Course Introduction
Investment Analysis
Textbook Exam Questions
Investment Analysis explores the fundamental principles and techniques used to evaluate various investment opportunities in financial markets. The course covers topics such as risk and return assessment, portfolio theory, security valuation, asset pricing models, and market efficiency. Students will learn how to analyze stocks, bonds, and alternative investments, apply quantitative methods to investment decisions, and develop strategies for portfolio management. Emphasis is placed on real-world application, analytical thinking, and understanding the impact of economic and market factors on investment performance.
Recommended Textbook Fundamentals of Investments 6th Edition by
Bradford D. Jordan
Available Study Resources on Quizplus
20 Chapters
1855 Verified Questions
1855 Flashcards
Source URL: https://quizplus.com/study-set/3164
Page 2
Chapter 1: A Brief History of Risk and Return
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/62640
Sample Questions
Q1) Uptown Industries common stock had returns of 9.2, 11.3, 10.6, and 5.4 percent, respectively, over the past four years. What is the standard deviation of these returns?
A) 2.07 percent
B) 2.38 percent
C) 2.41 percent
D) 2.59 percent
E) 2.63 percent
Answer: E
Q2) The total dollar return on a share of stock is defined as the:
A) change in the price of the stock over a period of time.
B) dividend income divided by the beginning price per share.
C) capital gain or loss plus any dividend income.
D) change in the stock price divided by the original stock price.
E) annual dividend income received.
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: The Investment Process
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/62639
Sample Questions
Q1) A discretionary account:
A) authorizes a broker to trade securities on your behalf.
B) charges an annual fee to cover all trading and management services.
C) is the term applied to brokerage accounts with check-writing and credit card services.
D) is the same as a wrap account.
E) is the account used to pledge securities as collateral for a margin loan.
Answer: A
Q2) If you ignore a margin call, your broker:
A) will seize all the assets in your account.
B) will close your account.
C) may place a short sale on your behalf to cover the amount of the call.
D) may sell some of your securities to repay the margin loan.
E) will increase both your margin loan and the rate of interest on that loan.
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
4
Chapter 3: Overview of Security Types
Available Study Resources on Quizplus for this Chatper
94 Verified Questions
94 Flashcards
Source URL: https://quizplus.com/quiz/62638
Sample Questions
Q1) When a put option is exercised, the:
A) seller of the option receives the strike price.
B) seller of the option receives the option premium.
C) buyer of the option sells the underlying asset and receives the option premium.
D) buyer of the option pays the option premium and receives the underlying asset.
E) seller of the option must buy the underlying asset and pay the strike price.
Answer: E
Q2) What is the latest earnings per share for Chelsea Industries stock if the PE is 22?
A) $1.06
B) $1.10
C) $2.19
D) $2.37
E) $4.10
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
5
Chapter 4: Mutual Funds
Available Study Resources on Quizplus for this Chatper
101 Verified Questions
101 Flashcards
Source URL: https://quizplus.com/quiz/62637
Sample Questions
Q1) You invested $8,000 in a mutual fund when the offering price was $32.50 and the NAV was $31.20. This purchase was made one year ago today. Today, the fund distributed a total of $1.67 in long-term gains and $0.82 in short-term gains. The current offering price is $33.42 and the NAV is $32.08. What is your return for the year?
A) 4.35 percent
B) 6.37 percent
C) 7.58 percent
D) 10.49 percent
E) 10.80 percent
Q2) Which one of the following statements is true?
A) An ETN shareholder owns a fractional ownership of the trust shares.
B) You can establish long, but not short, positions in ETNs.
C) ETNs invest only in commodities.
D) An ETN is an unsecured debt.
E) ETN is just another name for an ETF.
Q3) Which type of investor is most apt to purchase municipal bond funds and why?
Q4) What are the primary differences between an ETF and an ETN?
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: The Stock Market
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/62636
Sample Questions
Q1) A price-weighted index consists of stocks A, B, and C which are priced at $38, $21, and $26 a share, respectively. The current index divisor is 2.7. What will the new index divisor be if stock B undergoes a 3-for-1 stock split?
A) 2.1684
B) 2.2553
C) 2.5890
D) 2.7000
E) 3.1447
Q2) Steve placed a limit order to sell 500 shares of stock at $14 a share. Which of the following does Steve know for sure?
