# Quiz 5: Security-Market Indexes

Anthropology

Q 1Q 1

The general purpose of a market indicator series is to provide an overall indication of aggregate market changes or movements.

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True False

True

Q 2Q 2

An aggregate market index can be used as a benchmark to judge the performance of professional money managers.

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True False

True

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True False

False

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True False

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True False

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True False

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True False

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True False

Q 9Q 9

The New York Stock Exchange Index is based on a sample of all of the New York Stock Exchange stocks.

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True False

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True False

Q 11Q 11

Bond-market indicator series have been around much longer than stock-market indicator series.

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True False

Q 12Q 12

It is easier to construct an indicator series for bonds because of their relatively stable returns pattern.

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True False

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True False

Q 14Q 14

To solve comparability problems across countries, global equity indexes with consistent sample selection, weighting and computational procedure have been developed.

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True False

Q 15Q 15

There are no composite series currently available that will measure the performance of all securities (i.e. stocks and bonds) in a given country.

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True False

Q 16Q 16

The NYSE series should have higher rates of return and risk measures than the AMEX and OTC series.

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True False

Q 17Q 17

There is a high correlation between the Wilshire 5000 index and the alternative NYSE series (S&P 500 and the NYSE), representing the substantial influence of large NYSE stocks on the Wilshire 5000 index.

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True False

Q 18Q 18

The low correlations between the U.S. and Japan confirm the benefit of global diversification.

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True False

Q 19Q 19

The correlations among the U.S. investment-grade-bond series were very high because all rates of return for investment-grade bonds over time are impacted by common macroeconomic variables.

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True False

Q 20Q 20

A bond market index is easier to create than a stock market index because the universe of bonds is much broader than that of stocks.

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True False

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True False

Q 22Q 22

The Standard & Poor's International Index consists of 3 international, 19 national, and 38 international industry indexes.

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True False

Q 23Q 23

The most common way to test a portfolio manager's performance is to compare the portfolio return to a benchmark.

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True False

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True False

Q 25Q 25

The Morgan Stanley group index for Europe, Australia, and the Far East (EAFE) is a price weighted index.

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True False

Q 26Q 26

Which of the following is not a use of security market indicator series?
A)To use as a benchmark of individual portfolio performance
B)To develop an index portfolio
C)To determine factors influencing aggregate security price movements
D)To use in the measurement of systematic risk
E)To use in the measurement of diversifiable risk

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Multiple Choice

Q 27Q 27

A properly selected sample for use in constructing a market indicator series will consider the sample's source, size and
A)Breadth.
B)Average beta.
C)Value.
D)Variability.
E)Dividend record.

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Multiple Choice

Q 28Q 28

In a price weighted average stock market indicator series, the following type of stock has the greatest influence
A)The stock with the highest price
B)The stock with the lowest price
C)The stock with the highest market capitalization
D)The stock with the lowest market capitalization
E)The stock with the highest P/E ratio

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Multiple Choice

Q 29Q 29

What effect does a stock substitution or stock split have on a price-weighted series?
A)Index remains the same, divisor will increase/decrease.
B)Divisor remains the same, index will increase/decrease.
C)Index and divisor will both remain the same.
D)Index and divisor will both reflect the changes (immediately).
E)Not enough information is provided.

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Multiple Choice

Q 30Q 30

Which of the following is not a value-weighted series?
A)NASDAQ Industrial Index
B)Dow Jones Industrial Average
C)Wilshire 5000 Equity Index
D)American Stock Exchange Series
E)NASDAQ Composite Index

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Multiple Choice

Q 31Q 31

An example of a value weighted stock market indicator series is the
A)Dow Jones Industrial Average.
B)Nikkei Dow Jones Average.
C)S & P 500 Index.
D)Value Line Index.
E)Shearson Lehman Hutton Index.

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Multiple Choice

Q 32Q 32

In a value weighted index
A)Exchange rate fluctuations have a large impact.
B)Exchange rate fluctuations have a small impact.
C)Large companies have a disproportionate influence on the index.
D)Small companies have an exaggerated effect on the index.
E)None of the above

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Multiple Choice

Q 33Q 33

Of the following indices, which includes the most comprehensive list of stocks?
A)New York Exchange Index
B)Standard and Poor's Index
C)American Stock Exchange Index
D)NASDAQ Series Index
E)Wilshire Equity Index

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Multiple Choice

Q 34Q 34

The Value Line Composite Average is calculated using the ____ of percentage price changes.
A)arithmetic average
B)harmonic average
C)expected value
D)geometric average
E)logarithmic average

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Multiple Choice

Q 35Q 35

Which of the following is not a global equity indicator series?
A)Morgan Stanley Capital International Indexes
B)Dow Jones World Stock Index
C)FT/S & P-Actuaries World Indexes
D)Merrill Lynch-Wilshire World Indexes
E)None of the above (that is, each is a global equity indicator series)

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Multiple Choice

Q 36Q 36

The Ryan Treasury Index is an example of a
A)Bond market indicator series.
B)Stock market indicator series.
C)Composite security market series.
D)World market series.
E)Commodity market series.

