Personal Finance
Study Guide Questions
Course Introduction
Personal Finance is a comprehensive course designed to equip students with the essential knowledge and practical skills needed to manage their individual or family finances effectively. The course covers topics such as budgeting, saving, investing, credit management, insurance, taxation, and retirement planning. Through real-life scenarios and interactive exercises, students learn how to make informed financial decisions, set achievable financial goals, and develop strategies to secure their financial well-being throughout different stages of life. By the end of the course, students will have a solid foundation in financial literacy, empowering them to make responsible choices and build a stable financial future.
Recommended Textbook
Investments Analysis and Management 12th Edition by Charles P. Jones
Available Study Resources on Quizplus
22 Chapters
1336 Verified Questions
1336 Flashcards
Source URL: https://quizplus.com/study-set/3231 Page 2
Chapter 1: Understanding Investments
Available Study Resources on Quizplus for this Chatper
44 Verified Questions
44 Flashcards
Source URL: https://quizplus.com/quiz/64017
Sample Questions
Q1) Investment professionals who take companies public,arrange mergers and acquisitions,and participate in municipal bond issues are :
A)registered representatives
B)security analysts
C)investment bankers
D)portfolio managers
Answer: C
Q2) Most investors are risk averse which means:
A)they will assume more risk only if they are compensated by higher expected return.
B)they will always invest in the investment with the lowest possible risk.
C)they actively seek to minimize their risks.
D)they avoid the stock market due to the high degree of risk.
Answer: A
Q3) Investment decision making traditionally consists of two steps:
A)investment banking and security analysis
B)buying and selling
C)risk and expected return.
D)security analysis and portfolio management.
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Investment Alternatives
Available Study Resources on Quizplus for this Chatper
75 Verified Questions
75 Flashcards
Source URL: https://quizplus.com/quiz/64018
Sample Questions
Q1) Which of the following is not one of the characteristics of the primary nonmarketable financial assets owned by most individuals?
A)high liquidity
B)high return
C)often issued by the U.S.government
D)low risk
Answer: B
Q2) Direct investing involves trades made by directly purchasing shares of a financial intermediary.
A)True
B)False
Answer: False
Q3) Investors in high tax brackets would be unlikely to invest in municipal bonds.
A)True
B)False
Answer: False
Q4) The earnings retention rate is calculated as 1 - dividend yield.
A)True
B)False
Answer: True
Page 4
To view all questions and flashcards with answers, click on the resource link above.
Chapter 3: Indirect Investing
Available Study Resources on Quizplus for this Chatper
76 Verified Questions
76 Flashcards
Source URL: https://quizplus.com/quiz/64019
Sample Questions
Q1) You have decided to invest in an aggressive growth fund for long-run future needs.You have a publication listing a number of such funds with their most recent 12-month total returns.Is this a good predictor of future performance?
Answer: Not necessarily.The best fund last year may or may not be in the rankings next year.The literature is divided on the usefulness of past performance in predicting fund performance in the future.Some investors prefer longer-run performance measures such as five-year or ten-year compounded returns,but none are sure-fire guides to future performance.
Q2) Investment companies must register with the SEC under the provisions of the:
A)Securities Act of 1933
B)Securities Exchange Act of 1934
C)Maloney Act of 1938
D)Investment Company Act of 1940
Answer: D
Q3) Almost 70 percent of all U.S.households owned mutual funds as of 2005.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Securities Markets and Market Indexes
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/64020
Sample Questions
Q1) Automatic Shelf Registration refers to the practice of allowing:
A)well-seasoned issuers to file shelf registration statements with the SEC that become effective immediately,or the filing of a "base prospectus," enabling efficient stock issue
B)well-seasoned issuers to file shelf registration statements with the SEC that become effective immediately,or the filing of a "base prospectus," enabling efficient debt issue
C)well-seasoned issuers to file shelf registration statements with the SEC that become effective immediately,or the filing of a "base prospectus," enabling efficient stock or debt issue
D)well-seasoned issuers to file shelf registration statements with the SEC that become effective immediately upon filing of a "red herring prospectus," enabling efficient stock or bond issue
Q2) Prices of stocks traded on the NYSE are determined through supply and demand.
