Question 1 (2 points)


Returns from the overall market (or an individual stock) can be thought of as a combination of three factors: earnings growth, multiple expansion (or contraction), and dividend yield.

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Question 2 (2 points)

Future tax rates are difficult to estimate because they are politically influenced.

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Question 3 (2 points)

If the intrinsic value of an asset is greater than the market price, you would want to buy the investment.

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Question 4 (2 points)

According to Peter Lynch, a favorable attribute of a firm that may result in favorable stock performance is when a firm’s product is the latest craze.

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Question 5 (2 points)

Interest rate spread, 10-year Treasury bonds less federal funds, is listed as a lagging indicator in the Conference Board.

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Question 6 (2 points)

Which of the following is a market tenet of Warren Buffett? Select one.

Question 6 options:

  Long-term prospects
  Resistance to institutional imperative
  Creation of one dollar of market value for every dollar retained
  Purchase at discount to intrinsic value

Question 7 (2 points)

The two questions when assessing the performance measurement of an investment manager include which of the following? Select one.

Question 7 options:

  Did the manager follow the client’s policy statement?
  Did the manager completely diversify the portfolio to eliminate all unsystematic risk?
  Why did the portfolio manager perform as he or she did?
  Did the manager have the ability to derive above-average risk-adjusted returns?
  Did the manager deliver on expectations and produce an additional alpha component?

Question 8 (2 points)

Issues that provide funds to retire another issue early are known as what? Select one.

Question 8 options:

  Bearer bonds
  Secured debentures
  Unsecured debentures
  Revenue bonds
  Refunding bonds

Question 9 (2 points)

When a bond issue is secured by a legal claim on equipment it is known as which of the following? Select one.

Question 9 options:

  A junior bond
  An income bond
  A bearer bond
  A trust certificate
  A perpetuity

Question 10 (2 points)

Which bond provision would be considered the riskiest for an investor who is concerned that market interest rates will drop dramatically over the life of the bond? Select one.

Question 10 options:

  Sinking fund
  Deferred call
  Freely callable
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