Fnan 405

Front 1

Which of the following states that investors cannot consistently earn positive excess returns?

Back 1

efficient market hypothesis

Front 2

used to describe a stock price that moves over time creating no discernible pattern?

Back 2

random walk

Front 3

The day of the week effect is defined as the tendency for which day of the week to have a negative average rate of return?

Back 3

monday

Front 4

Stocks A B and C have identical risks. Stock A earns an annual return of 9.9 percent as compared to 9.6 percent returns on B and C. You can assume that

Back 4

Stock A has a positive excess return

Front 5

You are the CFO of Donnelly Industries. On multiple occasions, you have engaged in insider trading but have never been able to earn abnormal returns. Which form of market efficienct most likely exists given your situation?

Back 5

strong form

Front 6

Which of the following sources of information are used by informed traders?
1 financial statements
2inside information
3 internet reports
4 analysts reports

Back 6

1 2 and 4

Front 7

Helena is the CEO of Beltway Holdings. She owns 1.2 million shares of their stock and wished to sell ten percent of those shares in order to diversify her holdings. She follows the SEC requirements, along with those of her firm, and proceeds with sale on Monday. On Tuesday, the stock declines by 25 percent. Her stock trade is

Back 7

legal

Front 8

which of the following statements is correct?

Back 8

purchasing and holding a broad-based index fund is a highly recommended means of investing

Front 9

Security A and Security B have similar risks. However, Security A has a higher rate of return than Security B. The return on Security A minus the return on Security B is referred to as

Back 9

excess return

Front 10

Which of the following are ineffective strategies for producing excess returns if the market is semistrong form efficient
1 graphing past prices searching for patterns
2 watching the daily market movements
3 studying the latest analysts reports
4 analyzing a firms financial statements

Back 10

1 2 3 4

Front 11

High Color Detergent is issuing new shares of stock which will trade on NASDAQ. If Sue purchases 300 of these shares, the trade will occur in which one of the following markets?

Back 11

primary

Front 12

Hi-Tek Shoes is a private firm that has decided to issue shares of stock to the general public. This stock issue will be referred to as a

Back 12

initial public offering

Front 13

The process of purchasing newly isssued shares from the issuer and reselling those shares to the general public is called.

Back 13

underwriting

Front 14

The document that must be prepared in order to receive approval for a stock offering is called

Back 14

prospectus

Front 15

When stocks are held in an index in proportion to their total company market value, the index is

Back 15

value weighted

Front 16

Which of the following transactions occurs in the primary market?

Back 16

sale of newly issued shares by the issuer to a shareholder

Front 17

Faith placed an order to sell 7500 shares of stock she currently owned. As soon as the order reached the trading floor, the shares were immediately sold. Which type of order did Faith place?

Back 17

market

Front 18

After the trigger point is reached, a stop-loss order will be executed at the

Back 18

market price

Front 19

The DJIA is an index of the stock prices of # firms

Back 19

30

Front 20

You have the following info
stock a 1000 shares outstanding
beg price 35
end price 38
stock b 2000 shares outstanding
beg price 22
end price 23
You want the beginning price-weighted index of these two stocks to be 100. Given this, what is the ending index value?

Back 20

107.20

Front 21

The retention ratio is the

Back 21

percentage of net income held by a firm for future growth

Front 22

Precision Engineering recently announced that its next annual dividend will be $1.20 per share with later dividends increasing by 2.5 percent annually. What is the current value of this stock to you if yu require a 12 percent rate of return

Back 22

12.63

Front 23

Long Life Floors just paid an annual dividend of $0.82 a share and plans on increasing future dividends by 2 percent annually. The discount rate is 15 percent. What will the value of this stock be 5 years from today?

Back 23

$7.10

Front 24

DT Industries stock is valued at $9.60 a share. The firm pays annual dividends at an increasing rate of 2 percent annually. Next years dividend will be $1.50 per share. What is the required rate of return on this stock?

Back 24

17.63 percent

Front 25

The Rug Barn has paid an annual dividends of $1.30, $1.36, $1.40, $1.42 and $1.45 over the last five years, respectively. What is the average dividend growth rate?

Back 25

2.77

Front 26

Roy's markets has net income of $164K. The firm has 200K shares of common stock outstanding. The dividend for this year is $0.61 per share. What is the retention ratio?

