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Unit 6 – Quiz

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  1. Current
  2. Review
  3. Answered
  4. Correct
  5. Incorrect
  1. Question 1 of 105
    1. Question

    Stock markets in which already issued stocks are resold and re-bought are classified as

    Correct
    Incorrect
  2. Question 2 of 105
    2. Question

    As far as their value is concerned, the top priority group in company should be

    Correct
    Incorrect
  3. Question 3 of 105
    3. Question

    Preferred stock is considered as hybrid security because it includes

    Correct
    Incorrect
  4. Question 4 of 105
    4. Question

    Markets in which derivatives are traded, are classified as

    Correct
    Incorrect
  5. Question 5 of 105
    5. Question

    Which of the following is not a true statement about the goal of maximizing shareholder wealth?

    Correct
    Incorrect
  6. Question 6 of 105
    6. Question

    The efficient market hypothesis is based on which of the following assumptions?

    Correct
    Incorrect
  7. Question 7 of 105
    7. Question

    Although derivatives can be used as speculative instruments, businesses most often use them to

    Correct
    Incorrect
  8. Question 8 of 105
    8. Question

    Financial intermediaries differ from other businesses in that both their assets and their liabilities are mostly

    Correct
    Incorrect
  9. Question 9 of 105
    9. Question

    The ______ is defined as the present value of all cash proceeds to the investor in the stock.

    Correct
    Incorrect
  10. Question 10 of 105
    10. Question

    The net value of GDP after deducting depreciation from GDP is

    Correct
    Incorrect
  11. Question 11 of 105
    11. Question

    The average income of the country is

    Correct
    Incorrect
  12. Question 12 of 105
    12. Question

    If a market is inefficient, as new information is received about a security

    Correct
    Incorrect
  13. Question 13 of 105
    13. Question

    Business strategy focuses on

    Correct
    Incorrect
  14. Question 14 of 105
    14. Question

    Which of the following is not an element of Porter’s 5 Forces Model?

    Correct
    Incorrect
  15. Question 15 of 105
    15. Question

    What is likely to happen if many new businesses enter a market?

    Correct
    Incorrect
  16. Question 16 of 105
    16. Question

    In Product Life Cycle, Increased competition leads to price decrease, increasing public awareness, sales volume increase significantly are the characteristics of

    Correct
    Incorrect
  17. Question 17 of 105
    17. Question

    A depreciation of the U.S. dollar relative to foreign currencies will make

    Correct
    Incorrect
  18. Question 18 of 105
    18. Question

    In order to have a smoothed rate of growth, we use

    Correct
    Incorrect
  19. Question 19 of 105
    19. Question

    The difference between total current assets and total current liabilities is

    Correct
    Incorrect
  20. Question 20 of 105
    20. Question

    In relation to a Company, investors are least concerned with

    Correct
    Incorrect
  21. Question 21 of 105
    21. Question

    Which of the following is true about the current ratio?

    Correct
    Incorrect
  22. Question 22 of 105
    22. Question

    In the dividend discount model, which of the following are not incorporated into the discount rate?

    Correct
    Incorrect
  23. Question 23 of 105
    23. Question

    Other things being equal, a low ________ would be most consistent with a relatively high growth rate of firm earnings and dividends.

    Correct
    Incorrect
  24. Question 24 of 105
    24. Question

    A firm has a return on equity of 20% and a dividend payout ratio of 30%. The firm’s anticipated growth rate is

    Correct
    Incorrect
  25. Question 25 of 105
    25. Question

    Dividend discount models and P/E ratios are used by __________ to try to find mispriced securities.

    Correct
    Incorrect
  26. Question 26 of 105
    26. Question

    The most appropriate discount rate to use when applying a FCFE valuation model is the

    Correct
    Incorrect
  27. Question 27 of 105
    27. Question

    Which of the following highlights traders’ opinions about the market?

