Question 1

The industry with the highest ROE in 2009 was
A)food.
B)data storage.
C)business software.
D)computer systems.
E)integrated oil & gas.

Accepted Answer

The answer of The industry with the highest ROE in...

Question 2

Investment manager Peter Lynch refers to firms that are in bankruptcy or soon might be as
A)slow growers.
B)stalwarts.
C)cyclicals.
D)asset plays.
E)turnarounds.

Accepted Answer

According to Peter Lynch, firms that are in bankruptcy or soon might be are referred to as turnarounds. These are companies that have experienced difficulties and are working to change their operations and financials to become profitable again. As an investment manager, Lynch was known for finding value in turnaround companies and investing in them prior to their recovery.

Question 3

The emerging stock market exhibiting the highest local currency return in 2009 was
A)Russia
B)China
C)Poland
D)Mexico
E)Bolivia

Accepted Answer

In 2009, Russia's stock market had the highest local currency return among emerging markets, driven by a recovery in oil prices and investor sentiment.

Question 4

Which of the following are key economic statistics that are used to describe the state of the macroeconomy?
I.Gross domestic product
II.The unemployment rate
III.Inflation
IV.Consumer sentiment
V.The budget deficit
A)I, II, and V
B)I, III, and V
C)I, II, and III
D)I, II, III, and V
E)I,II,III,IV,and V

Accepted Answer

Gross domestic product (GDP), the unemployment rate, inflation, consumer sentiment, and the budget deficit are all key economic statistics used to describe the state of the macroeconomy. GDP measures the total value of goods and services produced, the unemployment rate indicates the percentage of the labor force that is jobless and seeking employment, inflation measures the rate at which the general level of prices for goods and services is rising, consumer sentiment reflects how consumers feel about the economy's health, and the budget deficit shows the difference between what the government spends and what it earns.

Question 5

In recent years,P/E multiples for S&P500 companies have
A)ranged from -1 to -10.
B)ranged from 1 to 8.
C)ranged from 6 to 10.
D)ranged from 12 to 25.
E)ranged from 20 to more than 50.

Accepted Answer

P/E (Price-to-Earnings) multiples for S&P500 companies have ranged from 12 to 25 in recent years. This means that investors are willing to pay between 12 to 25 times the company's earnings per share to purchase its stock. Higher P/E ratios typically indicate that investors have high expectations for the company's growth prospects.

Question 6

According to Michael Porter,there are five determinants of competition.An example of _____ is when the availability limits the prices that can be charged to customers.
A)Threat of Entry
B)Rivalry between Existing Competitors
C)Pressure from Substitute Products
D)Bargaining power of Buyers
E)Bargaining power of Suppliers

Accepted Answer

Pressure from substitute products limits the prices that can be charged to customers because substitutes provide alternative options, increasing competition.

Question 7

The life cycle stage in which industry leaders are likely to emerge is the
A)start-up stage.
B)maturity stage.
C)consolidation stage.
D)relative decline stage.
E)all of the above.

Accepted Answer

During the consolidation stage, the industry stabilizes, weaker competitors are eliminated, and industry leaders emerge as they acquire or outcompete others.

Question 8

According to Michael Porter,there are five determinants of competition.An example of _____ is when competitors seek to expand their share of the market.
A)Threat of Entry
B)Rivalry between Existing Competitors
C)Pressure from Substitute Products
D)Bargaining power of Buyers
E)Bargaining power of Suppliers

Accepted Answer

The determinant of competition described in the question is "Rivalry between Existing Competitors." This refers to the intensity of competition among existing firms in the industry. When competitors seek to expand their share of the market, they are engaging in competitive behavior that drives up rivalry within the industry. Options A, C, D, and E refer to other determinants of competition, such as the threat of new entrants, the threat of substitute products or services, and the bargaining power of buyers and suppliers.

Question 9

Sector rotation
A)should always be carried out.
B)is never worthwhile.
C)is shifting the portfolio more heavily toward an industry or sector that is expected to perform well in the future.
D)can be implemented costlessly.
E)none of the above

Accepted Answer

Sector rotation involves shifting a portfolio towards an industry or sector that is expected to perform well in the future. This can be a useful strategy for investors seeking to maximize returns. However, it is not always necessary or appropriate for all investors, and implementation may incur transaction costs. Therefore, answer choice A and D are incorrect. Answer choice B is incorrect because sector rotation can be worthwhile depending on the investor's goals and market conditions.

Question 10

The process of estimating the dividends and earnings that can be expected from the firm based on determinants of value is called
A)business cycle forecasting.
B)macroeconomic forecasting.
C)technical analysis.
D)fundamental analysis.
E)none of the above.

Accepted Answer

The process described in the question is fundamental analysis. It involves analyzing a company's financial statements, industry trends, and other relevant factors to determine its intrinsic value and potential for future growth. Business cycle forecasting and macroeconomic forecasting are broader economic analyses that may inform fundamental analysis but are not the same thing. Technical analysis, on the other hand, focuses on charts and patterns in stock prices rather than underlying factors affecting a company's value.

Question 11

________ is a proposition that a strong proponent of supply side economics would most likely stress.
A)Higher marginal tax rates will lead to a reduction in the size of the budget deficit and lower interest rates as they depend on government revenues.
B)Higher marginal tax rates promote economic inefficiency and thereby retard aggregate output as they encourage investors to undertake low productivity projects with substantial tax shelter benefits.
C)Income redistribution payments will exert little impact on real aggregate supply as they do not consume resources directly.
D)A tax reduction will increase the disposable income of households, and thus, the primary impact of a tax reduction on aggregate supply will stem from the influence of the tax change on the size of the budget deficit or surplus.
E)None of the above is a likely statement for a supply-side proponent.