Back 26

.256

Front 27

Wilderness Adventures has earnings per share of $2.35 and dividends per share of $1.10. The total equity of the firm is $945,000. There are 30,000 shares of stock outstanding. What is the sustainable rate of growth?

Back 27

3.97 percent

Front 28

A firm has a net income of $188,400 and total equity of 1.2 million. There are 220,000 shares of stock outstanding at a price per share of $14.80. What is the firm's price-earnings ratio

Back 28

17.28

Front 29

Miller's Farm has 110,000 shares of stock outstanding, sales of $960,000, and net income of $51000. Financial analysts believe the price-earnings ratio for this firm should be 15.8. Given this information, what should be the current stock price?

Back 29

$7.33

Front 30

The Satellite Shoppe has current sales per share of $7.15. The sales per share are expected to increase at an annual rate of 11 percent. The historical PE ratio is 16.2 and the historical PS ratio is 8.4. What is the expected price of this stock one year from tomorrow?

Back 30

$66.67

Front 31

loss aversion is defined as

Back 31

the reluctance to sell a security after it has decreased in value

Front 32

Which of the following statements is correct regarding prospect theory?

Back 32

Typical investors feel that losing $1 is twice as painful as the pleasure derived from making $1

Front 33

According to the concept of loss aversion, individual investors are most apt to do which of the following?

Back 33

sell stocks with gains more frequently than stocks with losses

Front 34

Tricia has lost money on a particular stock for the past three years. Thus, she believes that the stock will have a high positive rate of return this year because earning a good return is long overdue. This assumption is described as the

Back 34

gamblers fallacy

Front 35

What is the area of finance called that addresses issues such as how reasoning errors affect investment decisions?

Back 35

behavioral

Front 36

Mental accounting is the process of associating a stock with its

Back 36

purchase price

Front 37

Which one of the following is an example of mental accounting

Back 37

associating a security's gains or losses based on its purchase price

Front 38

Which one of the following is the tendency to believe that random events that occur in clusters are not really random?

Back 38

clustering illusion

Front 39

The increased cash flows into mutual funds that have recently had superior returns is most associated with which one of the following characteristics?

Back 39

clustering illusion

Front 40

Which one of the following is a trader whose trades are not based on meaningful financial analysis or information?

Back 40

noise trader

Front 41

Marco Painting Supplies is a publicly traded firm with $250,000 shares of stock outstanding. if the firm issues an additional 10,000 shares, those shares will be referred to as a

Back 41

seasoned equity offering

Front 42

A securities dealer is

Back 42

a trader who buys and sells from his or her own inventory

Front 43

Which one of the following statements related to stock indexes is correct

Back 43

the S&P 500

Front 44

Which one of the following terms is used to describe a stock price that moves over time creating no discernible pattern?

Back 44

random walk

Front 45

Which type of trader is defined as one who decides to trade securities based on publicly available information

Back 45

informed

Front 46

a firms current stock price divided by the firms revenue per share is referred to as which of the following ratios?

Back 46

price sales

Front 47

the sustainable growth rate is equal to

Back 47

ROE x (1- Payout ratio)

Front 48

Blue water tours just paid an annual dividend of $0.72 per share. the firm has a policy of increasing the dividend by 3 percent annually. What is the current value of this stock at a discount rate of 11.7 percent

Back 48

8,52

Front 49

Wilson just placed an order with his broker to purchase 500 of the outstanding shares of GE. This purchase will occur in which one of the following markets?

Back 49

secondary market

Front 50

A firm that specializes in arranging financing for companies is called a

Back 50

investment banking firm

Front 51

When an underwriting syndicate purchases an entire issue of new securities and accepts the risk of unsold shares, the underwriting is known as a _____ underwriting

Back 51

firm committment

Front 52

Which one of the following prices will an individual investor receive if he or she sells shares of Microsoft?

Back 52

bid

Front 53

The party who serves as a dealer for a few securities on an exchange floor and is obligated to maintain an orderly market for those securities is called a

Back 53

designated market maker

Front 54

You want to sell shares of stock at the current price. Which type of order should you take?

