Second Midterm Exam Answer

Second Midterm Exam Answer - Jest $600 in security A...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Background image of page 4
Background image of page 5
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Jest $600 in security A Wizl‘ a beta of 1.5 and $400 in security B with a beta of .90. The this portfolio is .4 . ._2 650 "” (“a ' 122 ft"; ’"T “0+ 500 (‘61): *2!" 0.1.50 2. Which of the following variables do Fama and French claim do a better job explaining stock returns than beta? 1. Book to market ratio 11. Unexpected change in industrial production III. Firm size A. I only B. l and II only \1 c. 1 and 111 only D. I, II and III 3. The expected return on the market portfolio is 15%. The risk—free rate is 8%. The expected return on SDA Corp. common stock is 16%. The beta of SDA Corp. common stock is 1.25. Within the context of the capital asset pricing model, A. SDA Corp. stock is underpriced - . p B. SDA Corp. stock is fairlypriced 0L ‘5 A 6 T beg + (‘2? 'f ‘“ 0‘03 i/C. EDA Corp. stoci‘s 1alpha: is —0.705% ; fl. {3 :0 07‘: D. DA Corp. stoc a p a 15 0.75%) 2 J 017:?) 4. If the beta of the market index is 1.0 and the standard deviation of the market index increases fiom 12% to 18%, What is the new beta of the market index? A. 0.8 3/ B. 1.0 C. 1.2 D. 1.5 5. The semi-strong form of the EMH states that must be reflected in the current stock price. A. all security price and volume data ‘1 B. all publicly available information C. all information including inside information D. all costless information ' 6. Which of the following is not a method employed by followers of technical analysis? A. Charting B. Relative strength analysis ‘J C. Earnings forecasting D. Trading around support and resistance levels BU5321 ~ First Midterm Exam Page 2 7. Fama and French (1991) and Reinganurn (1988) found that firms with market/book ratios had higher stock returns. A. high r’ B. low C. medium D. paired 8. The term random walk is used in investments to refer to A. stock price changes that are random but predictable . stock prices that respond slowly to both old and new information C. stock price changes that are random and unpredictable D. stock prices changes that follow the pattern of past price changes 9. Insiders are able to profitably trade and earn abnormal returns prior to the announcement of positive news. This is a violation of which form of efficiency? A. Weak form efficiency B. Semi—strong form efficiency \/ C. Strong form efficiency D. Technical analysis 10. Short interest is a indicator. \/ A. sentiment B. flow of funds C. market structure . | D. fundamental 11. Conventional finance theory assumes investors are and behavioral finance assumes investors are . ' xi A. rational; irrational B. irrational; rational C. greedy; philanthropic D. philanthropic; greedy 12. An investor holds a very conservative portfolio invested for retirement but she takes some extra cash she earned from her year—end bonus and buys gold futures. She appears to be engaging in . A. overconfidence B. representativeness C. forecast errors \i D. mental accounting BUS321 ~ First Midterm Exam Page 3 Question 13-14 Day 1 2 3 4 Advances 870 760 960 840 Declines 8 80 990 790 910 Volume Advancing (m) 580 620 430 510 Volume Declining (n1) 670 530 7’20 520 Yield on top rated Corporate bonds 6.3% 6.796 6.7% 6.696 Yield on intermediate Grade corporate bonds 7.4% 7.4% 7.5% 7.6% . . O _ A3013}; Tnn on day two is _. Tn Nam/0 a 3'? /0M 0 ' ' ' flim— 103719 B. 1.04 617 C. 0.92 7 e o D. 0.55 14. The Confidence Index on day one is A. 0.82 g g - B. 0.89 m- m rmth con 4 T -_'_. a. ' = ~ \/ C. 0.92 CD M ‘l 9% 7H '0 "0’; D. 1.09 - r ' = - - 15. A decrease in the value of the yen against the US. dollar can cause the Japanese automaker, ' Toyota, to either on its US. sales. A. lose market share or reduce its profit margin $33 gain market share or reduce its profit margin 1 4 C. lose market share or increase its profit margin D. gain market share or increase its profit margin 16. If you believe the economy is about to go into a recession you might change your asset allocation by selling and buying . \/ A. growth stocks; long-term bonds B. long-term bonds; grth stocks C. defensive stocks; growth stocks D. defensive stocks; long—term bonds BUSSZl — First Midterm Exam Page 4 17. You can earn abnormal returns on your investments via macro forecasting A. if you can forecast the economy at all B. if you can forecast the economy as well as the average forecaster l/C. if you can forecast the economy better than the average forecaster D. only if you can forecast the economy with perfect accuracy 18. A big increase in government spending is an example of \/ A. a positive demand shock B. a positive supply shock C. a negative demand shock D. a negative supply shock 19. in interest rates are associated with stock market declines. A. Anticipated increases T/ B. Unanticipated increases C. Anticipated decreases D. Unanticipated decreases 20. Pharmaceuticals, food, and other necessities would be good performers during the stage of the business cycle. A. peak \fB. contraction C. trough D. expansion 21. Large growth companies generally emerge in the h stage. A. start up B. consolidation ' 'C. maturity D. relative decline 22. New orders for nondefense capital goods is economic indicator. J A. leading B. lagging C. coincident D. mixed 23. Gagliardi Way Corporation has an expected ROE of 15%. If it pays out 30% of it earnings as dividends, its dividend growth rate will be A. 4.5% ' \/B. 10.5% 1 $06 0-5) :: .t‘§ {\w 03):» .ta‘ga C. 15.0% D. 30.0% BU5321 — First Midterm Exam Page 5 24. Ace Ventura, Inc. has expected earnings of $5 per share for next year. The firm's ROE is 15% and its earnings retention ratio is, 40%. If the firm‘s market capitalization rate is 10%, what is the present value of its growth opportunities? -JA.$25 > 3:32 war: a -- .3: a. if D.$100 A _ mil—Lt) I‘D 25. A firm has PVGO of 0 and a market capitalization rate of 12%. What is the finn's P/E ratio? J.A.12.00 - B. 3.33 , 7 n “a (3.1025 i’: r <3 e? W. 2 If 7 5’5; D. 18.55 26. Transportation stocks currently provide an expected rate of return of 15%. TTT, a large transportation company, will pay a year-end dividend of $3 per share. If the stock is selling at $60 per share, what must be the market's expectation of the constant growth rate of TTT dividends? \U. My :7 c3210 . 0 ca 020% D. None of the above 27. A stock is priced at $45 per share. The stock has earnings per share of $3.00 and a market ‘ capitalization rate of 14%. What is the stock's PVGO? - t/ A.$_23.5'7 5 33 3/ B.$15.00 Vs t,» H. .1 Pveo. )- 48’ ——-.— -.~.. 23.37 C.$19.78 [6. Gig. D.$21.34 28. The free cash flow to the firm is reported as $405 million. The interest expense to the firm is $76 million. If the tax rate is 35% and the net debt of the firm increased by $50, what is the free cash flow to the equity holders of the firm? \/ A. $406 million B. $454 million I (3. $505 million FM: 5 ‘r’ 40* "76 (I - 758‘) + 37) D. $553 million 1 46 f. a BUSBZl — First Midterm Exam Page 6 ...
View Full Document

{[ snackBarMessage ]}

Page1 / 5

Second Midterm Exam Answer - Jest $600 in security A...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online