Question 1

Finding high income (yield) and growth in the same investment is a relatively standard practice.

Accepted Answer

A) True 
 B)False

Question 2

When ranking security returns, the data shows that the annualized returns are as follows (ranked from highest return to lowest return):

Accepted Answer

A) Large stocks, small stocks, long-term corporate bonds, long-term government bonds, treasury bills. 
B) Small stocks, large stocks, long-term corporate bonds, long-term government bonds, treasury bills. 
C) Small stocks, large stocks, treasury bills, long-term government bonds, long-term corporate bonds. 
D) Treasury bills, long-term government bonds, long-term corporate bonds, large stocks, small stocks. 
E) Large stocks, small stocks, long-term government bonds, long-term corporate bonds, treasury bills. 
A) Large stocks, small stocks, long-term corporate bonds, long-term government bonds, treasury bills. 
B) Small stocks, large stocks, long-term corporate bonds, long-term government bonds, treasury bills. 
C) Small stocks, large stocks, treasury bills, long-term government bonds, long-term corporate bonds. 
D) Treasury bills, long-term government bonds, long-term corporate bonds, large stocks, small stocks. 
E) Large stocks, small stocks, long-term government bonds, long-term corporate bonds, treasury bills.

Question 3

Real assets, because of increasing replacement value and scarcity, tend to perform better than financial assets during periods of high inflation.

Accepted Answer

A) True 
 B)False

Question 4

A(n) _____ is a legally documented claim on an asset, while a(n) _____ is an actual, tangible asset which may be seen, felt, held, or collected.

Accepted Answer

A) Real asset; financial asset 
B) Financial asset; real asset 
C) Indirect equity claim; direct equity claim 
D) Direct equity claim; indirect equity claim 
E) None of the above 
A) Real asset; financial asset 
B) Financial asset; real asset 
C) Indirect equity claim; direct equity claim 
D) Direct equity claim; indirect equity claim 
E) None of the above

Question 5

A stock that pays low or no cash dividends is:

Accepted Answer

A) eBay. 
B) Duke Power. 
C) AT&T. 
D) All of the above 
A) eBay. 
B) Duke Power. 
C) AT&T. 
D) All of the above

Question 6

What are the components in determining the real rate of return?

Accepted Answer

A) The risk premium 
B) The inflation factor 
C) The required rate of return 
D) Both a) and b) above 
E) None of the above 
A) The risk premium 
B) The inflation factor 
C) The required rate of return 
D) Both a) and b) above 
E) None of the above

Question 7

The holding period to qualify for long-term capital gains is:

Accepted Answer

A) at least 6 months. 
B) at least 9 months. 
C) at least 18 months. 
D) at least 2 years. 
E) more than one year. 
A) at least 6 months. 
B) at least 9 months. 
C) at least 18 months. 
D) at least 2 years. 
E) more than one year.

Question 8

An investment requires a total return that comprises:

Accepted Answer

A) a real rate of return and compensation for inflation. 
B) a real rate of return, compensation for inflation, and a risk premium. 
C) compensation for inflation and a risk premium. 
D) a real rate of return, compensation for inflation, a risk premium, and compensation for time and effort devoted to researching alternative investments. 
E) None of the above 
A) a real rate of return and compensation for inflation. 
B) a real rate of return, compensation for inflation, and a risk premium. 
C) compensation for inflation and a risk premium. 
D) a real rate of return, compensation for inflation, a risk premium, and compensation for time and effort devoted to researching alternative investments. 
E) None of the above

Question 9

The Stocks, Bonds, Bills and Inflation Yearbook is an annual reference book that publishes return data on a variety of securities. The data shows that the large company category had a negative return in only one decade, and that was the 1930s.

Accepted Answer

A) True 
 B)False

Question 10

A share in a money market fund is an indirect equity claim.

Accepted Answer

A) True 
 B)False

Question 11

In managing a personal portfolio, an investor should consider opportunity costs.

Accepted Answer

A) True 
 B)False

Question 12

Assume the real return in the economy is 5.0%. It is anticipated that the consumer price index will go from 340 to 363.8. Shares of common stock for the market in general are assumed to have a required rate of return one-fourth higher than the risk-free rate. Compute the required return on common stock.

