Fall07-Solution-Exam20 - BUS 172A Investment Analysis Fall...

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BUS 172A – Investment Analysis Fall 2007 Exam 2 Last Name: __________________________First Name: _____________________ Class Time: _________________________ Instructions: There are 12 questions . Questions 1–4 are multiple-choice questions. Questions 5–12 are problems for which computations are necessary or open questions. For each question you need to report the correct final answer in the space provided . For questions 5–12, in addition to reporting the final answer, you must also report the complete and correct solution with computations. When reporting the solutions to the questions 5-12 you must label all the amounts you use in the computations. Your computations and solutions to the questions must be clear and easy to understand. Grading: Each multiple-choice question is worth 5 points. No partial credit is granted for questions 1-4 . For the problems 5-12 you can only receive the maximum points allowed if you record the correct final answer along with the complete and correct solution for the problem. If you report the correct final answer, but you do not provide a complete and consistent solution for the problems, you will not receive any points. Partial credit is granted for questions 5–12 . 1
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Section I – Multiple Choice Questions: 5 points each question 1. Assume that the market is semi-strong form efficient. The best investment strategy is to: a. Examine the past prices of a stock to determine the trend. b. Invest in an actively managed mutual fund whose manager searches for underpriced stocks. c. Invest in an index fund. d. Examine the financial statements for a company to find stocks that are not selling at intrinsic value. e. Invest in options and futures. ANSWER: ________ 2. Suppose that, after conducting an analysis of past stock prices, you come up with the following observations. Which could appear to contradict the weak form of the efficient market hypothesis? a. The average rate of return is significantly greater than zero. b. The correlation between the return during a given week and the return during the following week is zero. c. One could have made superior returns by buying stocks after a 10% rise in price and selling stocks after a 10% fall. d. One could have made higher-than-average capital gains by holding stocks with low dividend yields. e. One could have made consistent positive returns by buying small-cap stock and shorting long-term government bonds. ANSWER: ________
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This note was uploaded on 09/08/2010 for the course BUS 172A at San Jose State University .

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Fall07-Solution-Exam20 - BUS 172A Investment Analysis Fall...

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