Market Analysis

A customer viewing virtual trading floor information on the NYSE Website notices that he can see most, but not all, of the stocks included in the Dow Jones Industrial Average, trading on the floor. The customer asks his registered representative why this is the case. The customer should be told that: A Of the 30 stocks included in a Dow Jones Industrial Average, a handful do not trade on the NYSE B The NYSE only includes the most actively traded Dow Jones Industrial Average stocks in the display C These are the companies that have not paid the NYSE to be included in the display D The companies that are not displayed have just announced significant news and trading has been halted in those issues until the news is disseminated

A Of the 30 stocks included in a Dow Jones Industrial Average, a handful do not trade on the NYSE

Speculators in foreign currencies would NOT be subject to which of the following risks? A interest rate risk B exchange rate risk C market risk D political risk

A interest rate risk

If the dollar falls against foreign currencies, which of the following statements are TRUE? I Foreign currencies buy more dollars II U.S. exports are likely to rise III Foreign imports are likely to fall IV Foreign goods are more expensive in the U.S.

ALL the ABOVE

Trading in the Interbank market will affect all of the following directly EXCEPT: A foreign currency prices in terms of U.S. dollars B American Depositary Receipt prices in terms of U.S. dollars C future economic growth D future trade deficit or surplus figures

B American Depositary Receipt prices in terms of U.S. dollars

An investment strategy that apportions investments into different types of securities with different risk/return characteristics is called: A dollar cost averaging B diversification C laddering D capital preservation Review

B Diversification

The largest component of the Standard and Poor's 500 Average is the: A utilities B technology C consumer staples D industrials

B Technology

Trading of Swiss francs takes place on the: A New York Stock Exchange B Over-the-Counter Market C Interbank Market D

C Interbank Market

If the dollar falls against foreign currencies, all of the following statements are true EXCEPT: A U.S. goods are cheaper to foreign countries B U.S. exports are likely to rise C foreign currencies buy fewer dollars D foreign imports are likely to fall

C foreign currencies buy fewer dollars If the dollar falls, U.S. goods become cheaper to foreigners and foreign goods become more expensive in the U.S. Thus, exports are likely to rise and imports are likely to fall. Since the dollar is cheaper, foreign currencies buy more dollars and/or goods.

All of the following statements are true about the interbank market EXCEPT the market: A is unregulated B responds to central bank intervention C is located in New York City D operates 24 hours a day

C is located in New York City The interbank market trades foreign currencies across the globe, 24 hours a day. The market is unregulated and responds to central bank buying and selling of currencies. Review

Which index is the narrowest measure of the market? A Wilshire Index B Value Line Index C NYSE Composite Index D Dow Jones Industrial Average

D Dow Jones Industrial Avgerage

All of the following actions are likely to cause the value of the U.S. Dollar to decline EXCEPT: A the Federal Reserve lowers the discount rate B U.S. trade is running a widening trade deficit with foreign nations C United States investors are making large purchases of foreign securities D foreign investors are making large purchases of U.S. securities Review

D foreign investors are making large purchases of U.S. securities

The largest component of the Dow Jones Averages is: A banking and finance B transportations C utilities D industrials

D industrials

If the dollar appreciates against foreign currencies, which of the following statements are TRUE? I Foreign currencies buy fewer dollars II U.S. exports are likely to rise III Foreign imports are likely to rise IV Foreign goods are more expensive in the U.S.

I and II only

Trades of foreign currencies in the interbank market settle: I Spot II Cash III Forward IV Future

I and III

If the U.S. economy runs balance of trade surpluses, which of the following statements are TRUE? I U.S. currency values will increase relative to that of foreign countries II U.S. currency values will decrease relative to that of foreign countries III U.S. exports should become more expensive to foreign countries IV U.S. exports should become less expensive to foreign countries

I and III If our economy consistently runs balance of trade surpluses, then the country is becoming "richer" and its currency value increases relative to that of foreign countries. As the currency value increases, exports become more expensive to foreign countries, so exports decline and the surplus should dissipate over time.

An investor holds an international bond fund. Regarding the performance of the fund, which of the following statements are TRUE? I If the foreign currency value rises against the dollar, the fund's Net Asset Value will increase II If the foreign currency value rises against the dollar, the fund's Net Asset Value will decrease III If the dollar falls against the foreign currency, the fund will have an inferior performance relative to dollar denominated funds IV If the dollar falls against the foreign currency, the fund will have a superior performance relative to dollar denominated funds

I and IV

The Federal Reserve Bank has made a policy decision to try to strengthen the U.S. Dollar versus the Japanese Yen. Which of the following intervention actions would increase the U.S. Dollar's exchange value? I Buy U.S. Dollars II Sell U.S. Dollars III Buy Japanese Yen IV Sell Japanese Yen

I and IV

An investor has purchased shares of an international bond fund. The fund will have inferior performance if the value of the: I U.S. Dollar increases II U.S. Dollar decreases III foreign currency increases IV foreign currency decreases

I and IV An international bond fund will have securities that are denominated in foreign currencies. If the foreign currency value falls against the dollar, then when the fund's NAV is converted into dollars, proportionately fewer dollars will be created, since each unit of foreign currency buys less dollars. Similarly, if the U.S. Dollar rises against the foreign currency, when the fund's NAV is converted into dollars, proportionately fewer dollars will be created, since each unit of foreign currency buys fewer dollars.

Trading in the Interbank market will affect: I foreign currency prices in terms of U.S. dollars II future trade deficit or surplus figures III future economic growth IV future inflation levels

I, II, III

A balance of payments deficit would be narrowed by which of the following? I Decreased levels of U.S. imports II Increased sales of U.S. securities to foreign holders III Increased levels of foreign tourists visiting the United States IV Increased dividends paid to foreign holders of U.S. securities

I, II, III I Decreased levels of U.S. imports II Increased sales of U.S. securities to foreign holders III Increased levels of foreign tourists visiting the United States

A balance of payments deficit would be widened by which of the following? I Increased levels of U.S. imports II Decreased sales of U.S. securities to foreign holders III Decreased levels of foreign tourists visiting the United States IV Decreased dividends paid to foreign holders of U.S. securities

I, II, III I Increased levels of U.S. imports II Decreased sales of U.S. securities to foreign holders III Decreased levels of foreign tourists visiting the United States

Which of the following economic events would have a negative long term impact on common stock prices? I Rising interest rates II Rising capital gains tax rates III Rising employment rates IV Rising inflation rates

I, II, IV

Based solely upon fluctuations in foreign currency exchange rates, the net asset value per share, valued in U.S. dollars, of an "international" bond mutual fund, would increase if: I the value of the U.S. dollar increases II the value of the U.S. dollar decreases III interest rates increase in the United States IV interest rates increase in foreign countries

II and IV

Trading in the Interbank market will DIRECTLY affect: I American Depositary Receipt prices in terms of U.S. dollars II Foreign Currency prices in terms of U.S. dollars III Future trade deficit or surplus figures IV Future economic growth

II, III, IV II Foreign Currency prices in terms of U.S. dollars III Future trade deficit or surplus figures IV Future economic growth

Which of the following indexes is the broadest measure of the market? A Value Line Index B New York Stock Exchange Composite Index C Wilshire Index D Standard and Poor's Composite Index

c Wilshire Index