If you believe the economy is about to go into a recession, you might change your asset allocation by selling _ and buying ___.
growth stocks; long-term bonds
defensive stocks; long-term bonds
defensive stocks; growth stocks
long-term bonds; growth stocks
If you believe the economy is about to go into a recession, you might change your asset allocation by selling _ and buying ___.
growth stocks; long-term bonds
defensive stocks; long-term bonds
defensive stocks; growth stocks
long-term bonds; growth stocks
Attempting to forecast future earnings and dividends is consistent with which of the following approaches to securities analysis?
Both technical analysis and fundamental analysis
Technical analysis
Fundamental analysis
Indexing
Attempting to forecast future earnings and dividends is consistent with which of the following approaches to securities analysis?
Both technical analysis and fundamental analysis
Technical analysis
Fundamental analysis
Indexing
If economic conditions are such that very slow growth is expected in the foreseeable future, one would want to invest in industries with _____ sensitivity to economic conditions.
below-average
Since growth is expected to be slow, sensitivity to economic conditions is not an issue.
above-average
average
If economic conditions are such that very slow growth is expected in the foreseeable future, one would want to invest in industries with _____ sensitivity to economic conditions.
below-average
Since growth is expected to be slow, sensitivity to economic conditions is not an issue.
above-average
average
Which of the following affects a firm's sensitivity of its earnings to the business cycle?
I and II only
II only
I and III only
I, II, and III
Which of the following affects a firm's sensitivity of its earnings to the business cycle?
I and II only
II only
I and III only
I, II, and III
An example of a highly cyclical industry is the _____.
automobile industry
pharmaceutical industry
tobacco industry
utility industry
An example of a highly cyclical industry is the _____.
automobile industry
pharmaceutical industry
tobacco industry
utility industry
Pharmaceuticals, food, and other necessities would be good performers during the _____ stage of the business cycle.
expansion
peak
trough
contraction
Pharmaceuticals, food, and other necessities would be good performers during the _____ stage of the business cycle.
expansion
peak
trough
contraction
Capital goods industries such as industrial equipment, transportation, and construction would be good investments during the _____ stage of the business cycle.
peak
trough
expansion
contraction
Capital goods industries such as industrial equipment, transportation, and construction would be good investments during the _____ stage of the business cycle.
peak
trough
expansion
contraction
A firm in the early stages of its industry life cycle will likely have _____.
low rates of return on investment
low dividend payout rates
low rates of investment
low R&D spending
A firm in the early stages of its industry life cycle will likely have _____.
low rates of return on investment
low dividend payout rates
low rates of investment
low R&D spending
An analyst starts by examining the broad economic environment and then considers the implications of the economy on the industry in which the firm operates. This is called _____ analysis.
upside-down
outside-inside
bottom-up
top-down
An analyst starts by examining the broad economic environment and then considers the implications of the economy on the industry in which the firm operates. This is called _____ analysis.
upside-down
outside-inside
bottom-up
top-down
If the currency of your country is depreciating, this should _ exports and ___ imports.
stimulate; discourage
discourage; stimulate
discourage; discourage
stimulate; stimulate
If the currency of your country is depreciating, this should _ exports and ___ imports.
stimulate; discourage
discourage; stimulate
discourage; discourage
stimulate; stimulate
If interest rates increase, business investment expenditures are likely to _ and consumer durable expenditures are likely to ___.
decrease; decrease
decrease; increase
increase; increase
increase; decrease
If interest rates increase, business investment expenditures are likely to _ and consumer durable expenditures are likely to ___.
decrease; decrease
decrease; increase
increase; increase
increase; decrease
Increases in the money supply will cause demand for investment and consumption goods to _ in the short run and may cause prices to ___ in the long run.
decrease; decrease
decrease; increase
increase; decrease
increase; increase
Increases in the money supply will cause demand for investment and consumption goods to _ in the short run and may cause prices to ___ in the long run.
decrease; decrease
decrease; increase
increase; decrease
increase; increase
An investment strategy that entails shifting the portfolio into industry sectors that are expected to outperform others based on macroeconomic forecasts is termed _____.
life-cycle analysis
contraction/expansion analysis
sector rotation
business-cycle shifting
An investment strategy that entails shifting the portfolio into industry sectors that are expected to outperform others based on macroeconomic forecasts is termed _____.
life-cycle analysis
contraction/expansion analysis
sector rotation
business-cycle shifting
What economic variable is most closely associated with increasing corporate profits?
Exchange rates
Budget deficits
Inflation
Gross domestic product
What economic variable is most closely associated with increasing corporate profits?
