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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 multiplechoice 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 512 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 multiplechoice question is worth 5 points.
No partial credit is granted for
questions 14
.
•
For the
problems 512
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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– Multiple Choice Questions: 5 points each question
1.
Assume that the market is semistrong 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 higherthanaverage capital gains by holding stocks with
low dividend yields.
e.
One could have made consistent positive returns by buying smallcap stock and
shorting longterm 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 .
 '09
 Pagani,Marco

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