Accepted Answer

A strong proponent of supply side economics would most likely stress that higher marginal tax rates promote economic inefficiency and discourage productive investment. They believe that lower tax rates will stimulate economic growth, increase investment, and create more jobs, ultimately leading to higher tax revenues for the government. Option A is contrary to this view, as it suggests that higher tax rates will reduce the budget deficit and lower interest rates. Option C is unrelated to supply-side economics, and option D implies that the primary impact of a tax reduction would be through its effect on the budget deficit rather than its impact on economic efficiency and growth. Option E is also not a likely statement for a supply-side proponent.

Question 12

An example of a positive demand shock is
A)a decrease in the money supply.
B)a decrease in government spending.
C)a decrease in foreign export demand.
D)a decrease in the price of imported oil.
E)a decrease in tax rates.

Accepted Answer

The answer of An example of a positive demand shock...

Question 13

The industry with the lowest return in 2009 was
A)renewable energy equipment.
B)oil equipment.
C)health care.
D)brokerage.
E)banking.

Accepted Answer

The answer of The industry with the lowest return in...

Question 14

During which stage of the industry life cycle would a firm experience stable growth in sales?
A)Consolidation
B)Relative Decline
C)Maturity
D)Start-up
E)Stabilization

Accepted Answer

The answer of During which stage of the industry life...

Question 15

Investors can ______ invest in an industry with the highest expected return by purchasing ______.
A)most easily; industry-specific iShares
B)not; industry-specific iShares
C)most easily; industry-specific ADRs
D)not; individual stocks
E)none of the above

Accepted Answer

Investors can most easily invest in an industry with the highest expected return by purchasing industry-specific iShares, which are exchange-traded funds (ETFs) that track specific industry sectors.

Question 16

A top-down analysis of a firm's prospects starts with
A)an examination of the firm's industry.
B)an evaluation of the firm's position within its industry.
C)a forecast of interest rate movements.
D)an assessment of the broad economic environment.
E)the application of the CAPM to find the firm's theoretical return.

Accepted Answer

A top-down analysis begins with an assessment of the broad economic environment, taking into consideration factors such as interest rate movements, inflation, and overall economic growth. This analysis then leads to an evaluation of the industry in which the firm operates and its position within that industry. Only after these assessments are made can the CAPM or other tools be applied to determine the firm's theoretical return. Therefore, option D, an assessment of the broad economic environment, is the best choice for the first step in a top-down analysis of a firm's prospects.

Question 17

According to Michael Porter,there are five determinants of competition.An example of _____ is when new entrants to an industry put pressure on prices and profits.
A)Threat of Entry
B)Rivalry between Existing Competitors
C)Pressure from Substitute Products
D)Bargaining power of Buyers
E)Bargaining power of Suppliers

Accepted Answer

The determinant described in the question is the "Threat of Entry," which refers to the possibility of new competitors entering an industry and therefore putting pressure on prices and profits. This is a key factor in determining the level of competition in an industry, as new entrants can disrupt the existing market and force existing competitors to lower their prices or improve their products and services.

Question 18

The emerging stock market exhibiting the highest U.S.dollar return in 2009 was
A)Brazil
B)Argentina
C)Poland
D)Mexico
E)China

Accepted Answer

In 2009, Brazil's stock market, represented by the Bovespa Index, had one of the highest returns in U.S. dollar terms among emerging markets, driven by strong economic growth and investor interest.

Question 19

The industry with the lowest ROE in 2009 was
A)food.
B)data storage.
C)business software.
D)iron/steel.
E)integrated oil & gas.

Accepted Answer

The answer of The industry with the lowest ROE in...

Question 20

The industry with the highest return in 2009 was
A)home construction.
B)travel and tourism.
C)health care.
D)brokerage.
E)banking.

Accepted Answer

The answer of The industry with the highest return in...

Quiz 17: Options Markets: Introduction

The industry with the highest ROE in 2009 was

Investment manager Peter Lynch refers to firms that are in bankruptcy or soon might be as

The emerging stock market exhibiting the highest local currency return in 2009 was

Which of the following are key economic statistics that are used to describe the state of the macroeconomy? I.Gross domestic product II.The unemployment rate III.Inflation IV.Consumer sentiment V.The budget deficit

In recent years,P/E multiples for S&P500 companies have

According to Michael Porter,there are five determinants of competition.An example of _____ is when the availability limits the prices that can be charged to customers.

The life cycle stage in which industry leaders are likely to emerge is the

According to Michael Porter,there are five determinants of competition.An example of _____ is when competitors seek to expand their share of the market.

Sector rotation

The process of estimating the dividends and earnings that can be expected from the firm based on determinants of value is called

________ is a proposition that a strong proponent of supply side economics would most likely stress.

An example of a positive demand shock is

The industry with the lowest return in 2009 was

During which stage of the industry life cycle would a firm experience stable growth in sales?

Investors can invest in an industry with the highest expected return by purchasing .

A top-down analysis of a firm's prospects starts with

According to Michael Porter,there are five determinants of competition.An example of _____ is when new entrants to an industry put pressure on prices and profits.

The emerging stock market exhibiting the highest U.S.dollar return in 2009 was

The industry with the lowest ROE in 2009 was

The industry with the highest return in 2009 was