Question 1

The average duration of unemployment and changes in the consumer price index for services are_________.

Accepted Answer

A) leading economic indicators 
B) coincidental economic indicators 
C) lagging economic indicators 
D) composite economic indicators 
E) none of the above 
A) leading economic indicators 
B) coincidental economic indicators 
C) lagging economic indicators 
D) composite economic indicators 
E) none of the above

Question 2

During which stage of the industry life cycle would a firm experience stable growth in sales?

Accepted Answer

A) Consolidation 
B) Relative Decline 
C) Maturity 
D) Start-up 
E) Stabilization 
A) Consolidation 
B) Relative Decline 
C) Maturity 
D) Start-up 
E) Stabilization

Question 3

The "normal" range of price-earnings ratios for the S&P500 Index is

Accepted Answer

A) between 2 and 10. 
B) between 5 and 15. 
C) less than 8. 
D) between 12 and 25. 
E) greater than 20. 
A) between 2 and 10. 
B) between 5 and 15. 
C) less than 8. 
D) between 12 and 25. 
E) greater than 20.

Question 4

Calculate firm B's degree of operating leverage.

Accepted Answer

A) .714 
B) 9.09 
C) 7.86 
D) 7.14 
E) none of the above. 
A) .714 
B) 9.09 
C) 7.86 
D) 7.14 
E) none of the above.

Question 5

If the economy is growing,firms with high operating leverage will experience __________.

Accepted Answer

A) higher increases in profits than firms with low operating leverage 
B) similar increases in profits as firms with low operating leverage 
C) smaller increases in profits than firms with low operating leverage 
D) no change in profits 
E) none of the above 
A) higher increases in profits than firms with low operating leverage 
B) similar increases in profits as firms with low operating leverage 
C) smaller increases in profits than firms with low operating leverage 
D) no change in profits 
E) none of the above

Question 6

________ is a proposition that a strong proponent of supply side economics would most likely stress.

Accepted Answer

A) Higher marginal tax rates will lead to a reduction in the size of the budget deficit and lower interest rates as they depend on government revenues. 
B) Higher marginal tax rates promote economic inefficiency and thereby retard aggregate output as they encourage investors to undertake low productivity projects with substantial tax shelter benefits. 
C) Income redistribution payments will exert little impact on real aggregate supply as they do not consume resources directly. 
D) A tax reduction will increase the disposable income of households, and thus, the primary impact of a tax reduction on aggregate supply will stem from the influence of the tax change on the size of the budget deficit or surplus. 
E) None of the above is a likely statement for a supply-side proponent. 
A) Higher marginal tax rates will lead to a reduction in the size of the budget deficit and lower interest rates as they depend on government revenues. 
B) Higher marginal tax rates promote economic inefficiency and thereby retard aggregate output as they encourage investors to undertake low productivity projects with substantial tax shelter benefits. 
C) Income redistribution payments will exert little impact on real aggregate supply as they do not consume resources directly. 
D) A tax reduction will increase the disposable income of households, and thus, the primary impact of a tax reduction on aggregate supply will stem from the influence of the tax change on the size of the budget deficit or surplus. 
E) None of the above is a likely statement for a supply-side proponent.

Question 7

If the economy is growing,firms with low operating leverage will experience __________.

Accepted Answer

A) higher increases in profits than firms with high operating leverage 
B) similar increases in profits as firms with high operating leverage 
C) smaller increases in profits than firms with high operating leverage 
D) no change in profits 
E) none of the above 
A) higher increases in profits than firms with high operating leverage 
B) similar increases in profits as firms with high operating leverage 
C) smaller increases in profits than firms with high operating leverage 
D) no change in profits 
E) none of the above

Question 8

The industry with the highest return in 2009 was

Accepted Answer

A) home construction. 
B) travel and tourism. 
C) health care. 
D) brokerage. 
E) banking. 
A) home construction. 
B) travel and tourism. 
C) health care. 
D) brokerage. 
E) banking.

Question 9

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 
E) none of the above 
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 
E) none of the above

Question 10

If the economy is strong,the total revenue of Firm C will be ________.