I. His order will execute but the time of execution is unknown.
II. His order may never execute.
III. He will receive exactly $7,000 if his order executes.
IV. He could receive more, but not less, than $14 a share.
A) I and III only
B) I and IV only
C) II and III only
D) II and IV only
E) I only
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 6: Common Stock Valuation
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/62635
Sample Questions
Q1) The current book value per share ofB.L. Black & Sons is $5.65 and the required return on the stock is 16 percent. The firm expects earnings per share of $1.85 next year with annual earnings growth of 4.5 percent. What is the current market value of this stock?
A) $9.16
B) $10.91
C) $13.88
D) $18.18
E) $16.67
Q2) The constant perpetual growth model is applicable primarily to those firms which:
A) adhere to a residual dividend policy.
B) pay dividends that increase at a steady rate.
C) have irregular dividend growth rates.
D) maintain a constant dividend payout ratio.
E) have multiple rates of dividend growth.
Q3) Identify three causes for a decrease in a firm's sustainable rate of growth.
Q4) The residual income model for valuing a stock suffers from some of the same estimating errors as the dividend growth model. Identify and explain these estimating errors.
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: Stock Price Behavior and Market Efficiency
Available Study Resources on Quizplus for this Chatper
82 Verified Questions
82 Flashcards
Source URL: https://quizplus.com/quiz/62634
Sample Questions
Q1) Over the time period of 1929 to 1932, the stock market lost approximately _____ percent of its value.
A) 33
B) 40
C) 50
D) 75
E) 90
Q2) Efficient markets tend to exist:
A) only when all investors are rational.
B) anytime market volume exceeds the average trading volume.
C) only when market volatility is low.
D) when rational arbitrage traders dominate irrational traders.
E) when arbitrage trading is prohibited.
Q3) The term "independent deviations from rationality" implies that:
A) irrational investors are absent from an efficient market.
B) arbitrage traders act independent of each other.
C) markets must be inefficient.
D) irrational investors behave differently from one another.
E) arbitrage traders act together to offset the actions of rational investors.
To view all questions and flashcards with answers, click on the resource link above.
Page 9
Chapter 8: Behavioral Finance and the Psychology of Investing
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/62633
Sample Questions
Q1) What is the primary purpose of Dow theory?
A) to measure the level of investor optimism and pessimism
B) to analyze daily market movements
C) to identify and measure market waves
D) to eliminate market corrections
E) to signal changes in the market's primary direction
Q2) The price of a stock increased from $21 to $26. Using phi, what are the primary and secondary support areas for the stock?
A) $25.33; $23.67
B) $23.67; $25.33
C) $24.09; $22.91
D) $28.14; $26.99
E) $26.99; $28.14
Q3) Technical analysis is the study of which one of the following as the basis for trading?
A) systematic risk
B) historical prices
C) dividend growth
D) financial statements
E) investor's required return
10
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Interest Rates
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/62632
Sample Questions
Q1) A pure discount security is an interest-bearing asset that pays:
A) interest on a semi-annual basis.
B) interest on an annual basis.
C) a single payment at maturity.
D) no interest.
E) a variable-rate interest.
Q2) Which one of the following statements is correct?
A) All real interest rates will be positive as long as the inflation rate is positive.
B) Real rates must exceed inflation rates.
C) Short-term interest rates are affected by future inflation expectations.
D) Treasury bill returns tend to vary in direct relation to inflation rates.
E) The Fisher hypothesis advocates that real interest rates follow inflation rates.
Q3) Based solely on the maturity preference theory, long-term interest rates:
A) should equal short-term rates.
B) are unrelated to short-term rates.
C) may be higher than or lower than short-term rates.
D) should be lower than short-term rates.
E) should be higher than short-term rates.
To view all questions and flashcards with answers, click on the resource link above.
11
Chapter 10: Bond Prices and Yields
Available Study Resources on Quizplus for this Chatper
95 Verified Questions
95 Flashcards
Source URL: https://quizplus.com/quiz/62631
Sample Questions
Q1) Price risk is the risk that:
A) coupon payments will be reinvested at a rate that is less than the bond's yield-to-maturity.
B) the bond principal will not be paid in full or on time.
C) the bonds in a dedicated portfolio will decrease in value in response to an increase in interest rates.
