ACC 4113 - FWA revision (1)

Which of the following is the best measure of the floor for a stock price?

• Book value

• Liquidation value

• Replacement cost

• Market value

Which of the following is not a characteristic of a money market instrument?

• Liquidity

• Long maturity

• Liquidity premium

• Long maturity and liquidity premium

The trading of stock that was previously issued takes place.

• in the secondary market.

• in the primary market.

• usually with the assistance of an investment banker.

• in the secondary and primary markets.

According to the Capital Asset Pricing Model (CAPM), which one of the following statements is incorrect?

• The expected rate of return on a security increases as its beta increases.

• A fairly priced security has an alpha of zero.

• In equilibrium, all securities lie on the security market line.

• The expected rate of return on a security increases in direct proportion to a decrease in the risk-free rate.

A market where current market price reflects information from all past price movements is classified as _____________.

• rarely efficient

• semi strong efficient

• weak form efficient

• strong form efficient

A fixed-income security pays.

• A fixed level of income for the life of the owner.

• A fixed stream of income or a stream of income that is determined according to a specified formula for the life of the security.

• A variable level of income for owners on a fixed income.

• A fixed or variable income stream at the option of the owner.

The smallest component of the money market is…….

• repurchase agreements.

• small-denomination time deposits.

• money market mutual funds.

• commercial paper.

The initial margin requirement on margin purchases is 40 percent. An investor buys 100 shares at $10 a share using just the required cash. The loan from broker is:

• $300

• $600

• $1,000

• $1,300

In the context of the Capital Asset Pricing Model (CAPM), the relevant measure of risk is:

• unique risk.

• beta.

• standard deviation of returns.

• variance of returns.

If you believe in the ________ form of the ADX, you believe that stock prices reflect all relevant information, including historical stock prices and current public information about the firm, but not information that is available only to insiders.

• semistrong

• strong

• weak

• None of the options are correct.