chapter 13

1. Which analysis most likely involves calculating the intrinsic value and checking if the company is overvalued or undervalued

• a. Fundamental analysis
• b. Technical analysis
• c. Industry analysis
• d. Moving average analysis
• Venus

2. Which of the following most likely uses profitability ratios to determine whether a company can properly service its debt and pay its current dividend

• a. Fundamental analysis
• b. Technical analysis
• c. Industry analysis
• d. Moving average analysis

3. Which of the following most likely attempts to understand the market sentiments behind the trend in a stock price

• a. Technical analysis
• b. Fundamental analysis
• c. Industry analysis
• d. Moving average analysis

4. Assumption that profit seeking investors in the market place react quickly to the release of information and when the new information about a stock appears investors reassess the intrinsic value of the stock and adjust their estimation of its price is based on which of the following theory

• a. Efficient market
• b. Random walk
• c. Rational expectation
• d. Technical analysis

5. Assumption that new information concerning a stock is disseminated randomly over time and price changes are therefore random and bear no relation to previous prices is based on which theory

• a. Random walk
• b. Efficient market
• c. Rational expectation
• d. Technical analysis

6. Assumption that people are rational and have access to all necessary information and people use all necessary information intelligently in their own self-interest and make investment decisions after weighing all available information is based on which theory

• a. Rational expectation
• b. Random walk
• c. Efficient market
• d. Technical analysis

7. Mr A is trading based on conclusion that a stock price fully reflects all available information and represents the best estimate of the stocks true value is most likely considering which theory

• a. Efficient market
• b. Random walk
• c. Rational expectation
• d. Technical analysis

8. Your client Caitlin is trading based on the conclusion that past price changes bear no useful information because any developments affecting the company have already been reflected in the current price of the stock

• a. Random walk
• b. Efficient market
• c. Rational expectation
• d. Technical analysis

9. You read an article that concludes past mistakes in the market can be avoided by using available information to anticipate change

• a. Rational expectation
• b. Random walk
• c. Efficient market
• d. Technical analysis

10. All past market information is fully reflected in the current prices is based on which form of efficient markets

• a. Weak form
• b. Semi strong form
• c. Strong form
• d. Non efficient form