Accepted Answer

.1583 or 15.83%
Explanation: Refer to Fo

Question 13

The Tax Act of 2003 offers greater potential for wealth accumulation.

Accepted Answer

A) True 
 B)False

Question 14

The riskiness of an investment is measured by the dispersion of possible outcomes.

Accepted Answer

A) True 
 B)False

Question 15

Those who engage in short-term market tactics are considered traders.

Accepted Answer

A) True 
 B)False

Question 16

The age and economic circumstances of an investor are important variables in determining an appropriate level of risk.

Accepted Answer

A) True 
 B)False

Question 17

Under the Economic Growth and Tax Reconciliation Act of 2001, when will estate taxes be eliminated?

Accepted Answer

A) 2008 
B) 2009 
C) 2010 
D) 2019 
E) The estate tax will not be eliminated. 
A) 2008 
B) 2009 
C) 2010 
D) 2019 
E) The estate tax will not be eliminated.

Question 18

Rare paintings and baseball cards may be considered as forms of investment.

Accepted Answer

A) True 
 B)False

Question 19

Diamonds represent a form of real assets, but cattle do not.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is the most accurate concerning security returns over the eight decades since the 1920s?

Accepted Answer

A) Returns on large common stocks were very stable. 
B) Returns on long-term corporate bonds were very stable. 
C) Returns on long-term government bonds were very stable. 
D) Returns on treasury bills were very consistent from period to perioD. 
E) All securities exhibited very unstable returns over the eight decades in question. 
A) Returns on large common stocks were very stable. 
B) Returns on long-term corporate bonds were very stable. 
C) Returns on long-term government bonds were very stable. 
D) Returns on treasury bills were very consistent from period to perioD. 
E) All securities exhibited very unstable returns over the eight decades in question.

Exam 1: The Investment Setting

Finding high income (yield) and growth in the same investment is a relatively standard practice.

When ranking security returns, the data shows that the annualized returns are as follows (ranked from highest return to lowest return):

Real assets, because of increasing replacement value and scarcity, tend to perform better than financial assets during periods of high inflation.

A(n) _____ is a legally documented claim on an asset, while a(n) _____ is an actual, tangible asset which may be seen, felt, held, or collected.

A stock that pays low or no cash dividends is:

What are the components in determining the real rate of return?

The holding period to qualify for long-term capital gains is:

An investment requires a total return that comprises:

The Stocks, Bonds, Bills and Inflation Yearbook is an annual reference book that publishes return data on a variety of securities. The data shows that the large company category had a negative return in only one decade, and that was the 1930s.

A share in a money market fund is an indirect equity claim.

In managing a personal portfolio, an investor should consider opportunity costs.

The Tax Act of 2003 offers greater potential for wealth accumulation.

The riskiness of an investment is measured by the dispersion of possible outcomes.

Those who engage in short-term market tactics are considered traders.

The age and economic circumstances of an investor are important variables in determining an appropriate level of risk.

Under the Economic Growth and Tax Reconciliation Act of 2001, when will estate taxes be eliminated?

Rare paintings and baseball cards may be considered as forms of investment.

Diamonds represent a form of real assets, but cattle do not.

Which of the following statements is the most accurate concerning security returns over the eight decades since the 1920s?

Security Markets

Participating in the Market

Investment Companies: Mutual Funds, Exchange-Traded Funds, Closed-End Funds, and Unit Investment Trusts

Economic Activity

Industry Analysis

Valuation of the Individual Firm

Financial Statement Analysis

Efficient Markets and Anomalies

Behavioral Finance and Technical Analysis

Bond and Fixed-Income Fundamentals

Principles of Bond Valuation and Investment

Convertible Securities and Warrants

Put and Call Options

Commodities and Financial Futures

Stock Index Futures and Options

A Basic Look at Portfolio Management and Capital Market Theory

Duration and Bond Portfolio Management

International Securities Markets

Investments in Real Assets

Alternative Investments: Private Equity and Hedge Funds

Measuring Risks and Returns of Portfolio Managers

A Comprehensive Analysis for Real Estate Investment Decisions

The Makeup of Institutional Investors

Filters

A(n) _ is a legally documented claim on an asset, while a(n) _ is an actual, tangible asset which may be seen, felt, held, or collected.