Question 1

Which of the following is not a value-weighted series?

Accepted Answer

A)  NASDAQ Industrial Index 
B)  Dow Jones Industrial Average 
C)  Wilshire 5000 Equity Index 
D)  American Stock Exchange Series 
E)  NASDAQ Composite Index 
A)  NASDAQ Industrial Index 
B)  Dow Jones Industrial Average 
C)  Wilshire 5000 Equity Index 
D)  American Stock Exchange Series 
E)  NASDAQ Composite Index

Question 2

An aggregate market index can be used as a benchmark to judge the performance of professional money managers.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not a use of security market indicator series?

Accepted Answer

A)  To use as a benchmark of individual portfolio performance 
B)  To develop an index portfolio 
C)  To determine factors influencing aggregate security price movements 
D)  To use in the measurement of systematic risk 
E)  To use in the measurement of diversifiable risk 
A)  To use as a benchmark of individual portfolio performance 
B)  To develop an index portfolio 
C)  To determine factors influencing aggregate security price movements 
D)  To use in the measurement of systematic risk 
E)  To use in the measurement of diversifiable risk

Question 4

Exhibit 5.2
Use the Information Below for the Following Problem(S)
 $\begin{array}{lcccccc} 
~&&\text { Stock Price } &&& \text { \# Shares } \
 & \mathbf{X} & \mathbf{Y} & \mathbf{Z} & \mathbf{X} & \mathbf{Y} & \mathbf{Z} \
 \text { Jan. } 13,2005 & 20 & 40 & 30 & 1000 & 2000 & 1000^{*} \
\text { Jan. } 14,2005 & 25 & 42 & 18 & 1000 & 2000 & 2000 \
\text { Jan. } 15,2005 & 27 & 45 & 8 & 1000^{* *} & 2000 & 2000 \
\text { Jan. } 16,2005 & 20 & 40 & 10 & 3000 & 2000 & 2000
\end{array}$ 
*2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005
-Refer to Exhibit 5.2.Calculate a value weighted index for January 16th if the initial index value is 100.

Accepted Answer

A)  123.07 
B)  100.00 
C)  102.31 
D)  111.54 
E)  None of the above 
A)  123.07 
B)  100.00 
C)  102.31 
D)  111.54 
E)  None of the above

Question 5

The New York Stock Exchange Index is based on a sample of all of the New York Stock Exchange stocks.

Accepted Answer

A) True 
 B)False

Question 6

Bond-market indicator series have been around much longer than stock-market indicator series.

Accepted Answer

A) True 
 B)False

Question 7

The following are examples of Style Indexes

Accepted Answer

A)  Small-cap growth 
B)  Mid-cap value 
C)  Small-cap value 
D)  All of the above 
E)  None of the above 
A)  Small-cap growth 
B)  Mid-cap value 
C)  Small-cap value 
D)  All of the above 
E)  None of the above

Question 8

It is easier to construct an indicator series for bonds because of their relatively stable returns pattern.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following are factors that make it difficult to create and maintain a bond index?

Accepted Answer

A)  The universe of bonds is broader than stocks. 
B)  The universe of bonds is constantly changing due to new issues, bond maturities, calls, and bond sinking funds. 
C)  It is difficult to derive value, up-to-date prices. 
D)  Choices a and c 
E)  All of the above 
A)  The universe of bonds is broader than stocks. 
B)  The universe of bonds is constantly changing due to new issues, bond maturities, calls, and bond sinking funds. 
C)  It is difficult to derive value, up-to-date prices. 
D)  Choices a and c 
E)  All of the above