Accepted Answer

A) $1,680,000 
B) $1,400,000 
C) $2,000,000 
D) $2,400,000 
E) none of the above 
A) $1,680,000 
B) $1,400,000 
C) $2,000,000 
D) $2,400,000 
E) none of the above

Question 11

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 above 
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 above

Question 12

A declining GDP indicates a(n)______ economy with ______ opportunity for a firm to increase sales.

Accepted Answer

A) stagnant; little 
B) stagnant; ample 
C) expanding; little 
D) expanding; ample 
E) stable; no 
A) stagnant; little 
B) stagnant; ample 
C) expanding; little 
D) expanding; ample 
E) stable; no

Question 13

According to Michael Porter,there are five determinants of competition.An example of _____ is when a buyer purchases a large fraction of an industry's output and can demand price concessions.

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 14

If interest rates decrease,business investment expenditures are likely to ______ and consumer durable expenditures are likely to _________.

Accepted Answer

A) increase, increase 
B) increase, decrease 
C) decrease, increase 
D) decrease, decrease 
E) be unaffected,be unaffected 
A) increase, increase 
B) increase, decrease 
C) decrease, increase 
D) decrease, decrease 
E) be unaffected,be unaffected

Question 15

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 16

Demand-side economics is concerned with _______.

Accepted Answer

A) government spending and tax levels 
B) monetary policy 
C) fiscal policy 
D) A and B 
E) A,B,and C 
A) government spending and tax levels 
B) monetary policy 
C) fiscal policy 
D) A and B 
E) A,B,and C

Question 17

A peak 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 a feature of geography and not an investment term 
E) none of the above 
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 a feature of geography and not an investment term 
E) none of the above

Question 18

An example of a highly cyclical industry is ________.

Accepted Answer

A) the automobile industry 
B) the tobacco industry 
C) the food industry 
D) A and B 
E) B and C 
A) the automobile industry 
B) the tobacco industry 
C) the food industry 
D) A and B 
E) B and C

Question 19

If the economy enters a recession,the after-tax profit of Firm A will be ________.

Accepted Answer

A) $0 
B) $6,000 
C) $30,000 
D) $60,000 
E) none of the above 
A) $0 
B) $6,000 
C) $30,000 
D) $60,000 
E) none of the above

Question 20

An example of a defensive industry is ________.

Accepted Answer

A) the automobile industry 
B) the tobacco industry 
C) the food industry 
D) A and B 
E) B and C 
A) the automobile industry 
B) the tobacco industry 
C) the food industry 
D) A and B 
E) B and C

Exam 17: Options Markets: Introduction

The average duration of unemployment and changes in the consumer price index for services are_________.

During which stage of the industry life cycle would a firm experience stable growth in sales?

The "normal" range of price-earnings ratios for the S&P500 Index is

Calculate firm B's degree of operating leverage.

If the economy is growing,firms with high operating leverage will experience __________.

________ is a proposition that a strong proponent of supply side economics would most likely stress.

If the economy is growing,firms with low operating leverage will experience __________.

The industry with the highest return in 2009 was

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

If the economy is strong,the total revenue of Firm C will be ________.

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

A declining GDP indicates a(n)______ economy with ______ opportunity for a firm to increase sales.

According to Michael Porter,there are five determinants of competition.An example of _____ is when a buyer purchases a large fraction of an industry's output and can demand price concessions.

If interest rates decrease,business investment expenditures are likely to ______ and consumer durable expenditures are likely to _________.

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.

Demand-side economics is concerned with _______.

A peak is ________.

An example of a highly cyclical industry is ________.

If the economy enters a recession,the after-tax profit of Firm A will be ________.

An example of a defensive industry is ________.

The Investment Environment

Asset Classes and Financial Instruments

How Securities are Traded

Mutual Funds and Other Investment Companies

Introduction to Risk,return,and the Historical Record

Risk Aversion and 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

Option Valuation

Futures Markets

Futures, swaps, and Risk Management

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the CFA Institute Appendices

Filters

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

A declining GDP indicates a(n) economy with opportunity for a firm to increase sales.

If interest rates decrease,business investment expenditures are likely to and consumer durable expenditures are likely to ___.