the foreseeable future B) historical price and volume information. C) publicly available information. D) relevant information, including information not publicly available.

B) intentionally deviates from the normal asset mix to take advantage of market opportunities

The tactical approach to the asset allocation review process A) requires no predictive abilities B) intentionally deviates from the normal asset mix to take advantage of market opportunities C) is designed to maintain a minimum or floor for the value of the portfolio's assets D) strives to maintain a constant asset mix over a long period of time

B) 91-day Treasury bill

There are several financial models that refer to the "risk-free" rate of return. Which of the following instruments is used to measure that rate? A) Federal funds B) 91-day Treasury bill C) 1-year CD D) 30-year Treasury bond

D) The strong form

Which form of the efficient market hypothesis (EMH) states that security prices fully reflect all information from both public and private sources? A) The random walk form B) The weak form C) The semi-strong form D) The strong form

C) Price-to-earnings ratio

Which of the following would be of least interest to a technical analyst? A) Advance/decline line B) Trading volume C) Price-to-earnings ratio D) Short interest ratio

C) $150 million

A company has 15 million shares of stock outstanding, and the price per share is $10. The company's market capitalization is A) $15 million B) $1.5 million C) $150 million D) $25 million

A) the current earnings per share.

An analyst using the dividend growth model would take into account all of the following factors except A) the current earnings per share. B) the investor's required rate of return. C) the growth of the dividend. D) the current dividend.

B) dollar cost averaging

An individual is a participant in the 401(k) plan offered by her employer. If she were to invest $400 per month into a large-cap growth fund, she would be A) following a constant ratio plan B) dollar cost averaging C) using a tactical asset allocation style D) matching her employer's contribution

B) a bullish outlook

One of your customers notices that the short interest on KAPCO common stock is high. When she asks you for an interpretation, you should tell her that this signals A) that a change in interest rates is coming B) a bullish outlook C) a shortage of enough stock to go around D) a bearish outlook

D) $660,000

One of your retired clients aims to maintain a 70%/30% relationship between bonds and equities in her portfolio. At the beginning of the year, the mix was $1.4 million in bonds and $600,000 in equity. At the end of the year, her bonds were worth $1.54 million. Rebalancing the portfolio would not be required if the equities were worth A) $462,000 B) $666,000 C) $513,333 D) $660,000

C) Odd lot

Proponents of which of the following technical theories assume that small investors are usually wrong? A) Short interest B) Breadth of market C) Odd lot D) Advance/decline

B) Tactical

Sector rotation would most likely be employed by an investment adviser using which of the following investment styles? A) Buy and hold B) Tactical C) Contrarian D) Strategic

C) 91-day Treasury bill

There are several financial models that refer to the "risk-free" rate of return. Which of the following instruments is used to measure that rate? A) Federal funds B) 1-year CD C) 91-day Treasury bill D) 30-year Treasury bond

D) Indexing

Which investment style does not take into consideration whether a specific security is under or overvalued? A) Contrarian B) Growth C) Active D) Indexing

B) Tactical asset allocation

Which of the following investment strategies reflects determining an appropriate portfolio allocation based on the short-term market movements and risk tolerance of the client? A) Strategic asset allocation B) Tactical asset allocation C) Efficient market allocation D) Top-down fundamental analysis

C) Style

Which of the following is not a type of diversification that is achieved by investing in international equities? A) Asset class B) Currency C) Style D) Geographic

C) Moving averages

Which of the following is used in technical analysis in an attempt to modify fluctuations of stock prices over the long term into a smoothed trend? A) Support and resistance B) Consolidation C) Moving averages D) Trend lines

C) A bond ladder strategy is a relatively easy way to immunize a portfolio against interest rate risk.

Which of the following statements regarding a bond ladder strategy is correct? A) A bond ladder strategy involves the purchase of very long-term and very short-term bonds. B) A laddered portfolio of bonds will provide lower yields than a portfolio consisting entirely of short-term bonds. C) A bond ladder strategy is a relatively easy way to immunize a portfolio against interest rate risk. D) A bond ladder strategy is generally more aggressive than a bond barbell strategy.

C) Growth managers focus on the denominator in the P/E ratio, searching for firms and industries where high expected earnings growth will drive the stock price up even higher.

Which of the following statements regarding the growth style of investing is correct? A) Growth managers focus on the numerator in the P/E ratio, desiring a low stock price relative to earnings or book value of assets. B) Growth managers believe that, although a firm's earnings are depressed now, the earnings will rise in the future as they revert to the historical range. C) Growth managers focus on the denominator in the P/E ratio, searching for firms and industries where high expected earnings growth will drive the stock price up even higher. D) Growth managers look for a high-dividend yield and often take a contrarian approach.