D) market prices increase due to market interest rate changes making bonds more expensive to purchase.
E) the yield-to-maturity will be less than the inflation risk causing the real rate of return to be negative.
Q2) Which one of the following measures a bond's sensitivity to changes in market interest rates?
A) yield to call
B) yield to market
C) duration
D) immunization
E) target date valuation
Q3) Explain the conditions under which an investor should place more reliance on the yield-to-call than on the yield-to-maturity.
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 11: Diversification and Risky Asset Allocation
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/62630
Sample Questions
Q1) Where does the minimum variance portfolio lie in respect to the investment opportunity set?
A) lowest point
B) highest point
C) most leftward point
D) most rightward point
E) exact center
Q2) Stock X has a standard deviation of 22 percent per year and stock Y has a standard deviation of 8 percent per year. The correlation between stock A and stock B is .21. You have a portfolio of these two stocks wherein stock Y has a portfolio weight of 40 percent. What is your portfolio variance?
A) .02022
B) .02156
C) .02239
D) .02247
E) .02350
Q3) Explain the primary goal of portfolio diversification as it relates to asset allocation and correlation.
To view all questions and flashcards with answers, click on the resource link above.
13
Chapter 12: Return, Risk, and the Security Market Line
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/62629
Sample Questions
Q1) A stock has an expected return of 14.59 percent and a beta of 1.35. What is the risk-free rate if the market rate is 12.7 percent?
A) 6.48 percent
B) 6.92 percent
C) 7.01 percent
D) 7.30 percent
E) 7.90 percent
Q2) Reed Plastics just announced the earnings per share for the quarter just ended were $.45 a share. Analysts were expecting $.51. What is the amount of the surprise portion of the announcement?
A) -$.12
B) -$.06
C) $.06
D) $.00
E) $.03
Q3) Identify and describe each of the three components of a security's expected return according to the capital asset pricing model.
Q4) Explain the relationship between the security market line and market efficiency.
To view all questions and flashcards with answers, click on the resource link above.
14
Chapter 13: Performance Evaluation and Risk Management
Available Study Resources on Quizplus for this Chatper
91 Verified Questions
91 Flashcards
Source URL: https://quizplus.com/quiz/62628
Sample Questions
Q1) Which one of the following statements is correct in relation to a security that has a negative Jensen's alpha?
A) The security is overpriced and will plot below the security market line.
B) The security is overpriced and will plot above the security market line.
C) The security is underpriced and will plot below the security market line.
D) The security is underpriced and will plot above the security market line.
E) The security is incorrectly priced but you cannot tell if it is underpriced or overpriced based on the information provided.
Q2) The Miller Fund's correlation with the market is .648. What percentage of the fund's movement can be explained by movements in the overall market?
A) 35 percent
B) 42 percent
C) 51 percent
D) 65 percent
E) 71 percent
Q3) Explain a key advantage and a key disadvantage of Jensen's alpha.
Q4) Explain the similarities and differences between the Sharpe and Treynor ratios. Also, explain the most appropriate application for each.
To view all questions and flashcards with answers, click on the resource link above.
Page 15
Chapter 14: Futures Contracts
Available Study Resources on Quizplus for this Chatper
97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/62627
Sample Questions
Q1) Which one of the following statements is correct?
A) Futures contracts must be held to maturity.
B) Futures contracts can be closed out only by contract buyers.
C) Futures contracts can be closed out, but only during the week prior to maturity.
D) You cannot avoid accepting delivery once you purchase a futures contract.
E) Futures contracts can be closed out by entering a reverse trade.
Q2) Which one of the following is a difference between a forward contract and a futures contract?
A) Forward contracts are based on commodities while futures contracts are based on financial instruments.
B) The price of the asset exchanged is determined when a forward contract is entered while the price is set on the exchange date for a futures contract.
C) A forward contract is a formal agreement while a futures contract is an informal agreement.
D) Futures contracts are managed through an organized exchange while forward contracts are not.
E) There are no differences between forward and futures contracts.
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Stock Options
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/62626
Sample Questions
Q1) Which of the following characteristics are correct regarding the new style option quotation system?