Question 10

Exhibit 5.5
Use the Information Below for the Following Problem(S)
 $$\begin{array} { c c c c c } 
\text { Stack } & \begin{array} { c } 
\text { 31-Dec-03 } \
\text { Price }
\end{array} & \begin{array} { c } 
\text { 31-Dec-03 } \
\text { Shares }
\end{array} & \begin{array} { c } 
\text { 31-Dec-04 } \
\text { Price }
\end{array} & \begin{array} { c } 
\text { S1-Dec-04 } \
\text { Shares }
\end{array} \
\hline W & \$ 75.00 & 10000 & \$ 50.00 & 20000 \
X & \$ 150.00 & 5000 & \$ 65.00 & 10000 \
Y & \$ 2500 & 20000 & \$ 35.00 & 20000 \
Z & \$ 20.00 & 25000 & \$ 50.00 & 25000
\end{array}$$ 
Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.
-Refer to Exhibit 5.5.Calculate the percentage return in the price weighted series for the period Dec 31,2000 to Dec 31,2004.

Accepted Answer

A)  12.68% 
B)  20.00% 
C)  21.76% 
D)  33.33% 
E)  40.00% 
A)  12.68% 
B)  20.00% 
C)  21.76% 
D)  33.33% 
E)  40.00%

Question 11

A price weighted series is disproportionately influenced by larger capitalization companies.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 5.1
Use the Information Below for the Following Problem(S)
                     
$\begin{array}{c}
\begin{array}{lll}
\text { Number of shares}
\end{array}
\begin{array}{lll}
\text { Glasing Prices}
\end{array}
\begin{array}{lll}
\text { (per share)} 
\end{array}
\end{array}$

$\begin{array}{cccc}
\text { Companies } & \text { outstanding } & \text { Day T } & \text { Day T + 1 } \
\hline 1 & 2,000 & \$ 30.00 & \$ 25.00 \
2 & 7,000 & 55.00 & 60.00 \
3 & 5,000 & 20.00 & 25.00 \
4 & 4.000 & 40.00 & 45.00
\end{array}$

-Refer to Exhibit 5.1.For a value-weighted series,assume that Day T is the base period and the base value is 100.What is the new index value for Day T + 1 and what is the percentage change in the index from Day T?

Accepted Answer

A)  106.33, 6.33% 
B)  107.48, 7.48% 
C)  109.93, 9.93% 
D)  108.7, 8.7% 
E)  None of the above 
A)  106.33, 6.33% 
B)  107.48, 7.48% 
C)  109.93, 9.93% 
D)  108.7, 8.7% 
E)  None of the above

Question 13

A properly selected sample for use in constructing a market indicator series will consider the sample's source,size and

Accepted Answer

A)  Breadth. 
B)  Average beta. 
C)  Value. 
D)  Variability. 
E)  Dividend record. 
A)  Breadth. 
B)  Average beta. 
C)  Value. 
D)  Variability. 
E)  Dividend record.

Question 14

Exhibit 5.5
Use the Information Below for the Following Problem(S)
 $$\begin{array} { c c c c c } 
\text { Stack } & \begin{array} { c } 
\text { 31-Dec-03 } \
\text { Price }
\end{array} & \begin{array} { c } 
\text { 31-Dec-03 } \
\text { Shares }
\end{array} & \begin{array} { c } 
\text { 31-Dec-04 } \
\text { Price }
\end{array} & \begin{array} { c } 
\text { S1-Dec-04 } \
\text { Shares }
\end{array} \
\hline W & \$ 75.00 & 10000 & \$ 50.00 & 20000 \
X & \$ 150.00 & 5000 & \$ 65.00 & 10000 \
Y & \$ 2500 & 20000 & \$ 35.00 & 20000 \
Z & \$ 20.00 & 25000 & \$ 50.00 & 25000
\end{array}$$ 
Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.
-Refer to Exhibit 5.5.Calculate the unweighted index (geometric mean)for Dec 31,2004.Assume a base index value of 100.The base year is Dec 31,2003.

Accepted Answer

A)  119.25 
B)  121.25 
C)  151.25 
D)  95.25 
E)  100.25 
A)  119.25 
B)  121.25 
C)  151.25 
D)  95.25 
E)  100.25

Question 15

Which of the fundamental factors was not used in the Fundamental Index created by Research Affiliates,Inc.?