    Correct
    Incorrect
  28. Question 28 of 105
    28. Question

    The number of stocks hitting new 52-week highs is a(n)

    Correct
    Incorrect
  29. Question 29 of 105
    29. Question

    A bar chart is used to illustrate

    Correct
    Incorrect
  30. Question 30 of 105
    30. Question

    Which of the following is most closely associated with the terms “primary trend,” “intermediate trend,” and “short-term trend”?

    Correct
    Incorrect
  31. Question 31 of 105
    31. Question

    Which type of chart has no time horizon?

    Correct
    Incorrect
  32. Question 32 of 105
    32. Question

    A higher open on next trading day of hammer indicates that

    Correct
    Incorrect
  33. Question 33 of 105
    33. Question

    What does a decline below support level indicate?

    Correct
    Incorrect
  34. Question 34 of 105
    34. Question

    Which of the following candlestick pattern look like star falling from sky with a tail trailing it?

    Correct
    Incorrect
  35. Question 35 of 105
    35. Question

    Day traders must have proper knowledge of

    Correct
    Incorrect
  36. Question 36 of 105
    36. Question

    A daily fluctuation of little importance is called

    Correct
    Incorrect
  37. Question 37 of 105
    37. Question

    Which of the following is not a Dow Theory?

    Correct
    Incorrect
  38. Question 38 of 105
    38. Question

    What are one of the most popular and easy to use tools available to the technical analyst?

    Correct
    Incorrect
  39. Question 39 of 105
    39. Question

    The method of moving averages is used for which of the following purposes?

    Correct
    Incorrect
  40. Question 40 of 105
    40. Question

    Traders use the _________ due to the way it represents price, eliminates noise and shows clear trends.

    Correct
    Incorrect
  41. Question 41 of 105
    41. Question

    For drawing the Kagi Chart, the first step is to calculate the

    Correct
    Incorrect
  42. Question 42 of 105
    42. Question

    The thin lines at the top and bottom represent the space between the open or close and the high or low are referred to as

    Correct
    Incorrect
  43. Question 43 of 105
    43. Question

    The Beta is a measure of the ______ of a security that cannot be avoided through diversification.

    Correct
    Incorrect
  44. Question 44 of 105
    44. Question

    Price movements that are caused by short-term deviations of prices from the underlying trend line are called

    Correct
    Incorrect
  45. Question 45 of 105
    45. Question

    Which of the following consist of five sub-waves that make net movement in the same direction as the trend of the next-largest degree?

    Correct
    Incorrect
  46. Question 46 of 105
    46. Question

    A downtrend remains in place until

    Correct
    Incorrect
  47. Question 47 of 105
    47. Question

    Which of he following is a basic assumptions of technical analysis in contrast to fundamental analysis?

    Correct
    Incorrect
  48. Question 48 of 105
    48. Question

    The advance/decline line is typically used to

    Correct
    Incorrect
  49. Question 49 of 105
    49. Question

    Right of stockholders of firm that new shares must be offered to existing stockholders first, rather than new stock holders is classified as

    Correct
    Incorrect
  50. Question 50 of 105
    50. Question

    Public issue, Rights issue, Private placements and Preferential allotment are the ways for issue of shares which are not existing before can be done in

    Correct
    Incorrect
  51. Question 51 of 105
    51. Question

    Which portfolio will mimic the performance of a price-weighted index?

    Correct
    Incorrect
  52. Question 52 of 105
    52. Question

    Which of the following statements about the real rate of return is true?

    Correct
    Incorrect
  53. Question 53 of 105
    53. Question

    A preferred stock will pay a dividend of Rs. 3.00 in the upcoming year, and every year thereafter, for three year. You require a return of 9% on this stock. Use the constant growth model to calculate the intrinsic value of this preferred stock?