Back 54

market

Front 55

In order to currently trade on the floor of the NYSE, members must:

Back 55

purchase a license

Front 56

An index consists of the following securities and has an index divisor of 3. What is the price weighted return?
stock a: Shares out- 2000, beg share price-17, ending share price-19
stock b: shares out- 5000, beg price-14 end price-11
stock c: out-3000, beg-26, end-33

Back 56

10.53%

Front 57

An index consists of the following securities. What is the value weighted index return?
stock c: out-3000, beg share price-19, end share price-21
stock t: 8000, beg-11, end-7
stock w: 4000, beg-33 and 42

Back 57

3.61

Front 58

Wilson's furniture is experiencing good growth so has decided to commence paying dividends starting next year. The first dividend will be $0.50 a share with an annual increase of 4 percent in the dividend amount. The discount rate is 11 percent. What will the value of this stock be three years from now?

Back 58

$8.03

Front 59

Whole Sale Foods common stock is valued at $11.05 a share. The firm pays annual dividends which increase at a constant rate. The last dividend paid was $1.20. The required rate of return is 12 percent. What is the dividend growth rate?

Back 59

1.03 percent

Front 60

Factory Stores pays annual dividends and increases those dividends by 2 percent each year. The stock is currently valued at $12 per share and has required return of 16 percent. You own 400 shares of this stock. What is the total amount of dividend income you should expect to receive next year?

Back 60

672

Front 61

A firm has paid annual dividends of 1.45, 1.53, 1.55, 1.60, 1.62 and 1.66 per share over the last 6 years respectively. What is the geometric average growth rate for these dividends?

Back 61

2.74

Front 62

The Brown Jug has paid annual dividends of .61, .65, .7, .8, .88 per share over the past 5 years respectively. What is the geometric average dividend growth rate for this period?

Back 62

9.59 percent

Front 63

Detroit Imports has a dividend payout ratio of 35 percent and annual dividends of $2.50 per share. what is the retention ratio?

Back 63

.650

Front 64

LB Jay has a net income of $38,000, total assets of $437,000, total liabilities of $208,000, and a price-book ratio of 3.8. There are 60,000 shares of stock outstanding. What is the firms price-earnings ratio?

Back 64

22.90

Front 65

The Satellite Shoppe has current sales per share of $7.15. The sales per share are expected to increase at an annual rate of 11 percent. The historical PE ratio is 16.2 and the historical ps ratio is 8.4. What is the expected price of this stock one year from now?

Back 65

$66.67

Front 66

Which of the following correctly identifies the phenomenon that states that one month has the greatest tendency for small stocks to earn large returns?

Back 66

January effect

Front 67

In an efficient market, stocks with similar risks will

Back 67

have similar rates of return

Front 68

Which of the following best describes the types of information included in a strong form efficient market?

Back 68

private and public

Front 69

Which one of the following statements is correct?

Back 69

any trading based on information known to be private is illegal

Front 70

studies indicate that the vangaurd 500 index fund tends to

Back 70

out perform most professional money managers especially over longer-periods of time

Front 71

Which of the following will automatically occur if all investors are rational?

Back 71

equivalent risk assets will have equal expected rates of returns

Front 72

You analyze a firm's financial statements and invest based upon the results of this analysis. Which form of market efficiency must exist if you are able to earn excess profits on these investments?

Back 72

weak form

Front 73

If the market is semi strong form efficient, then which of the following is true?

Back 73

Neither technical nor fundamental analysis leads to abnormal profits

Front 74

Which of the following will lead to excess profits in a semitstrong form efficient market
1 private financial information
2 historical analysts reports
3 financial analysts reports
4 unreleased merger plans

Back 74

1 and 4

Front 75

Which one of the following is the basis for prospect theory?

Back 75

investors react differently to prospective gains and losses

Front 76

Which one of the following defines frame dependence?

Back 76

investors react differently depending on how an opportunity is presented

Front 77

Representativeness heuristic is best explained as

Back 77

concluding that casual factors cause random events when in fact they do not

Front 78

The belief that information you hold is superior to information held by other investors best describes

Back 78

over confidence

Front 79

The concept that well capitalized, rational traders may be unable to correct a mispricing defines which one of the following terms

Back 79

limits to arbitrage

Front 80

Which of the following risks is related to irrational beliefs?

Back 80

sentiment based

Front 81

according to the concept of house money, individual investors are most apt to do which one of the following?

Back 81

value money differently depending on its source

Front 82

Investors who tend to invest too heavily in the securities issued by their employer suffer from the condition

Back 82

over confidence

Front 83

which one of the following statements appears to be correct based on current research?

Back 83

over confidence tends to result in lower returns