I. The system is known as OPRA - the Options Price Reporting Authority code
II. The system has 3 data elements
III. The system has 21 characters
IV. The system has 5 characters
V. The system is known as the OCC Series Key
VI. The root symbol is the underlying stock's ticker symbol
A) I, II, III, and VI
B) II, III, IV, and V
C) I, II, and IV
D) II, III, V, and VI
E) III, V, and VI
Q2) A 4-month call has a strike price of $20. The current underlying stock price is $21.45. What is the intrinsic value of this call?
A) $0.00
B) $0.48
C) $1.45
D) $3.90
E) $4.35
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Option Valuation
Available Study Resources on Quizplus for this Chatper
72 Verified Questions
72 Flashcards
Source URL: https://quizplus.com/quiz/62625
Sample Questions
Q1) A 6-month call option on ABC stock is priced at $3.60. The call option delta is 0.76. How will the approximate call option price be computed if the underlying stock price increases by $1?
A) $3.60
B) $3.60 - $0.76
C) $3.60 + $0.76
D) $3.60 * .76
E) $3.60 * (1 + .76)
Q2) Which two of the following are key to making SPX options an easy choice as a hedge against an equity portfolio?
I. European style
II. American style
III. trade in whole or partial contracts
IV. cash settlement
A) III only
B) I and III only
C) I and IV only
D) II and III only
E) II and IV only
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Projecting Cash Flow and Earnings
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/62624
Sample Questions
Q1) Pro forma financial statements are statements based on which one of the following?
A) projected future income, cash flows, and other non-cash items
B) historical revenue and expenses
C) historical asset and liability values
D) current period cash flows
E) current period revenues and expenses
Q2) A firm maintains a constant dividend payout ratio of .40. What must the plowback ratio be?
A) 1 + .40
B) 1 - .40
C) 1 * .40
D) 1/.40
E) .40
Q3) Why is the expected rate of sales growth so critical to pro forma statements?
Q4) What value does the Statement of Cash Flows add to the financial statements of a firm?
Q5) Explain the role the external financing need plays in the future growth outlook for a firm.
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Corporate Bonds
Available Study Resources on Quizplus for this Chatper
85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/62623
Sample Questions
Q1) Explain why the prices of adjustable-rate bonds tend to fluctuate less than the prices of plain vanilla bonds in response to changes in market interest rates.
Q2) A cumulative preferred stock pays a quarterly dividend of $1.25. The issuing firm is experiencing some cash shortfalls and has not paid the dividend for the last two quarters. The current situation is expected to be corrected within the month. Next month, the firm wants to pay dividends to both its preferred and common shareholders. How much will it have to pay to the preferred shareholders per share to do this?
A) $0.00
B) $1.33
C) $3.75
D) $3.99
E) $4.40
Q3) Which one of the following correctly applies to adjustable-rate bonds?
A) callable but not putable
B) coupon rate equal to the U.S. Treasury bill rate
C) greater interest rate risk than a fixed rate bond
D) greater fluctuation in its market price than a fixed-rate bond
E) frequently putable at par value
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: Government Bonds
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/62622
Sample Questions
Q1) Which one of the following is the feature of a municipal bond that specifies when the bond may be called and the call price?
A) put provision
B) conversion provision
C) close-out clause
D) payment clause
E) call provision
Q2) Which one of the following generally applies to municipal bonds?
A) issued as term bonds without a sinking fund
B) $5,000 par value
C) trading based on price quotes
D) highly liquid market
E) callable at any time at par value
Q3) Explain how the imputed interest is computed on a U. S. Treasury bill.
Q4) What is a note that pays an interest rate based on current market rates called?
A) discount note
B) market note
C) serial note
D) flexible note
E) variable-rate note
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: Mortgage-Backed Securities
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/62621
Sample Questions
Q1) Which of the following affect the amount of funds available to a homeowner from a reverse mortgage?
I. current mortgage balance on the home
II. age of homeowner
III. location of the home
IV. appraised value of the home
A) I and IV only
B) II and III only
C) I, II, and IV only
D) I, III, and IV only
E) I, II, III, and IV
Q2) Which one of the following is the risk associated with receiving a mortgage bond's principal payments sooner than anticipated?
A) prepayment risk
B) default risk
C) amortized risk
D) market risk
E) seasoned risk
Q3) Explain what a reverse mortgage is, how it works, and who it is intended to help.
To view all questions and flashcards with answers, click on the resource link above.
Page 22