Exchange rates
Budget deficits
Inflation
Gross domestic product
Earnings yields tend to _____ when Treasury yields fall.
remain unchanged
fall
fluctuate wildly
rise
Earnings yields tend to _____ when Treasury yields fall.
remain unchanged
fall
fluctuate wildly
rise
If a stock is correctly priced, then you know that _____.
the sum of the stock's expected capital gains
the dividend payout ratio is optimal
the stock's required return is equal to the growth rate in earnings and dividends
the stock is undervalued
If a stock is correctly priced, then you know that _____.
the sum of the stock's expected capital gains
the dividend payout ratio is optimal
the stock's required return is equal to the growth rate in earnings and dividends
the stock is undervalued
What is the expected return of an underpriced stock based on CAPM?
equal to
less than
greater than or equal to
greater than
What is the expected return of an underpriced stock based on CAPM?
equal to
less than
greater than or equal to
greater than
When can the constant-growth dividend discount model (DDM) be used?
growth rate is less than the required return
growth rate is less than or equal to the required return
growth rate is greater than or equal to the required return
growth rate is greater than the required return
When can the constant-growth dividend discount model (DDM) be used?
growth rate is less than the required return
growth rate is less than or equal to the required return
growth rate is greater than or equal to the required return
growth rate is greater than the required return
What is the maximum price you would pay for a share to earn a 12% return if you expect $1.25 in dividends and $35 from sale?
$38.47
$31.25
$32.37
$41.32
What is the maximum price you would pay for a share to earn a 12% return if you expect $1.25 in dividends and $35 from sale?
$38.47
$31.25
$32.37
$41.32
A company with a higher expected earnings growth rate than typical likely has what?
a dividend yield which is greater than that of the typical company
less sensitivity to market trends than the typical company
a dividend yield which is less than that of the typical company
less risk than the typical company
A company with a higher expected earnings growth rate than typical likely has what?
a dividend yield which is greater than that of the typical company
less sensitivity to market trends than the typical company
a dividend yield which is less than that of the typical company
less risk than the typical company
If you believe the economy is about to go into a recession, you might change your asset allocation by selling _ and buying ___.
growth stocks; long-term bonds
long-term bonds; growth stocks
defensive stocks; long-term bonds
defensive stocks; growth stocks
Attempting to forecast future earnings and dividends is consistent with which of the following approaches to securities analysis?
Fundamental analysis
Technical analysis
Indexing
Both technical analysis and fundamental analysis
If economic conditions are such that very slow growth is expected in the foreseeable future, one would want to invest in industries with _____ sensitivity to economic conditions.
above-average
Since growth is expected to be slow, sensitivity to economic conditions is not an issue.
average
below-average
Which of the following affects a firm's sensitivity of its earnings to the business cycle?
I, II, and III
I and II only
I and III only
II only
An example of a highly cyclical industry is the _____.
utility industry
tobacco industry
automobile industry
pharmaceutical industry
Pharmaceuticals, food, and other necessities would be good performers during the _____ stage of the business cycle.
peak
trough
contraction
expansion
Capital goods industries such as industrial equipment, transportation, and construction would be good investments during the _____ stage of the business cycle.
expansion
peak
contraction
trough
A firm in the early stages of its industry life cycle will likely have _____.
low rates of return on investment
low R&D spending
low dividend payout rates
low rates of investment
An analyst starts by examining the broad economic environment and then considers the implications of the economy on the industry in which the firm operates. This is called _____ analysis.
outside-inside
upside-down
bottom-up
top-down
If the currency of your country is depreciating, this should _ exports and ___ imports.
stimulate; discourage
discourage; discourage
discourage; stimulate
stimulate; stimulate
If interest rates increase, business investment expenditures are likely to _ and consumer durable expenditures are likely to ___.
decrease; decrease
increase; increase
decrease; increase
increase; decrease
Increases in the money supply will cause demand for investment and consumption goods to _ in the short run and may cause prices to ___ in the long run.
increase; increase
decrease; increase
decrease; decrease
increase; decrease
An investment strategy that entails shifting the portfolio into industry sectors that are expected to outperform others based on macroeconomic forecasts is termed _____.
sector rotation
contraction/expansion analysis
life-cycle analysis
business-cycle shifting
What economic variable is most closely associated with increasing corporate profits?
Gross domestic product
Inflation
Exchange rates
Budget deficits
Earnings yields tend to _____ when Treasury yields fall.
rise
remain unchanged
fluctuate wildly
fall
If a stock is correctly priced, then you know that _____.
the stock is undervalued
the stock's required return is equal to the growth rate in earnings and dividends
the dividend payout ratio is optimal
the sum of the stock's expected capital gains
What is the expected return of an underpriced stock based on CAPM?
less than
greater than or equal to
equal to
greater than
When can the constant-growth dividend discount model (DDM) be used?
growth rate is less than the required return
growth rate is greater than or equal to the required return
growth rate is less than or equal to the required return
growth rate is greater than the required return
What is the maximum price you would pay for a share to earn a 12% return if you expect $1.25 in dividends and $35 from sale?
$41.32
$32.37
$31.25
$38.47
A company with a higher expected earnings growth rate than typical likely has what?
less risk than the typical company
less sensitivity to market trends than the typical company
a dividend yield which is less than that of the typical company
a dividend yield which is greater than that of the typical company
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