A)True
B)False
Q3) What is Instinet and what does it offer for investors?
Q4) What is the difference between a seasoned new issue and an initial public offering?
To view all questions and flashcards with answers, click on the resource link above.
Page 6
Chapter 5: How Securities Are Traded
Available Study Resources on Quizplus for this Chatper
81 Verified Questions
81 Flashcards
Source URL: https://quizplus.com/quiz/64021
Sample Questions
Q1) A margin call occurs anytime the equity position of the margin account falls below the initial margin.
A)True
B)False
Q2) Most full-service stockbrokers derive over 80% of their income from customer commissions.
A)True
B)False
Q3) An order that must be filled immediately in its entirety,or otherwise must be canceled,is known as:
A)an immediate or cancel order.
B)an all or none order
C)a fill or kill order.
D)a full or bust order
Q4) Negotiated commissions are the norm for institutional investors; whereas most individual investors pay specified commissions set by the brokerage firms.
A)True
B)False
Q5) What is insider trading? Does it only affect large investors?
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: The Risks and Returns From Investing
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/64022
Sample Questions
Q1) The recent housing bubble and resulting credit crisis of 2008 is a perfect example of:
A)nonsystematic risk
B)systematic risk
C)inflation risk
D)political risk
Q2) Political stability is the major factor concerning:
A)exchange-rate risk
B)systematic risk
C)nonsystematic risk
D)country risk
Q3) What common variable is used in the calculation of both the cumulative wealth index and the geometric mean return? How is the common variable calculated? How is it used in each?
Q4) Both present value and future value are based upon the concept of the time value of money.
A)True
B)False
Q5) What is the present value of $20,000 to be received in 40 years if the interest rate is 9 percent?
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Portfolio Theory
Available Study Resources on Quizplus for this Chatper
53 Verified Questions
53 Flashcards
Source URL: https://quizplus.com/quiz/64023
Sample Questions
Q1) Standard deviations for well-diversified portfolios are reasonably steady over time.
A)True
B)False
Q2) Are the expected returns and standard deviation of a portfolio both weighted averages of the individual securities expected returns and standard deviations? If not,what other factors are required?
Q3) A change in the correlation coefficient of the returns of two securities in a portfolio causes a change in
A)both the expected return and the risk of the portfolio
B)only the expected return of the portfolio
C)only the risk level of the portfolio
D)neither the expected return nor the risk level of the portfolio
Q4) The relevant risk for a well-diversified portfolio is:
A)interest rate risk
B)inflation risk
C)business risk
D)market risk
Q5) How is the correlation coefficient important in choosing among securities for a portfolio?
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Portfolio Selection
Available Study Resources on Quizplus for this Chatper
53 Verified Questions
53 Flashcards
Source URL: https://quizplus.com/quiz/64024
Sample Questions
Q1) Indifference curves:
A)always curve to the left
B)have a positive slope
C)cannot intersect
D)are convex
Q2) When the Markowitz model assumes that most investors are considered to be "risk averse",this really means that they:
A)will not take a "fair gamble"
B)will take a "fair gamble"
C)will take a "fair gamble" fifty percent of the time
D)will never assume investment risk
Q3) A portfolio which lies below the efficient frontier is described as
A)optimal
B)unattainable
C)dominant
D)dominated
Q4) The single index model requires (3n+2)total pieces of data to implement.
A)True
B)False
Q5) Explain what is efficient about the efficient frontier.
Page 10
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Asset Pricing Models
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/64025
Sample Questions
Q1) Betas of individual securities are unstable over time.What are some characteristics that could cause a company's beta to change over time?
Q2) Two points define a straight line.What two points could be most readily identified to estimate the SML?
Q3) Some securities are considered to be "defensive" in that they tend to hold their value or increase in value when the majority of securities are losing value,such as during a recession.What could one conclude about the betas of defensive securities?
Q4) Unlike the CAPM,the APT does not assume borrowing and lending at the risk-free rate.
