Question 1

If the economy is shrinking, firms with low operating leverage will experience

Accepted Answer

A) higher decreases in profits than firms with high operating leverage. 
B) similar decreases in profits as firms with high operating leverage. 
C) smaller decreases in profits than firms with high operating leverage. 
D) no change in profits. 
A) higher decreases in profits than firms with high operating leverage. 
B) similar decreases in profits as firms with high operating leverage. 
C) smaller decreases in profits than firms with high operating leverage. 
D) no change in profits.

Question 2

Investors can ______ invest in an industry with the highest expected return by purchasing ______.

Accepted Answer

A) most easily; industry-specific iShares 
B) not; industry-specific iShares 
C) most easily; industry-specific ADRs 
D) not; individual stocks 
E) None of the options 
A) most easily; industry-specific iShares 
B) not; industry-specific iShares 
C) most easily; industry-specific ADRs 
D) not; individual stocks 
E) None of the options

Question 3

The industry with the highest return in 2012 was

Accepted Answer

A) trucking. 
B) home improvement. 
C) health plans. 
D) asset management. 
E) money center banks. 
A) trucking. 
B) home improvement. 
C) health plans. 
D) asset management. 
E) money center banks.

Question 4

Classifying firms into groups, such as _________, provides an alternative to the industry life cycle.

Accepted Answer

A) slow-growers 
B) stalwarts 
C) countercyclicals 
D) slow-growers and stalwarts 
E) slow-growers and countercyclicals 
A) slow-growers 
B) stalwarts 
C) countercyclicals 
D) slow-growers and stalwarts 
E) slow-growers and countercyclicals

Question 5

Which of the following are key economic statistics that are used to describe the state of the macroeconomy
I. Gross domestic product
II. The unemployment rate
III. Inflation
IV. Consumer sentiment
V. The budget deficit

Accepted Answer

A) I, II, and V 
B) I, III, and V 
C) I, II, and III 
D) I, II, III, and V 
E) I, II, III, IV, and V 
A) I, II, and V 
B) I, III, and V 
C) I, II, and III 
D) I, II, III, and V 
E) I, II, III, IV, and V

Question 6

Two firms, A and B, both produce widgets.The price of widgets is $1 each.Firm A has total fixed costs of $500,000 and variable costs of 50¢ per widget.Firm B has total fixed costs of $240,000 and variable costs of 75¢ per widget.The corporate tax rate is 40%.If the economy is strong, each firm will sell 1,200,000 widgets.If the economy enters a recession, each firm will sell 1,100,000 widgets. If the economy enters a recession, the after-tax profit of Firm B will be

Accepted Answer

A) $0. 
B) $6,000. 
C) $36,000. 
D) $60,000. 
E) None of the options 
A) $0. 
B) $6,000. 
C) $36,000. 
D) $60,000. 
E) None of the options

Question 7

Demand-side economics is concerned with

Accepted Answer

A) government spending and tax levels. 
B) monetary policy. 
C) fiscal policy. 
D) government spending and tax levels and monetary policy. 
E) All of the options. 
A) government spending and tax levels. 
B) monetary policy. 
C) fiscal policy. 
D) government spending and tax levels and monetary policy. 
E) All of the options.

Question 8

The industry with the highest ROE in 2012 was

Accepted Answer

A) restaurants. 
B) trucking. 
C) business software. 
D) computer systems. 
E) integrated oil and gas. 
A) restaurants. 
B) trucking. 
C) business software. 
D) computer systems. 
E) integrated oil and gas.

Question 9

According to Michael Porter, there are five determinants of competition.An example of _____ is when competitors seek to expand their share of the market.

Accepted Answer

A) threat of entry 
B) rivalry between existing competitors 
C) pressure from substitute products 
D) bargaining power of buyers 
E) bargaining power of suppliers 
A) threat of entry 
B) rivalry between existing competitors 
C) pressure from substitute products 
D) bargaining power of buyers 
E) bargaining power of suppliers

Question 10

If the economy is shrinking, firms with high operating leverage will experience

Accepted Answer

A) higher decreases in profits than firms with low operating leverage. 
B) similar decreases in profits as firms with low operating leverage. 
C) smaller decreases in profits than firms with low operating leverage. 
D) no change in profits. 
A) higher decreases in profits than firms with low operating leverage. 
B) similar decreases in profits as firms with low operating leverage. 
C) smaller decreases in profits than firms with low operating leverage. 
D) no change in profits.

Question 11

A top down analysis of a firm starts with

Accepted Answer

A) the relative value of the firm. 
B) the absolute value of the firm. 
C) the domestic economy. 
D) the global economy. 
E) the industry outlook. 
A) the relative value of the firm. 
B) the absolute value of the firm. 
C) the domestic economy. 
D) the global economy. 
E) the industry outlook.