Accepted Answer

A)  Sales 
B)  Profits (cash flow) 
C)  Leverage (debt/equity) 
D)  Net assets (book value) 
E)  Dividends 
A)  Sales 
B)  Profits (cash flow) 
C)  Leverage (debt/equity) 
D)  Net assets (book value) 
E)  Dividends

Question 16

The Standard & Poor's 500 index is an example of a value weighted index.

Accepted Answer

A) True 
 B)False

Question 17

Unlike the Dow Jones Industrial Average,the Nikkei-Dow Jones Average is price weighted.

Accepted Answer

A) True 
 B)False

Question 18

Exhibit 5.2
Use the Information Below for the Following Problem(S)
 $\begin{array}{lcccccc} 
~&&\text { Stock Price } &&& \text { \# Shares } \
 & \mathbf{X} & \mathbf{Y} & \mathbf{Z} & \mathbf{X} & \mathbf{Y} & \mathbf{Z} \
 \text { Jan. } 13,2005 & 20 & 40 & 30 & 1000 & 2000 & 1000^{*} \
\text { Jan. } 14,2005 & 25 & 42 & 18 & 1000 & 2000 & 2000 \
\text { Jan. } 15,2005 & 27 & 45 & 8 & 1000^{* *} & 2000 & 2000 \
\text { Jan. } 16,2005 & 20 & 40 & 10 & 3000 & 2000 & 2000
\end{array}$ 
*2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005
-Refer to Exhibit 5.2.Calculate a price weighted average for January 13th.

Accepted Answer

A)  32 
B)  30 
C)  36.13 
D)  34 
E)  None of the above 
A)  32 
B)  30 
C)  36.13 
D)  34 
E)  None of the above

Question 19

The Morgan Stanley group index for Europe,Australia,and the Far East (EAFE)is a price weighted index.

Accepted Answer

A) True 
 B)False

Question 20

The low correlations between the U.S.and Japan confirm the benefit of global diversification.

Accepted Answer

A) True 
 B)False

Exam 5: Security-Market Indexes

Which of the following is not a value-weighted series?

An aggregate market index can be used as a benchmark to judge the performance of professional money managers.

Which of the following is not a use of security market indicator series?

The New York Stock Exchange Index is based on a sample of all of the New York Stock Exchange stocks.

Bond-market indicator series have been around much longer than stock-market indicator series.

The following are examples of Style Indexes

It is easier to construct an indicator series for bonds because of their relatively stable returns pattern.

Which of the following are factors that make it difficult to create and maintain a bond index?

A price weighted series is disproportionately influenced by larger capitalization companies.

A properly selected sample for use in constructing a market indicator series will consider the sample's source,size and

Which of the fundamental factors was not used in the Fundamental Index created by Research Affiliates,Inc.?

The Standard & Poor's 500 index is an example of a value weighted index.

Unlike the Dow Jones Industrial Average,the Nikkei-Dow Jones Average is price weighted.

The Morgan Stanley group index for Europe,Australia,and the Far East (EAFE)is a price weighted index.

The low correlations between the U.S.and Japan confirm the benefit of global diversification.

An Overview of the Investment Process

The Asset Allocation Decision

The Global Market Investment Decision

Securities Markets: Organization and Operation

Efficient Capital Markets

An Introduction to Portfolio Management

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Analysis of Financial Statements

Security Valuation Principles

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

Equity Portfolio Management Stragtegies

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

Bond Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward and Futures Contracts

Option Contracts

Swap Contracts,convertible Securities,and Other Embedded Derivatives

Professional Money Management, alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Investment Return and Risk Analysis Questions

Investment and Retirement Plans

Calculating Covariance and Correlation Coefficient of Assets

Portfolio Variance and Stock Weight Calculations

Portfolio Optimization with Negative Correlation: Finding Minimum Variance and Weight Allocation

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