Question 1

For technical analysts,the pattern formed by a series of price fluctuations characterised by rising bottoms and horizontal tops is a/an:

Accepted Answer

A)  ascending triangle. 
B)  symmetrical triangle. 
C)  descending triangle. 
D)  a pennant.

Question 2

Investment analysts use a number of approaches in the analysis of fundamentals that may affect share prices.Which of the following statements in relation to the top-down approach to share price analysis is MOST correct? The top-down approach:

Accepted Answer

A)  identifies specific firms to include in an investment portfolio. 
B)  provides a measure of the level of unsystematic risk in the market. 
C)  compares the performance of firms through financial ratio analysis. 
D)  identifies future economic factors that may impact on industry sector performance.

Question 3

The weak form of the efficient market hypothesis asserts that:

Accepted Answer

A)  the change in future share prices cannot be predicted from past share prices. 
B)  share prices adjust rapidly to new information contained in past prices or past data. 
C)  technical analysts cannot be expected to outperform the market. 
D)  all of the given answers are correct.

Question 4

Daily share-price data is given over a seven-day period for a company.Calculate the five-day moving average over the period.
14 June:$6.75
15 June:$6.80
16 June:$6.94
17 June:$6.58
18 June:$6.23
21 June:$5.95
22 June:$5.80

Accepted Answer

A)  $6.23; $5.95; $5.80 
B)  $6.23; $6.50; $6.44 
C)  $6.66; $6.50; $6.30 
D)  $6.66; $6.54; $6.44

Question 5

In relation to charting,an upward trend line connects the _______ points of a _______ price series,while a downward trend connects the _______ points of a _______ price series.

Accepted Answer

A)  upper; rising; higher; falling 
B)  lower; rising; higher; falling 
C)  upper; falling; lower; rising 
D)  lower; falling; upper; rising

Question 6

In technical analysis,a price level below which the market price is temporarily unlikely to fall is a:

Accepted Answer

A)  trend channel. 
B)  resistance line. 
C)  support line. 
D)  trend line.

Question 7

If you believe that share prices reflect all information that can be derived from examining the market trading data such as the history of past share prices,which form of efficient market hypothesis do you believe in?

Accepted Answer

A)  Weak. 
B)  Semi-strong. 
C)  Strong. 
D)  Informational.

Question 8

The bottom-up approach to fundamental analysis considers the impact of forecast changes in systematic market variables.

Accepted Answer

A) True 
 B)False

Question 9

For technical analysts,the pattern formed by a series of price fluctuations composed with each top and bottom smaller than its predecessor and with transaction volumes usually diminishing is a/an:

Accepted Answer

A)  ascending triangle. 
B)  symmetrical triangle. 
C)  descending triangle. 
D)  pole.

Question 10

If a company's shares are expected to perform better than other companies in the same industry,there will be _______ for the company shares and a ____ in the share price.

Accepted Answer

A)  increased demand; rise 
B)  decreased demand; rise 
C)  increased supply; fall 
D)  decreased supply; fall

Question 11

The approach that seeks to identify factors that are likely to influence the growth rate and future profits of a company is called:

Accepted Answer

A)  economic analysis. 
B)  factor analysis. 
C)  fundamental analysis. 
D)  technical analysis.

Question 12

According to modern portfolio theory,the _______ the degree of systematic risk,the _______ should be the expected return.

Accepted Answer

A)  smaller; greater. 
B)  greater; greater. 
C)  smaller; smaller. 
D)  greater; smaller.

Question 13

An alternative approach to forecasting the behaviour of share prices is technical analysis.Which of the following statements in relation to the approach taken by technical analysts is incorrect?

Accepted Answer

A)  As a price pattern emerges, it is assumed that the historical pattern will re-emerge in full. 
B)  The stock markets are, at times, dominated by mass psychology. 
C)  Historical price patterns are of little use in forecasting future price movements. 
D)  Analysts typically adopt either a 'technical' or a 'fundamental' approach.

Question 14

An investor finds that for a particular group of shares,large positive price changes are always followed by large negative price changes.This finding violates:

Accepted Answer

A)  the strong form of the efficient market hypothesis. 
B)  the semi-strong form of the efficient market hypothesis. 
C)  the weak form of the efficient market hypothesis. 
D)  none of the given choices.

Question 15

In relation to a country's economy,the more a country imports and the worse the current account becomes,the:

Accepted Answer

A)  more the currency increases. 
B)  lower interest rates fall. 
C)  lower foreign debt becomes. 
D)  higher foreign debt becomes.

Question 16

The greater the degree of systematic risk,the:

Accepted Answer

A)  higher the expected share price. 
B)  higher the expected rate of return. 
C)  lower the expected return on a share. 
D)  closer a share's beta will be to 1.

Question 17

Historical growth trends in developed countries suggest sustainable long-term growth is in the range of 3 and 4% per annum.

Accepted Answer

A) True 
 B)False

Question 18

Which group of investors is able to earn consistent superior profits if the financial markets are strong-form efficient?

Accepted Answer

A)  Only fundamental analysts will be able to profit 
B)  Only technical analysts will be able to profit 
C)  Only specialists, analysts and insiders in the company will be able to profit 
D)  No one will be able to sustain superior profits

Question 19

Compared with fundamental analysis,technical analysis focuses on:

Accepted Answer

A)  accounting ratios. 
B)  forecasting a company's future profitability. 
C)  forecasting a company's technical ratios. 
D)  share price movements.

Question 20

Strategies based on technical analysis are most likely to be profitable in a market that is regarded as:

Accepted Answer

A)  following a random walk. 
B)  semi-strong efficient. 
C)  not strong-form efficient. 
D)  not weak-form efficient.

Exam 7: Forecasting Share Price Movements