Question 12

Discuss the industry life cycle, how this concept can be used by security analysts, and the limitations of this concept for security analysis.

Accepted Answer

The industry life cycle may be defined b

Question 13

If the economy were going into a recession, an attractive industry to invest in would be the

Accepted Answer

A) automobile industry. 
B) medical services industry. 
C) construction industry. 
D) automobile and construction industries. 
E) medical services and construction industries. 
A) automobile industry. 
B) medical services industry. 
C) construction industry. 
D) automobile and construction industries. 
E) medical services and construction industries.

Question 14

The North American Industry Classification System (NAICS) codes

Accepted Answer

A) are for firms that operate in the NAFTA region. 
B) group firms by industry. 
C) are a perfect classification system for firms. 
D) are for firms that operate in the NAFTA region and group firms by industry. 
E) are for firms that operate in the NAFTA region and are a perfect classification system for firms. 
A) are for firms that operate in the NAFTA region. 
B) group firms by industry. 
C) are a perfect classification system for firms. 
D) are for firms that operate in the NAFTA region and group firms by industry. 
E) are for firms that operate in the NAFTA region and are a perfect classification system for firms.

Question 15

An example of a negative demand shock is

Accepted Answer

A) a decrease in the money supply. 
B) a decrease in government spending. 
C) an increase in foreign export demand. 
D) a decrease in the price of imported oil. 
E) a decrease in the money supply and a decrease in government spending. 
A) a decrease in the money supply. 
B) a decrease in government spending. 
C) an increase in foreign export demand. 
D) a decrease in the price of imported oil. 
E) a decrease in the money supply and a decrease in government spending.

Question 16

List and discuss three of the five determinants of competition suggested in Porter's 1985 study.

Accepted Answer

The determinants are: the threat of entr

Question 17

Discuss the National Bureau of Economic Research (NBER)'s indexes of economic indicators and how each of the categories of these indicators might be used by the securities' analyst.

Accepted Answer

The NBER has developed a set of cyclical

Question 18

Sector rotation

Accepted Answer

A) should always be carried out. 
B) is never worthwhile. 
C) is shifting the portfolio more heavily toward an industry or sector that is expected to perform well in the future. 
D) can be implemented costlessly. 
A) should always be carried out. 
B) is never worthwhile. 
C) is shifting the portfolio more heavily toward an industry or sector that is expected to perform well in the future. 
D) can be implemented costlessly.

Question 19

In recent years, P/E multiples for S&P 500 companies have

Accepted Answer

A) ranged from -1 to -10. 
B) ranged from 1 to 8. 
C) ranged from 6 to 10. 
D) ranged from 12 to 25. 
E) ranged from 20 to more than 50. 
A) ranged from -1 to -10. 
B) ranged from 1 to 8. 
C) ranged from 6 to 10. 
D) ranged from 12 to 25. 
E) ranged from 20 to more than 50.

Question 20

A trough is

Accepted Answer

A) a transition from an expansion in the business cycle to the start of a contraction. 
B) a transition from a contraction in the business cycle to the start of an expansion. 
C) a depression that lasts more than three years. 
D) only something used by farmers to feed pigs and not an investment term. 
A) a transition from an expansion in the business cycle to the start of a contraction. 
B) a transition from a contraction in the business cycle to the start of an expansion. 
C) a depression that lasts more than three years. 
D) only something used by farmers to feed pigs and not an investment term.

Exam 17: Macroeconomic and Industry Analysis

If the economy is shrinking, firms with low operating leverage will experience

Investors can ______ invest in an industry with the highest expected return by purchasing ______.

The industry with the highest return in 2012 was

Classifying firms into groups, such as _________, provides an alternative to the industry life cycle.

Which of the following are key economic statistics that are used to describe the state of the macroeconomy I. Gross domestic product II. The unemployment rate III. Inflation IV. Consumer sentiment V. The budget deficit

Demand-side economics is concerned with

The industry with the highest ROE in 2012 was

According to Michael Porter, there are five determinants of competition.An example of _____ is when competitors seek to expand their share of the market.

If the economy is shrinking, firms with high operating leverage will experience

A top down analysis of a firm starts with

Discuss the industry life cycle, how this concept can be used by security analysts, and the limitations of this concept for security analysis.

If the economy were going into a recession, an attractive industry to invest in would be the

The North American Industry Classification System (NAICS) codes

An example of a negative demand shock is

List and discuss three of the five determinants of competition suggested in Porter's 1985 study.

Discuss the National Bureau of Economic Research (NBER)'s indexes of economic indicators and how each of the categories of these indicators might be used by the securities' analyst.

Sector rotation

In recent years, P/E multiples for S&P 500 companies have

A trough is

The Investment Environment

Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters

Investors can invest in an industry with the highest expected return by purchasing .