D) $150 million

A company has 15 million shares of stock outstanding, and the price per share is $10. The company's market capitalization is A) $25 million B) $1.5 million C) $15 million D) $150 million

C) daily trading volumes on the NYSE

A fundamental analyst would be interested in all of the following except A) corporate annual reports B) statistics of the U.S. Department of Commerce on disposable income C) daily trading volumes on the NYSE D) innovations within the automotive industry

A) I and II

A mutual fund investor is using a dollar cost averaging strategy. For the average price per share to exceed the investor's average cost, which of the following conditions must be present? The market price per share fluctuates with each purchase. A fixed dollar amount is invested at regular intervals. A fixed number of shares is purchased monthly. A constant dollar value is maintained in the account. A) I and II B) II and III C) I and III D) II and IV

D) Tactical

A securities analyst does not believe that markets are highly efficient. This analyst most likely follows which of the following investing strategies? A) Strategic B) Passive C) Indexing D) Tactical

B) Daniel's portfolio, which consists of shares of common stock in 52 different corporations.

All of the following are examples of a portfolio diversified through asset allocation except A) Daniella's portfolio, which consists of shares of common stock, municipal bonds, and money market funds. B) Daniel's portfolio, which consists of shares of common stock in 52 different corporations. C) Dakota's portfolio, which consists of shares of common stock, corporate bonds, and jumbo CDs. D) Dawson's portfolio, which consists of shares of preferred stock, Treasury bonds, and Treasury bills.

A) Contrarian

All of the major equity indexes have been making new highs. A portfolio manager employing which of the following management styles would be the most likely to have significant short positions? A) Contrarian B) Value C) Growth D) Passive

B) Minimizing investment expense and proper asset allocation

An adviser who does not believe he can time the market, or pick those securities that will outperform their benchmarks, would have which of the following as the most important portfolio consideration? A) Looking for asset classes that will outperform their benchmarks B) Minimizing investment expense and proper asset allocation C) Selecting stocks that are expected to outperform their benchmarks D) Maximizing current income to provide a solid base for total return

B) if one security has a higher return than another and at the same time has a higher risk, choose it.

An investment adviser (IA) explaining modern portfolio theory (MPT) to a client might make all of the following statements except A) if two securities offer the same rate of return, choose the one with the lower risk. B) if one security has a higher return than another and at the same time has a higher risk, choose it. C) if two securities offer the same risk, choose the one with the higher return. D) if one security has a higher return than another and at the same time has a lower risk, choose it.

C) cost basis for tax purposes was $14.71.

An investor does not wish to attempt to time the market, so she invests $300 each month into the GEMCO Growth Fund. Over the past five months, her purchase prices have been $10, $12, $15, $20, and $25. On the basis of this information, if she were to stop investing at this point and sell her shares two months from now when the net asset value (NAV) is $15 per share and the public offering price is $15.79, it would be correct to state that her A) realized loss was $1.40 per share. B) proceeds were $15.79 per share. C) cost basis for tax purposes was $14.71. D) average cost per share was $16.40.

B) Purchase put options on XYZ

As a result of an inheritance, Danielle now owns a large position in XYZ stock. She is concerned that the stock may decline in the upcoming months while she is deciding what to do with the investment. What type of investment strategy could she employ to protect the stock from substantial downside risk? A) Purchase index put options B) Purchase put options on XYZ C) Write call options on XYZ D) Write put options on XYZ

A) 16.8%.

If the expected return on the market is 20% and the risk-free rate is 4%, a stock with a beta coefficient of 0.8 would have an expected rate of return under CAPM of A) 16.8%. B) 16.0%. C) 19.2%. D) 12.8%.

B) the efficient frontier

If the risk and return profiles of all the possible risky portfolios were plotted on a graph, those portfolios that would be the most attractive to investors would lie on A) the security market line B) the efficient frontier C) the y-axis D) the capital market line

B) 11.30%

If the risk-free rate of return is 3.5%, the expected market return is 9.5%, and the beta of a stock is 1.3, what is the required return on the stock according to the capital asset pricing model? A) 8.85% B) 11.30% C) 7.80% D) 12.35%

C) contrarian.

In the field of portfolio management, there are a number of different management styles. One of those styles involves committing additional capital to the market when others are reducing their exposure, or eliminating positions while others are increasing theirs. This style is generally referred to as: A) growth. B) value. C) contrarian. D) active.