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Multiple Choice

Q 37Q 37

Studies of correlations among monthly equity price index returns have found:
A)Low correlations between various U.S.equity indexes
B)High correlations between various U.S.equity indexes
C)High correlations between U.S.and non-U.S.equity indexes
D)Negative correlations between various U.S.equity indexes
E)None of the above

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Multiple Choice

Q 38Q 38

Which of the following is true of the various market index series?
A)A low correlation exists between the U.S.indexes and those of Japan.
B)The NYSE series have higher rates of return and risk measures than the AMEX and OTC series.
C)A low correlation exists between alternative series that include almost all NYSE stocks.
D)A low correlation exists between alternative bond series.
E)None of the above

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Multiple Choice

Q 39Q 39

Which of the following are factors that make it difficult to create and maintain a bond index?
A)The universe of bonds is broader than stocks.
B)The universe of bonds is constantly changing due to new issues, bond maturities, calls, and bond sinking funds.
C)It is difficult to derive value, up-to-date prices.
D)Choices a and c
E)All of the above

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Multiple Choice

Q 40Q 40

Which of the following is not a U.S. investment-grade bond index?
A)Merrill Lynch
B)Ryan Treasury
C)Salomon Brothers
D)Lehman Brothers
E)None of the above (that is, all are U.S.investment-grade bond indexes)

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Multiple Choice

Q 41Q 41

The following are examples of Style Indexes
A)Small-cap growth
B)Mid-cap value
C)Small-cap value
D)All of the above
E)None of the above

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Multiple Choice

Q 42Q 42

Studies of correlations among monthly U.S. bond price index returns have found:
A)Low correlations between investment grade bonds and high yield bonds
B)High correlations between investment grade bonds and high yield bonds
C)Low correlations between various investment grade bond indexes
D)Negative correlations between investment grade bonds and high yield bonds
E)None of the above

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Multiple Choice

Q 43Q 43

Index movements are influenced by differential prices of the components in a(n)
A)Equally-weighted index.
B)Price-weighted index.
C)Unweighted index.
D)Value-weighted index.
E)All of the above

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Multiple Choice

Q 44Q 44

A style index created to track ethical funds is known as:
A)Green index
B)SRI index
C)EAFE index
D)Freedom index
E)Ethical index

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Multiple Choice

Q 45Q 45

Which index is created by first deriving the initial total market value of all stocks used in the index?
A)Equally-weighted index.
B)Price-weighted index.
C)Unweighted index.
D)Value-weighted index.
E)All of the above

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Multiple Choice

Q 46Q 46

The actual index movements are typically based on the arithmetic mean of the percent changes in price or value for the stocks in the
A)Price-weighted index.
B)Unweighted index.
C)Value-weighted index.
D)All of the above
E)None of the above

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Multiple Choice

Q 47Q 47

Which of the fundamental factors was not used in the Fundamental Index created by Research Affiliates, Inc.?
A)Sales
B)Profits (cash flow)
C)Leverage (debt/equity)
D)Net assets (book value)
E)Dividends

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Multiple Choice

Q 48Q 48

Exhibit 5.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 5.1. Assume that a stock price-weighted indicator consisted of the four issues with their prices. What are the values of the stock indicator for Day T and T + 1 and what is the percentage change?
A)36.25, 38.75, 6.9%
B)38.75, 36.25, 6.9%
C)100, 106.9, 6.9%
D)107.48, 106.33, 1.15%
E)None of the above

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Multiple Choice

Q 49Q 49

Exhibit 5.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 5.1. For a value-weighted series, assume that Day T is the base period and the base value is 100. What is the new index value for Day T + 1 and what is the percentage change in the index from Day T?
A)106.33, 6.33%
B)107.48, 7.48%
C)109.93, 9.93%
D)108.7, 8.7%
E)None of the above

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Multiple Choice

Q 50Q 50

Exhibit 5.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 5.1. Compute an unweighted price indicator series, using geometric means. What is the percentage change in the index from Day T to Day T+1? Assume a base index value of 100 on Day T.
A)5.35%
B)7.48%
C)9.93%
D)6.33%
E)None of the above