A)True
B)False
Q5) The arbitrage pricing theory (APT)and the CAPM both assume all except the following?
A)Investors have homogeneous beliefs.
B)Investors are risk-averse utility maximizers.
C)Borrowing and lending can be done at the rate RF.
D)Markets are perfect.
Q6) Compare the capital market line and the security market line.
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Common Stock Valuation
Available Study Resources on Quizplus for this Chatper
70 Verified Questions
70 Flashcards
Source URL: https://quizplus.com/quiz/64026
Sample Questions
Q1) A number of companies that formerly experienced rapid growth were unable to sustain high growth rates.These companies included Cisco,Dell,Yahoo,and Google.
A)True
B)False
Q2) Brotech Unlimited sells at $40 per share,and its latest 12 month earnings were $8 per share,of which $3.20 per share were paid as dividends.
(a)What is Brotech's current P/E ratio?(b)If Brotech's earnings are expected to grow by 9 percent per year,what is the projected price for next year assuming that the P/E ratio remains constant?(c)If you had a required rate of return of 15 percent,expected the dividend payout ratio to remain constant,and dividends to grow at a rate of 9 percent,would you buy this stock?
Q3) The financial newscaster comments that the Stock X is overvalued at an earnings multiple of 60.What could cause a P/E this high?
Q4) If the growth rate in dividends is greater than the required rate of return,the price found under the constant growth model will be negative.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Common Stocks: Analysis
Available Study Resources on Quizplus for this Chatper
62 Verified Questions
62 Flashcards
Source URL: https://quizplus.com/quiz/64027
Sample Questions
Q1) Commodity ETF's are mainly used as speculative plays by:
A)hedge fund traders.
B)conservative investors.
C)mutual fund managers.
D)value investors.
Q2) For adequately diversified common stock portfolios,market effects often account for -------- percent and more of the variability of the portfolio's return.
A)60
B)70
C)80
D)90
Q3) Which of the following is TRUE regarding fluctuations in both individual stock prices and portfolios of stocks?
A)aggregate market movements are the largest single factor explaining these fluctuations
B)beta is the largest single factor explaining these fluctuations
C)standard deviation of returns is the largest single factor explaining these fluctuations
D)financial risk is the largest single factor explaining these fluctuations
To view all questions and flashcards with answers, click on the resource link above.
13
Chapter 12: Market Efficiency
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/64028
Sample Questions
Q1) Nike Inc.reports first quarter earnings of $2.00 per share.As an investor using the SUE technique,you had estimated earnings to be $1.50 per share,with a standard error of estimate (SEE)of 0.15.
(a)Calculate the SUE for Nike.
(b)Would this stock be a good buy on the basis of this SUE?
Q2) Debont and Thayler (1985)'s overreaction hypothesis tends to:
A)support the weak form of the EMH.
B)not support the weak form of the EMH.
C)support the semistrong form of the EMH.
D)not support the semistrong form of the EMH.
Q3) What types of information are considered in each of the three forms of the EMH?
Q4) An investor who believes in the strong form of the EMH should be an active investor. A)True B)False
Q5) If securities are fairly priced,then the portfolio manager is unlikely to be able to identify undervalued stocks.What other activities could portfolio managers perform?
Q6) What is a market anomaly? Give examples of several market anomalies.
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: Economy Market Analysis
Available Study Resources on Quizplus for this Chatper
66 Verified Questions
66 Flashcards
Source URL: https://quizplus.com/quiz/64029
Sample Questions
Q1) Which of the following is not a component of GDP?
A)business investment spending.
B)government "investment" (really spending).
C)net exports.
D)financial transactions.
Q2) The ability of the market to predict economic recoveries is remarkably good.Stock prices almost always turn up how many months before recovery?
A)3-5,with 4 typical.
B)3-7,with 5 typical.
C)4-8,with 6 typical.
D)5-9,with 7 typical.
Q3) The advance estimate of GDP predicts direction of quarterly change in real GDP growth approximately what percent of the time?
A)10%.
B)25%.
C)75%.
D)90%.