    Correct
    Incorrect
  54. Question 54 of 105
    54. Question

    Inflationary expectations are important because widespread changes in inflationary expectations affect

    Correct
    Incorrect
  55. Question 55 of 105
    55. Question

    Equity analysts provides estimates of earnings and earnings growth for future, using historical data and

    Correct
    Incorrect
  56. Question 56 of 105
    56. Question

    A lady bought 100 shares of a leading diamond mining company with an expected return of 20 percent per year. The following day the company’s president announced a major new discovery in Arkansas. The stock price immediately doubled. This scenario probably best illustrates that the

    Correct
    Incorrect
  57. Question 57 of 105
    57. Question

    A monopolized market is in long-run equilibrium when

    Correct
    Incorrect
  58. Question 58 of 105
    58. Question

    In which stage of the product life cycle is advertising and promotion aimed at retaining existing customers and persuading customers to switch from competitor products?

    Correct
    Incorrect
  59. Question 59 of 105
    59. Question

    In the Boston Consulting Group matrix, unsuccessful products move around the matrix in which order?

    Correct
    Incorrect
  60. Question 60 of 105
    60. Question

    Which of the following statements is most correct regarding the current ratio for a firm that uses industry averages and a peer benchmark as their comparison?

    Correct
    Incorrect
  61. Question 61 of 105
    61. Question

    If a company’s share price falls, then its P/E ratio and dividend yield?

    Correct
    Incorrect
  62. Question 62 of 105
    62. Question

    Given the following information, find return on equity (ROE)?
    Net income after tax = Rs. 500,000
    Preferred dividend = Rs. 20,000
    Common equity = Rs. 35,08,000
    Earnings per share = Rs. 4.81

    Correct
    Incorrect
  63. Question 63 of 105
    63. Question

    In conducting a common-size analysis every balance sheet item is divided by __________ and every income statement is divided by _______________.

    Correct
    Incorrect
  64. Question 64 of 105
    64. Question

    What is the collection and interpretation of information about forces, events, and relationships that may affect the organization?

    Correct
    Incorrect
  65. Question 65 of 105
    65. Question

    A company whose stock is selling at a P/E ratio greater than the P/E ratio of a market index most likely has

    Correct
    Incorrect
  66. Question 66 of 105
    66. Question

    The market capitalization rate on the stock of Flex steel Company is 12%. The expected ROE is 13% and the expected EPS are Rs. 3.60. If the firm’s plowback ratio is 50%, the P/E ratio will be

    Correct
    Incorrect
  67. Question 67 of 105
    67. Question

    The required rate of return on equity is the most appropriate discount rate to use when applying a

    Correct
    Incorrect
  68. Question 68 of 105
    68. Question

    Low Tech Company has an expected ROE of 10%. The dividend growth rate will be ________ if the firm follows a policy of paying 40% of earnings in the form of dividends.

    Correct
    Incorrect
  69. Question 69 of 105
    69. Question

    Which of the following is a correct statement regarding the Confidence Index?

    Correct
    Incorrect
  70. Question 70 of 105
    70. Question

    A firm that has an ROE of 12% is considering cutting its dividend payout. The stockholders of the firm desire a dividend yield of 4% and a capital gain yield of 9%. Given this information which of the following statement(s) is/are correct?
    I. All else equal the firm’s growth rate will accelerate after the payout change
    II. All else equal the firm’s stock price will go up after the payout change
    III. All else equal the firm’s P/E ratio will increase after the payout change

    Correct
    Incorrect
  71. Question 71 of 105
    71. Question

    An underpriced stock provides an expected return which is ____________ the required return based on the capital asset pricing model (CAPM).

    Correct
    Incorrect
  72. Question 72 of 105
    72. Question

    Firm A is high risk and Firm B is low risk. Everything else equal, which firm would you expect to have a higher P/E ratio?

    Correct
    Incorrect
  73. Question 73 of 105
    73. Question

    Which of the following compares a day’s closing price to a recent range of prices to determine if a market is overbought or oversold?

    Correct
    Incorrect
  74. Question 74 of 105
    74. Question

    Which of the following do technical analysts believe is a lower bound on a stock’s price?

