Question 1

A firm in an industry that is very sensitive to the business cycle will likely have a stock beta

Accepted Answer

A)  -greater than 1.0. 
B)  equal to 1.0. 
C)  less than 1.0 but greater than 0.0. 
D)  equal to or less than 0.0. 
E)  There is no relationship between beta and sensitivity to the business cycle. 
A)  -greater than 1.0. 
B)  equal to 1.0. 
C)  less than 1.0 but greater than 0.0. 
D)  equal to or less than 0.0. 
E)  There is no relationship between beta and sensitivity to the business cycle.

Question 2

The "normal" range of price-earnings ratios for the S&P 500 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 3

If the currency of your country is appreciating, the result should be to ______ exports and to _______ imports.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  -decrease; increase 
D)  decrease; decrease 
E)  not affect; not affect 
A)  increase; increase 
B)  increase; decrease 
C)  -decrease; increase 
D)  decrease; decrease 
E)  not affect; not affect

Question 4

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 5

Two firms, C and D, both produce coat hangers. The price of coat hangers is $1.20 each. Firm C has total fixed costs of $750,000 and variable costs of 30¢ per coat hanger. Firm D has total fixed costs of $400,000 and variable costs of 50¢ per coat hanger. The corporate tax rate is 40%. If the economy is strong, each firm will sell 2,000,000 coat hangers. If the economy enters a recession, each firm will sell 1,400,000 coat hangers. If the economy is strong, the after-tax profit of firm C will be

Accepted Answer

A)  $0. 
B)  $6,000. 
C)  $36,000. 
D)  $60,000. 
E)  -$630,000. 
A)  $0. 
B)  $6,000. 
C)  $36,000. 
D)  $60,000. 
E)  -$630,000.

Question 6

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. 
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.

Question 7

Assume the U.S. government was to decide to increase the budget field. Holding all else constant, this will cause ______ to increase.

Accepted Answer

A)  interest rates 
B)  government borrowing 
C)  unemployment 
D)  -interest rates and government borrowing 
E)  None of the options are correct. 
A)  interest rates 
B)  government borrowing 
C)  unemployment 
D)  -interest rates and government borrowing 
E)  None of the options are correct.

Question 8

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 9

An example of a positive demand shock is

Accepted Answer

A)  a decrease in the money supply. 
B)  a decrease in government spending. 
C)  a decrease in foreign export demand. 
D)  a decrease in the price of imported oil. 
E)  -a decrease in tax rates. 
A)  a decrease in the money supply. 
B)  a decrease in government spending. 
C)  a decrease in foreign export demand. 
D)  a decrease in the price of imported oil. 
E)  -a decrease in tax rates.

Question 10

Fiscal policy generally has a _______ direct impact than monetary policy on the economy, and the formulation and implementation of fiscal policy is ______ than that of monetary policy.

Accepted Answer

A)  more; quicker 
B)  -more; slower 
C)  less; quicker 
D)  less; slower 
E)  Cannot tell from the information given 
A)  more; quicker 
B)  -more; slower 
C)  less; quicker 
D)  less; slower 
E)  Cannot tell from the information given

Question 11

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 12

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 13

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 options are correct. 
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 options are correct.

Question 14

The "real," or inflation-adjusted, exchange rate is

Accepted Answer

A)  the balance of trade. 
B)  the budget deficit. 
C)  -the purchasing-power ratio. 
D)  unimportant to the U.S. economy. 
E)  None of the options are correct. 
A)  the balance of trade. 
B)  the budget deficit. 
C)  -the purchasing-power ratio. 
D)  unimportant to the U.S. economy. 
E)  None of the options are correct.

Question 15

The most widely used monetary tool is

Accepted Answer

A)  altering the discount rate. 
B)  altering the reserve requirements. 
C)  -open-market operations. 
D)  altering marginal tax rates. 
E)  None of the options are correct. 
A)  altering the discount rate. 
B)  altering the reserve requirements. 
C)  -open-market operations. 
D)  altering marginal tax rates. 
E)  None of the options are correct.

Question 16

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

Accepted Answer

A)  larger 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)  larger 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 17

Two firms, C and D, both produce coat hangers. The price of coat hangers is $1.20 each. Firm C has total fixed costs of $750,000 and variable costs of 30¢ per coat hanger. Firm D has total fixed costs of $400,000 and variable costs of 50¢ per coat hanger. The corporate tax rate is 40%. If the economy is strong, each firm will sell 2,000,000 coat hangers. If the economy enters a recession, each firm will sell 1,400,000 coat hangers. If the economy enters a recession, the tax of firm C will be

Accepted Answer

A)  $1,680,000. 
B)  $750,000. 
C)  $510,000. 
D)  -$204,000. 
A)  $1,680,000. 
B)  $750,000. 
C)  $510,000. 
D)  -$204,000.

Question 18

The life cycle stage in which industry leaders are likely to emerge is the

Accepted Answer

A)  start-up stage. 
B)  maturity stage. 
C)  -consolidation stage. 
D)  relative decline stage. 
E)  All of the options are correct. 
A)  start-up stage. 
B)  maturity stage. 
C)  -consolidation stage. 
D)  relative decline stage. 
E)  All of the options are correct.

Question 19

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 20

According to Michael Porter, there are five determinants of competition. An example of _____ is the threat new competitors pose to existing competitors in an industry.

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

Exam 17: Macroeconomic and Industry Analysis

A firm in an industry that is very sensitive to the business cycle will likely have a stock beta

The "normal" range of price-earnings ratios for the S&P 500 Index is

If the currency of your country is appreciating, the result should be to ______ exports and to _______ imports.

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

Assume the U.S. government was to decide to increase the budget field. Holding all else constant, this will cause ______ to increase.

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

An example of a positive demand shock is

Fiscal policy generally has a _______ direct impact than monetary policy on the economy, and the formulation and implementation of fiscal policy is ______ than that of monetary policy.

An example of a negative demand shock is

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

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

The "real," or inflation-adjusted, exchange rate is

The most widely used monetary tool is

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

The life cycle stage in which industry leaders are likely to emerge is the

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

According to Michael Porter, there are five determinants of competition. An example of _____ is the threat new competitors pose to existing competitors in an industry.

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

If the currency of your country is appreciating, the result should be to exports and to _ imports.

Fiscal policy generally has a _ direct impact than monetary policy on the economy, and the formulation and implementation of fiscal policy is than that of monetary policy.