Q4) Why is the stock market a leading indicator of the economy? Use the constant-growth dividend discount model in your explanation.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Industry Analysis
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/64030
Sample Questions
Q1) The expansion stage of the industry life cycle is probably of most interest to investors,in which growth is rapid and risk is tolerable.
A)True
B)False
Q2) Which of the following statements about the industry life cycle is incorrect?
A)Companies may stay in one phase for a significant period of time .
B)All industries can be classified very accurately into a specific phase.
C)The general framework may not apply to some industries.
D)This approach does not explicitly lead to a stock price determination.
Q3) The food industry would be considered:
A)growth industry.
B)defensive industry.
C)cyclical industry.
D)countercyclical industry.
Q4) The most important point of Michael Porter's analysis is that industry profitability is a function of
A)economy.
B)interest-rate level.
C)industry structure.
D)industry beta.
Page 16
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: Company Analysis
Available Study Resources on Quizplus for this Chatper
74 Verified Questions
74 Flashcards
Source URL: https://quizplus.com/quiz/64031
Sample Questions
Q1) The investment advisory service best known for evaluating mutual funds in the United States is:
A)Standard & Poor's
B)Moody's Industrial Manuals
C)Morningstar
D)Value Line Investment Survey
Q2) When analyzing stocks,the major variable of interest to a majority of investors is:
A)sales.
B)profit margins.
C)dividend yield.
D)earnings per share.
Q3) Internet Industries expects to earn $5.00 for the coming year,and pay a $2.00 dividend.Its ROA is 13 percent,while its leverage factor is 1.7.
(a)Calculate the expected growth rate in dividends.
(b)Given a required rate of return of 17 percent,determine the estimated price for High Tech,Inc.,common stock.
(c)Calculate the expected dollar dividend two periods from now.
Q4) What are "earnings surprises?" How do they affect stock prices?
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Technical Analysis
Available Study Resources on Quizplus for this Chatper
59 Verified Questions
59 Flashcards
Source URL: https://quizplus.com/quiz/64032
Sample Questions
Q1) Technical analysis reflects the idea that stock prices:
A)move upward over time.
B)move inversely over time.
C)move in trends.
D)move randomly.
Q2) Which of the following is not true regarding the Dow Theory?
A)It is intended to forecast the start of a primary movement.
B)It does not forecast how long a movement will last.
C)It has a very high success rate.
D)It is subject to many criticisms.
Q3) A period of correction is often followed by a period of ________.
A)channel lines.
B)momentum.
C)reversals.
D)consolidation.
Q4) Volume and specific calendar time are not considered important in a:
A)Logarithmic price and volume chart.
B)Point and figure chart
C)Nominal price and volume chart.
D)Moving average convergence and divergence chart.
18
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Bond Yields
Available Study Resources on Quizplus for this Chatper
30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/64033
Sample Questions
Q1) As interest rates increase,long bonds will decrease in price more slowly than shorter bonds.
A)True
B)False
Q2) Which of the following is NOT a true statement?
A)Duration measures the time until the principal is repaid.
B)Duration is the weighted average of the timing of the bond's payments.
C)The weights in the calculation of duration are the present value of each payment,divided by the value of the bond.
D)Modified duration measures the sensitivity of the bond's price to interest rate changes.
Q3) Assume an investor buys a newly issued 8 percent,semi-annual 10 year bond at par.He sells it two years later,when market interest rates have decreased to 6 percent.How much is the investor's capital gain or loss?
A)$1,000 gain
B)$1,125.44 gain
C)$125.44 gain
D)$377.00 loss
Q4) Yield spreads vary inversely with the: ______________________________.
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Bonds: Analysis and Strategy
Available Study Resources on Quizplus for this Chatper
59 Verified Questions
59 Flashcards
Source URL: https://quizplus.com/quiz/64034
Sample Questions
Q1) What are the two components of interest-rate risk? How do they work to immunize a portfolio?
Q2) A portfolio is said to be immunized if:
A)the present value of the cashflows equals the principal.
B)the duration of the portfolio is equal to the term.
C)the present value of the cashflows is greater than the principal.