    Correct
    Incorrect
  75. Question 75 of 105
    75. Question

    Which type of chart includes daily high price, low price, opening price, and closing price?

    Correct
    Incorrect
  76. Question 76 of 105
    76. Question

    When technical analysts say that a stock has “good relative strength,” they mean that

    Correct
    Incorrect
  77. Question 77 of 105
    77. Question

    A Bullish Divergence represents __________ price pressure and a Bearish Divergence represents _________ price pressure.

    Correct
    Incorrect
  78. Question 78 of 105
    78. Question

    Which of the following highlights traders’ opinions about the market?

    Correct
    Incorrect
  79. Question 79 of 105
    79. Question

    Which of the following is not a basic tenet of the Dow Theory?

    Correct
    Incorrect
  80. Question 80 of 105
    80. Question

    Which of the following is not an example of breadth indicators?

    Correct
    Incorrect
  81. Question 81 of 105
    81. Question

    Which of the following measures the extent of current change in the price of securities and evaluates the oversold and overbought positions?

    Correct
    Incorrect
  82. Question 82 of 105
    82. Question

    Which of the following is NOT related to the “support and resistance” in the context of technical stock analysis?

    Correct
    Incorrect
  83. Question 83 of 105
    83. Question

    Consider a stock, with an expected dividend per share next period of Rs. 1, a cost of equity of 15%, and an expected growth rate of 6% forever. The value of this stock is

    Correct
    Incorrect
  84. Question 84 of 105
    84. Question

    The ________ allows for two stages of growth – an initial phase where the growth rate is not a stable growth rate and a subsequent steady state where the growth rate is stable and is expected to remain so for the long term.

    Correct
    Incorrect
  85. Question 85 of 105
    85. Question

    Which of the following consist of three, or a combination of three, sub-waves that make net movement in the direction opposite to the trend of the next-largest degree?

    Correct
    Incorrect
  86. Question 86 of 105
    86. Question

    Resistance and support areas for a stock market index are viewed as technical indicators of

    Correct
    Incorrect
  87. Question 87 of 105
    87. Question

    In discussions of financial market efficiency, which of the following is not one of the stylized forms of market efficiency?

    Correct
    Incorrect
  88. Question 88 of 105
    88. Question

    Which of the following intraday changes in the Dow Jones Industrials Average (DJIA) will trigger a circuit breaker halting NYSE trading for one hour?

    Correct
    Incorrect
  89. Question 89 of 105
    89. Question

    On 1st Feb 2010, Mr. AB bought 100 shares of SMB Company at SR50 per share. In March 2010, he received dividend of SR1.00 per share. On 31 July 2010, he sold his shares for SR54 per share. What is his annualized holding period return?

    Correct
    Incorrect
  90. Question 90 of 105
    90. Question

    You want to sell some shares of company ABC only if it shows sign of declining. The current market price is SR55. You will sell the shares when it drops to SR52 per share, but you don’t want to sell if it drops further than SR50. What type of order should you place?

    Correct
    Incorrect
  91. Question 91 of 105
    91. Question

    It was reported in the network news that Dow-Jones Industrial Averages (DJIA) jumped by 500 points from 10,000 to 10,500 in the month of January. This means

    Correct
    Incorrect
  92. Question 92 of 105
    92. Question

    Felton Farm Supplies, Inc., has an 8 percent return on total assets of $300,000 and a net profit margin of 5 percent. What are its sales?

    Correct
    Incorrect
  93. Question 93 of 105
    93. Question

    Barriers to entry affect the ability of firms outside an industry to enter and take advantage of profit opportunities. Which of the following is not an example of such a barrier?

    Correct
    Incorrect
  94. Question 94 of 105
    94. Question

    Which of the following items is not a criticism of the five forces model?
    i) The analysis is essentially static, whereas industries constantly change.
    ii) No force is deemed more important than the others.
    iii) In viewing all the forces as threats it does not allow for co-operation.
    iv) It stresses the environment to the exclusion of internal influences on strategy.
    v) The model was developed in the 1970s and is now obsolete.