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Multiple Choice

Q 51Q 51

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
*2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005
-Refer to Exhibit 5.2. Calculate a price weighted average for January 13th.
A)32
B)30
C)36.13
D)34
E)None of the above

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Multiple Choice

Q 52Q 52

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
*2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005
-Refer to Exhibit 5.2. What is the divisor at the beginning of January 14th?
A)3.0
B)2.5
C)2.2734
D)1.9375
E)None of the above

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Multiple Choice

Q 53Q 53

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
*2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005
-Refer to Exhibit 5.2. Calculate a price weighted average for January 14th.
A)32
B)30
C)36.13
D)34
E)None of the above

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Multiple Choice

Q 54Q 54

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
*2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005
-Refer to Exhibit 5.2. Calculate a price weighed average for January 15th.
A)30
B)36.13
C)32
D)34
E)None of the above

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Multiple Choice

Q 55Q 55

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
*2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005
-Refer to Exhibit 5.2. What is the divisor at the beginning of January 16th?
A)1.9375
B)3.0
C)2.5
D)2.2734
E)None of the above

Free

Multiple Choice

Q 56Q 56

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
*2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005
-Refer to Exhibit 5.2. Calculate a price weighted average for January 16th.
A)30
B)32
C)34
D)36.13
E)None of the above

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Multiple Choice

Q 57Q 57

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
*2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005
-Refer to Exhibit 5.2. Calculate a value weighted index for Jan. 13th if the initial index value is 100.
A)111.54
B)100
C)102.31
D)123.07
E)None of the above

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Multiple Choice

Q 58Q 58

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
*2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005
-Refer to Exhibit 5.2. Calculate a value weighted index for Jan. 14th if the initial index value is 100.
A)100
B)102.31
C)123.07
D)111.54
E)None of the above

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Multiple Choice

Q 59Q 59

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
*2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005
-Refer to Exhibit 5.2. Calculate a value weighted index for January 15th if the initial index value is 100.
A)102.31
B)100
C)123.07
D)111.54
E)None of the above

Free

Multiple Choice

Q 60Q 60

Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
*2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005
-Refer to Exhibit 5.2. Calculate a value weighted index for January 16th if the initial index value is 100.
A)123.07
B)100.00
C)102.31
D)111.54
E)None of the above

Free

Multiple Choice

Q 61Q 61

Exhibit 5.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 5.3. Calculate the average annual rate of change for GB Industries for the 5 year period using the arithmetic mean.
A)0.098%
B)9.80%
C)8.50%
D)8.00%
E)89.00%

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Multiple Choice

Q 62Q 62

Exhibit 5.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 5.3. Calculate the average annual rate of change for GB Industries for the 5 year period using the geometric mean.
A)9.7800%
B)0.0978%
C)9.0700%
D)0.0970%
E)3.6400%

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Multiple Choice

Q 63Q 63

Exhibit 5.4
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 5.4. Calculate the average annual rate of change for this index for the 5 year period using the arithmetic mean.
A)0.28%
B)1.28%
C)2.80%
D)3.58%
E)6.38%

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Multiple Choice

Q 64Q 64

Exhibit 5.4
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 5.4. Calculate the average annual rate of change for this index for the 5 year period using the geometric mean.
A)0.09%
B)1.99%
C)3.99%
D)4.50%
E)4.67%

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Multiple Choice

Q 65Q 65

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.
-Refer to Exhibit 5.5. Calculate the price weighted series for Dec 31, 2003, prior to the splits.
A)81.69
B)100.0
C)72.5
D)121.25
E)119.25

Free

Multiple Choice

Q 66Q 66

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.
-Refer to Exhibit 5.5. Calculate the price weighted series for Dec 31, 2003, after the splits.
A)72.5
B)100.0
C)119.25
D)121.25
E)81.69

Free

Multiple Choice

Q 67Q 67

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.
-Refer to Exhibit 5.5. Calculate the price weighted series for Dec 31, 2004.
A)121.25
B)119.25
C)100.0
D)72.5
E)81.69

Free

Multiple Choice

Q 68Q 68

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.
-Refer to Exhibit 5.5. Calculate the percentage return in the price weighted series for the period Dec 31, 2000 to Dec 31, 2004.
A)12.68%
B)20.00%
C)21.76%
D)33.33%
E)40.00%