A) Buy put optionsProtective put

Jasper Quartermaine is interested in using the options market to create "insurance" against a severe drop in the value of a stock portfolio that he owns. How could he best accomplish this goal and what is this type of strategy called? Type of optionStrategy A) Buy put optionsProtective put B) Write call optionsCovered call C) Buy call optionsProtective call D) Write call optionsProtective call

D) to bring the portfolio mix back to the original asset allocation percentages

One feature employed by portfolio managers using a passive style is rebalancing. The purpose of this technique is A) to ensure that the client's account is being properly reviewed B) making sure the client's account is profitable C) to follow a constant dollar plan D) to bring the portfolio mix back to the original asset allocation percentages

C) Standard deviation

One of the offshoots of the capital asset pricing model (CAPM) is the capital market line (CML). The equation for the CML uses which of the following? A) Beta B) Correlation coefficient C) Standard deviation D) Alpha

A) bullish indicator

One of your customers asks you to interpret her observation that the short interest in a stock she owns has been rapidly increasing over the past 4 months. Aligning with the short interest theory, you would tell her that this is a A) bullish indicator B) bearish indicator C) indication of predictable volatility in the stock D) indication of predictable stability in the stock

D) the standard deviation of the stock.

One popular method used to predict the expected return of a stock is the capital asset pricing model (CAPM). Analysts using CAPM rely on all of these except A) the expected return on the market. B) the risk-free rate available in the market. C) the beta coefficient of the stock. D) the standard deviation of the stock.

D) purchase call options on PQR.

Phocine and Ursus, LLC, a covered investment adviser, has a client with a large short position in PQR common stock. Their chief analyst believes that PQR is an attractive target for an acquisition. Based on this information, it might be wise for the firm to suggest this client A) take a long position in PQR. B) purchase put options on PQR. C) sell call options on PQR. D) purchase call options on PQR.

B) Asset allocation

Published studies have shown that much of the performance of a portfolio can be attributed to which of the following factors? A) Other factors B) Asset allocation C) Market timing D) Security selection

B) pricing securities based on their systematic risk

The capital asset pricing model (CAPM) is an investment theory that serves as a model for A) pricing securities based on their total risk B) pricing securities based on their systematic risk C) measuring the correlation between a security and the overall market D) pricing securities based on their unsystematic risk

B) a long hedge.

The use of futures to hedge against a price increase is best referred to as A) a neutral hedge. B) a long hedge. C) a trimmed hedge. D) a short hedge.

B) analyzing the issuer's financial statements

Value investing is one of the popular portfolio management styles. Those who adhere to the value style to select stocks would be most likely to spend most of their effort A) charting the stock's market price using moving averages B) analyzing the issuer's financial statements C) seeking companies that are in the forefront of new technology D) analyzing both micro and macroeconomic trends.

C) Bullet

Which of the following bond strategies is the least active? A) Ladder B) Yield curve C) Bullet D) Barbell

C) Large capitalization

Which of the following describes an investment management style? A) Rebalancing B) Margin C) Large capitalization D) Current income

D) An investor using a buy-and-hold strategy dollar cost averaging into an S&P 500 Index fund.

Which of the following investors aligns most closely with the strong form of the efficient market hypothesis (EMH)? A) An investor who uses stock charts to predict price movements and capitalize on buy-and-sell opportunities. B) An investor using dollar cost averaging to purchase shares in growth mutual funds having the highest portfolio turnover. C) An investor who researches corporate annual reports and industry publications to uncover buyand-sell opportunities within an industry or individual security. D) An investor using a buy-and-hold strategy dollar cost averaging into an S&P 500 Index fund.

A) Belief in random walk theory and efficient markets

Which of the following is not a characteristic of the active management approach to investing? A) Belief in random walk theory and efficient markets B) Focus on beating the market C) Higher expenses as compared to passive approaches D) Attempt to predict market changes

A) Goal of beating the market

Which of the following is not associated with passive investment management approaches? A) Goal of beating the market B) Belief in efficient markets C) Belief in the random walk theory D) Use of index investing

B) The study of a company's historical stock prices and trading volume.

Which of the following is not included in fundamental analysis of a company? A) The study of a firm's position within its industry. B) The study of a company's historical stock prices and trading volume. C) The study of the direction of the economy. D) The study of a firm's financial statements.

C) It implies that market information cannot be used to identify future price movements.

Which of the following is true of the weak form of the efficient market hypothesis? A) It implies that throwing darts is just as efficient as analyzing the market. B) It implies that insiders cannot make a profit from their trading. C) It implies that market information cannot be used to identify future price movements. D) It implies that stock prices react to information when it becomes publicly available.

C) Tactical asset allocation

Which of the following portfolio management styles would most likely incur the highest transaction costs? A) Buy and hold B) Strategic asset allocation C) Tactical asset allocation D) Indexing

D) It represents the maximum return for a given level of risk.

Which of the following statements is correct in relation to the efficient frontier? A) It identifies the required rate of return on a particular stock. B) It allows an investor to create a risk-free portfolio. C) It implies an inefficiency in stock valuations. D) It represents the maximum return for a given level of risk.

