End_of_Chapter_Questions_and_Answers - Chapter End...

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1) Which of the following is most likely illegal? A) The CEO buys 5,000 shares 5 days before earnings are announced B) It is always illegal for the CEO to purchase stock C) The CEO buys 5,000 shares 5 days after earnings are announced 2) The price of a stock will generally rise if A) Investors now are willing to accept a lower expected rate of return on the stock B) Investors now demand a higher expected rate of return on the stock 3) Suppose the S&P 500 falls from 1400 to 1300 over the next six months. In such a scenario, the investor holding a portfolio with a beta of _________ will generally earn the highest six-month return. A) 0.5 B) 1.0 C) 1.5 4) Compare two stocks, Whirlpool, which builds home appliances, and Abbott Labs, which makes health care products. Which stock will have the higher beta? A) Abbott Labs B) Whirlpool 5) What product attributes allow some companies to earn consistently high profits year after year? A) High switching costs B) Low switching costs 6) Consumers have spent an increasing fraction of their incomes on _____over the past 30 years. A) housing rent B) recreational products 7) Consumers have spent a decreasing fraction of their incomes on food over the past 30 years. A) True B) False 8) It is better for a company to have a few large buyers for their product than many small buyers. A) True B) False 9) Based on recent trends, the population of which region will grow the fastest over the next 10-15 years? A) Arizona, Colorado, Nevada B) Massachusetts, Connecticut, Rhode Island C) Illinois, Indiana, Iowa 10) The book value of a stock is the total dollar amount invested in the company by the shareholders and bondholders, divided by the number of shares outstanding. A) True B) False 11) A high PEG results from low expected growth and a high P/E ratio. A) True B) False 12) The price to book ratio is most useful for identifying an under or overpriced stock for A) The homebuilding industry B) The pharmaceutical industry 13) Stocks with relatively low expected growth tend to have relatively low P/E ratios. A) True
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This note was uploaded on 03/19/2008 for the course FI 320 taught by Professor Wiggins during the Spring '08 term at Michigan State University.

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End_of_Chapter_Questions_and_Answers - Chapter End...

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