Free

Multiple Choice

Q 69Q 69

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.
-Refer to Exhibit 5.5. Calculate the value weighted index for Dec 31, 2003, prior to the splits. Assume a base index value of 100. The base year is Dec 31, 2003.
A)120.0
B)81.69
C)72.5
D)100.0
E)121.25

Free

Multiple Choice

Q 70Q 70

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.
-Refer to Exhibit 5.5. Calculate the value weighted index for Dec 31, 2003, after the splits. Assume a base index value of 100. The base year is Dec 31, 2003.
A)72.5
B)81.69
C)100.0
D)120.0
E)121.25

Free

Multiple Choice

Q 71Q 71

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.
-Refer to Exhibit 5.5. Calculate the value weighted index for Dec 31, 2004. Assume a base index value of 100. The base year is Dec 31, 2003.
A)121.25
B)100.0
C)81.69
D)72.5
E)120.0

Free

Multiple Choice

Q 72Q 72

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.
-Refer to Exhibit 5.5. Calculate the percentage return in the value weighted index for the period Dec 31, 2003 to Dec 31, 2004.
A)12.68%
B)20.00%
C)21.76%
D)33.33%
E)40.00%

Free

Multiple Choice

Q 73Q 73

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.
-Refer to Exhibit 5.5. Calculate the unweighted index for Dec 31, 2003, prior to the splits. Assume a base index value of 100. The base year is Dec 31, 2003.
A)100.0
B)200.0
C)150.0
D)120.0
E)175.0

Free

Multiple Choice

Q 74Q 74

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.
-Refer to Exhibit 5.5. Calculate the unweighted index for Dec 31, 2003, after the splits. Assume a base index value of 100. The base year is Dec 31, 2003.
A)110.0
B)200.0
C)100.0
D)120.0
E)150.0

Free

Multiple Choice

Q 75Q 75

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.
-Refer to Exhibit 5.5. Calculate the unweighted index (geometric mean) for Dec 31, 2004. Assume a base index value of 100. The base year is Dec 31, 2003.
A)119.25
B)121.25
C)151.25
D)95.25
E)100.25

Free

Multiple Choice

Q 76Q 76

Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.
-Refer to Exhibit 5.5. Calculate the percentage return in the unweighted index (geometric mean) for the period Dec 31, 2003 to Dec 31, 2004. Assume a base index value of 100. Base year is Dec 31, 2003.
A)19.25%
B)21.25%
C)51.25%
D)5.25%
E)100.25%

Free

Multiple Choice

Q 77Q 77

Exhibit 5.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 5.6. Calculate a price weighted average for Day T.
A)46.20
B)53.33
C)54.12
D)92.39
E)108.23

Free

Multiple Choice

Q 78Q 78

Exhibit 5.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 5.6. Calculate a value weighted average for Day T + 1. Assume a base index value of 100 on Day T.
A)46.20
B)53.33
C)54.12
D)92.39
E)108.23

Free

Multiple Choice

Q 79Q 79

Exhibit 5.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 5.6. If an equal-weighted index is constructed on Day T with $10,000 in each stock, what is the percentage change in wealth for this index on Day T + 1? Assume a base index value of 100 on Day T.
A)8.65%
B)10.14%
C)15.69%
D)30.42%
E)47.08%

Free

Multiple Choice

Q 80Q 80

Exhibit 5.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 5.6. Compute the arithmetic mean of the price change of Stocks Q, R, and S from days T to T + 1.
A)8.65%
B)10.14%
C)15.69%
D)30.42%
E)47.08%

Free

Multiple Choice

Q 81Q 81

Exhibit 5.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 5.6. Compute the geometric mean of the price change of Stocks Q, R, and S from days T to T + 1.
A)9.32%
B)10.14%
C)15.57%
D)30.63%
E)54.37%

Free

Multiple Choice

Q 82Q 82

Exhibit 5.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 5.7. What would be the total percentage change in an equally weighted portfolio of ABC?
A)13.33%
B)18.67%
C)23.41%
D)26.67%
E)36.83%

Free

Multiple Choice

Q 83Q 83

Exhibit 5.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 5.7. If the December 31, 2011 equal weighted index for ABC was 100, what is the equal weighted index for ABC on December 31, 2012?
A)108.35
B)114.74
C)120.19
D)126.67
E)131.54

Free

Multiple Choice

Q 84Q 84

Exhibit 5.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
-Refer to Exhibit 5.7. If the December 31, 2011 value weighted index for ABC was 100, what is the value weighted index for ABC on December 31, 2012?
A)108.35
B)114.74
C)120.19
D)126.67
E)131.54

Free

Multiple Choice