B) High P/E and low dividend yield

Which of the following would you most likely consider characteristics of a growth stock? A) Low P/E and low dividend yield B) High P/E and low dividend yield C) High P/E and high dividend yield D) Low P/E and high dividend yield

C) buying five RMBN 12.50 puts.

Your client owns 500 shares of RMBN purchased at $11.94 per share. The stock is now selling for $12.70 per share, and the client is concerned that the market may turn downward. You could suggest protecting the profit by A) buy one RMBN 12.50 put. B) selling five RMBN 12.50 puts. C) buying five RMBN 12.50 puts. D) buying five RMBN 12.50 calls.

B) A five-year laddered portfolio of U.S. Treasury notes

Your client's child is entering college next year. Which of the following would be the most appropriate recommendation? A) A U.S. Treasury note mutual fund B) A five-year laddered portfolio of U.S. Treasury notes C) A zero-coupon bond maturing in five years D) A large-cap growth fund

A) diversification.

The chief analyst at your firm suggests that some of the IARs add emerging market equity securities to some client's portfolios. Among the benefits of doing so would be A) diversification. B) positive correlation. C) tax efficiency. D) steady income.

A) Indexing

Which investment style does not take into consideration whether a specific security is under or overvalued? A) Indexing B) Contrarian C) Active D) Growth

C) lower average cost to acquire fund shares relative to the fund's average price over the buying period

A customer who follows a strict dollar cost averaging program to acquire shares in a diversified common stock mutual fund should achieve A) significant reduction of market risk due to enhanced diversification B) allocation among various funds within a single investment company's family of funds C) lower average cost to acquire fund shares relative to the fund's average price over the buying period D) reasonable assurance against loss of principal, presuming the customer dollar cost averages over an extended period

B) go short an XUZ call.

An investor is long 100 shares of XUZ common stock. If the investor wishes to generate some additional income while also creating a partial hedge, the recommended strategy would be to A) go long an XUZ call. B) go short an XUZ call. C) buy additional XUZ stock. D) go short an XUZ put.

C) dollar cost averaging

An investor wishes to save for her retirement. She arranges to have $250 per month withdrawn from her account to be invested into a commodity fund. This type of saving plan is called A) constant dollar plan B) speculation C) dollar cost averaging D) investing in futures

C) REITs

Which of the following are asset classes? A) Forward contracts B) Large-cap stock funds C) REITs D) Options

B) Employs an active management style

Which of the following attributes best describes a tactical asset allocation portfolio style? A) Has an aggressive growth objective B) Employs an active management style C) Employs a strategic management style D) Employs a passive management style

B) Barbell strategy

Which of the following bond diversification strategies involves purchasing only short-term and long-term bonds? A) Immunization B) Barbell strategy C) Laddering strategy D) Bullet strategy

C) continuously adjusts the asset allocation and class mix in an attempt to take advantage of changing market conditions.

In contrast to the strategic approach, tactical asset allocation A) offers significant commission savings by generally qualifying for a lower commission schedule than a strategic manager. B) is used to determine an appropriate allocation based on the long-term financial goals of the client. C) continuously adjusts the asset allocation and class mix in an attempt to take advantage of changing market conditions. D) consistently provides higher net returns whether the market is performing well or is in decline.

B) the percentage of the portfolio invested in various asset classes remains constant

The purpose of portfolio rebalancing is used to make sure that A) the dollar amounts invested in various asset classes remain constant B) the percentage of the portfolio invested in various asset classes remains constant C) the portfolio responds to major swings in the business cycle D) the total value of the portfolio does not fall below a certain amount

C) fundamental analysis

The type of analysis that attempts to value securities by examining general economic trends and the growth potential and productivity of individual companies is A) credit analysis B) technical analysis C) fundamental analysis D) holding period analysis

B) Buy and hold

Which of the following bond strategies would be considered passive? A) Barbell B) Buy and hold C) Laddering D) Bullet

B) I and III

Customer A and Customer B each have an open account in a mutual fund that charges a front-end load. Customer A has decided to receive all distributions in cash, while Customer B automatically reinvests all distributions. How do their decisions affect their investments? Receiving cash distributions may reduce Customer A's proportional interest in the fund. Customer A may use the cash distributions to purchase shares later at NAV. Customer B's reinvestments purchase additional shares at NAV rather than at the offering price. Due to compounding, Customer B's principal will be at greater risk. A) I and IV B) I and III C) II and III D) II and IV

B) weak form market efficiency.

According to the efficient market hypothesis, information found when reading The Wall Street Journal would be considered A) strong form market efficiency. B) weak form market efficiency. C) random walk. D) semistrong form market efficiency.

A) II and IV

Two of the major factors involved in the capital asset pricing model (CAPM) are interest rates stock risk premium tax rates market risk premium A) II and IV B) I and II C) I and III D) II and III