    Correct
    Incorrect
  95. Question 95 of 105
    95. Question

    A company’s net income before income tax is $55,000. Income tax for the year was $5,000. Dividend requirements for preferred stock are $20,000. There are 20,000 shares of common stock outstanding. Earnings per common stock are

    Correct
    Incorrect
  96. Question 96 of 105
    96. Question

    Versatile Company is expected to pay a dividend of Rs. 3.50 in the coming year. Dividends are expected to grow at a rate of 10% per year. The risk-free rate of return is 5% and the expected return on the market portfolio is 13%. The stock is trading in the market today at a price of Rs. 90.
    What is the market capitalization rate and what is the approximate beta of Versatile Company?

    Correct
    Incorrect
  97. Question 97 of 105
    97. Question

    You wish to earn a return of 11% on each of two stocks, C and D. Stock C is expected to pay a dividend of $3 in the upcoming year while Stock D is expected to pay a dividend of $4 in the upcoming year. The expected growth rate of dividends for both stocks is 7%. The intrinsic value of stock C

    Correct
    Incorrect
  98. Question 98 of 105
    98. Question

    You wish to earn a return of 12% on each of two stocks, A and B. Each of the stocks is expected to pay a dividend of $2 in the upcoming year. The expected growth rate of dividends is 9% for stock A and 10% for stock B. The intrinsic value of stock A

    Correct
    Incorrect
  99. Question 99 of 105
    99. Question

    A firm has current assets which could be sold for their book value of $10 million. The book value of its fixed assets is $60 million but they could be sold for $95 million today. The firm has total debt at a book value of $40 million but interest rate changes have increased the value of the debt to a current market value of $50 million. This firm’s market to book ratio is

    Correct
    Incorrect
  100. Question 100 of 105
    100. Question

    Suppose that in 2009 the expected dividends of the stocks in a broad market index equaled $240 million when the discount rate was 8% and the expected growth rate of the dividends equaled 6%. Using the constant growth formula for valuation, if interest rates increase to 9% the value of the market will change by

    Correct
    Incorrect
  101. Question 101 of 105
    101. Question

    Yashoda Corp. is expected to pay a dividend of Rs. 1.50 in the upcoming year. Dividends are expected to grow at the rate of 6% per year. The risk-free rate of return is 6% and the expected return on the market portfolio is 14%. The stock of Yashoda Corp. has a beta of 0.75. The intrinsic value of the stock is

    Correct
    Incorrect
  102. Question 102 of 105
    102. Question

    If there are profit opportunities in the stock market, but they take a long time to realize, which stochastic process most closely reflects this behavior?

    Correct
    Incorrect
  103. Question 103 of 105
    103. Question

    Which of the following may be considered as justifications for using fundamental stock analysis as opposed to technical analysis?
    I. Fundamentalists believe that their analysis is based on sound financial theory and economic reasons.
    II. The value of a security is dependent on its cash flows; if cash flows are expected to increase in the future, its present value increases, and vice-versa.
    III. Due to much accounting flexibility, financial statements are not sufficiently accurate to depend on for a reliable stock analysis.
    IV. Because information comes to the market in random fashion, price changes are random and there should not be a trend in the market price.

    Correct
    Incorrect
  104. Question 104 of 105
    104. Question

    Estimated EPS of ABC Ltd. for next year is Rs. 132. Assume PE multiple of 22 (Forward P/E) for the next year. Then the target price of ABC Ltd. works out to

    Correct
    Incorrect
  105. Question 105 of 105
    105. Question

    After lengthy trial and error, you discover a trading system that would have doubled the value of your investment every six months if applied over the last three years. Which of the following problems makes it difficult to conclude that this is an example of market inefficiency?

    Correct
    Incorrect

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