D)the duration of the portfolio is equal to the investment horizon.
Q3) Which of the following terms describes a change in investors' preferences away from risky assets towards safer bonds?
A)immunization
B)flight to safety
C)laddering
D)Convexity
Q4) Why is immunization considered to be a hybrid strategy?
Q5) Floating rate bonds often have yields tied to:
A)London Interbank Offered Rate (LIBOR)plus some percentage yield amount.
B)London Interbank Offered Rate (LIBOR).
C)European Central Bank (ECB)borrowing rate.
D)Federal Funds overnight lending rate.
Q6) What are two passive management strategies? Two active strategies?
Page 20
To view all questions and flashcards with answers, click on the resource link above.
Chapter 19: Options
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/64035
Sample Questions
Q1) To maximize his/her potential upside returns,ceteris paribus,an investor who was bullish on a particular stock would execute which of the following options strategies:
A)buy calls
B)write calls
C)buy puts
D)write puts
Q2) Stock market index options are available on all of the following EXCEPT
A)the Standard and Poor's 500 Index.
B)the Major Market Index.
C)the National OTC Index.
D)the Shearson Lehman Hutton Index.
Q3) There is an positive relationship between the price of a put option and the volatility of the underlying common stock.
A)True
B)False
Q4) A stock investor wants to hedge the Dell stock in his portfolio.How can he use a covered call to do this?
Q5) What is the put-call parity? How is it related to arbitrage?
Q6) List five options exchanges.
21
To view all questions and flashcards with answers, click on the resource link above.
Chapter 20: Futures
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/64036
Sample Questions
Q1) The initial margin required for futures trading
A)is only put up by the seller.
B)is only put up by the buyer.
C)can be put up by either party,whoever initiates the transaction.
D)must be put up by both the buyer and the seller.
Q2) If an investor strongly believes that the stock market is going to have a sharp decline shortly,he or she could maximize profit by
A)short selling stock-index futures contracts.
B)hedging current short positions.
C)using stock-index futures to straddle the market.
D)buying stock-index futures contracts.
Q3) One difference between a hedger and a speculator is that the hedger
A)may have either a profit or a loss.
B)may not close out his position by taking an opposite position.
C)does not have to put up margin.
D)faces a risk without the futures contract.
Q4) Program trading generally involves positions in both stocks and stock-index futures.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 21: Portfolio Management
Available Study Resources on Quizplus for this Chatper
51 Verified Questions
51 Flashcards
Source URL: https://quizplus.com/quiz/64037
Sample Questions
Q1) Which of the following is not among the usual constraints and preferences considered when formulating an investment policy?
A)Avoidance of so-called "sin" stocks (alcohol,tobacco,firearms,etc.)
B)Liquidity needs
C)Economic assessment
D)Time horizon
Q2) The first step of portfolio management according to Maginn et al.(2007)is :
A)to assess market conditions.
B)to determine objectives,constraints and preferences.
C)to develop strategies and implement them.
D)to adjust the portfolio as necessary.
Q3) The spending phase of the life cycle is avoided by investors who follow the prudent man rule.
A)True
B)False
Q4) In order to arrive at an investment policy,it is necessary to determine whether the market is headed for a bull or bear market.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 23
Chapter 22: Evaluation of Investment
Available Study Resources on Quizplus for this Chatper
54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/64038
Sample Questions
Q1) The coefficient of determination is also known as R-squared,is used to denote the degree of diversification.
A)True
B)False
Q2) Total risk of a portfolio is measured by the beta coefficient.
A)True
B)False
Q3) Standard deviation,beta and coefficient of determination are readily available for mutual funds from sources like Morningstar.
A)True
B)False
Q4) The reward-to-variability ratio measures:
A)return above the risk-free rate.
B)excess return per unit of total risk.
C)total risk per unit of excess return.
D)return above the risk-free rate relative to the risk-free rate.
Q5) Sharpe's measure is a ratio of excess return to total risk.
A)True
B)False
Q6) How is regression analysis used to measure portfolio diversification?
Page 24
To view all questions and flashcards with answers, click on the resource link above.