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S 66 > Ch. 12 > Flashcards

Ch. 12 Flashcards

1
Q

T/F: stop limit orders are guaranteed execution of the trigger is touched.

A

False. Stop limit orders may not be executed at the limit price cannot be met.

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2
Q

T/F: strategic asset allocation is considered an active asset allocation approach.

A

False. Strategic asset allocation is considered a passive approach.

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3
Q

_________ risk is the inability to sell an investment easily.

A

Liquidity

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4
Q

What types of securities tend to have low beta?

A

Defensive stocks

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5
Q

What return will an investment have If it’s net present value is greater than zero?

A

The investment will generate a positive return

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6
Q

What is the fair value of a bond?

A

The discounted present value of the sum of the future payments

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7
Q

T/F: perfect negative correlation is -1.00, while a perfect positive correlation is 1.00.

A

True

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8
Q

How are secured creditor treated in a liquidation?

A

They are given priority up to the value of their collateral, and our unsecured for any remaining claim

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9
Q

What risk is based on the possibility of that new regulations may have a negative impact on an investment value?

A

Regulatory risk

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10
Q

What type of risk is avoided through indexing?

A

Business risk, since indexing involves purchasing stocks of many companies

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11
Q

Define capital structure.

A

Accompanies, issuance of debt and equity securities, both common and preferred, to finance operations

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12
Q

Which would have the most risk large mid or small cab companies?

A

Small cap stocks would have the most risk

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13
Q

List the risks associated with investing in 30 year US treasury bonds.

A

Inflation risk, and interest-rate risk

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14
Q

T/off: in the secondary market, a client buys at the bed and sells at the ask.

A

False. Clients buy at the ask or offer price and sell at the bid price.

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15
Q

The difference between an investments, total return, and the risk-free rate is the risk ________.

A

Premium

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16
Q

“ a dollar received today is worth more than a dollar receive tomorrow” describes what concept?

A

The time value of money

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17
Q

Which asset class is most susceptible to interest-rate risk?

A

Debt

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18
Q

Strategic asset allocation assumes that the markets are __________.

A

Efficient

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19
Q

If two investments go in opposite directions from one another, this is referred to as ___________ correlation.

A

Negative

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20
Q

What is commonly used to measure and assess risk free rate of return?

A

The interest rate on a US T-bill

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21
Q

A capital needs analysis is done to determine a clients __________
Needs in order to find future financial goals.

A

Insurance

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22
Q

What is the efficient frontier?

A

The line representing portfolios, excluding risk-free alternatives, showing the lower risk for a given level of return

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23
Q

Name for asset classes.

A

Stocks, bonds, real estate, and cash

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24
Q

What is another name for diversifiable risk?

A

Nonsystematic risk

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25
Q

Do those who favor market timing, active strategies, believe markets are efficient or inefficient?

A

Inefficient. They may alter their portfolio to take advantage of anticipated, economic events.

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26
Q

Two investments have the same price, but the net present value (NPV) of choice A is $50 while B’s is $40. Which is best?

A

Investment A is better. NPV measures net cash flows above a discount rate. A greater NPV indicates more value.

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27
Q

T/F: securities with a correlation coefficient of zero or considered uncorrelated

A

True

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28
Q

What type of risk is liquidity risk?

A

It’s a non-systematic risk, security risk may be diversified against by buying actively traded assets.

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29
Q

T/F: in a weak form, efficient market, technical analysis will be useful.

A

False. In a weak form, efficient market, only fundamental analysis will be useful.

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30
Q

What is the formula for determining a Stocks current yield?

A

annual dividend ➗ by current market value of the stock

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31
Q

T/F: when the market suffers a large, general decline, most stocks are affected.

A

True. Stocks are subject to the risks of the market as a whole.

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32
Q

12 years ago, Tina ❤️ invested $25,000 which is now ground to $100,000. What is the annual growth rate of her investment?

A

In 12 years, the money double twice so every six years. Using the rule of 72, 72÷6 years equals 12%

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33
Q

What are large cap stocks?

A

Stocks of mature companies, with a long history of dividend payments

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34
Q

A bonds inflation adjusted rate of return, may also be referred to as the ________ interest rate.

A

Real

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35
Q

Define net present value or NPV

A

The difference between the value of an investment, cash inflow, and outflow’s above the discount rate

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36
Q

What is the name for a graph of optimal portfolios?

A

The efficient frontier

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37
Q

Which is a better hedge against inflation, investing in stocks or bonds?

A

Historically, stocks of outperformed inflation. Since sponsor fixed income instruments They are hurt by inflation.

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38
Q

What type of meat is used to calculate the expected return?

A

The weighted arithmetic mean

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39
Q

Tactical asset allocation assumes that markets are ___________.

A

Inefficient

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40
Q

In the secondary market, a customer _________ at the bid, and _____ at the ask (offer).

A

Sells; buys

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41
Q

What measures risk adjusted return?

A

Alpha and the sharpe ratio

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42
Q

Business, regulatory, political, and liquinity risk are all types of _______ risk.

A

Unsystematic

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43
Q

If an asset outperforms the market, when prices are up, but under performs, when prices are down, what is its beta?

A

It’s been a must be greater than one

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44
Q

What are mid-cap stocks?

A

Stocks of companies that are more volatile and growth oriented than large caps stocks

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45
Q

Modern portfolio theory focuses on differing _________ of assets rather than on _________ securities.

A

Classes; individual

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46
Q

T/F: systematic rebalancing assumes markets are inefficient.

A

False

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47
Q

Stop limit orders become ________ orders once they are triggered/activated.

A

Limit

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48
Q

T/F: a country with high interest rates will generally have a stronger currency.

A

True

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49
Q

T/F: tactical asset allocation is changing a portfolios asset mix due to impending market in economic factors.

A

True

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50
Q

T/F: The S&P 400 is a large cap index.

A

F; the S&P 400 is a mid cap index

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51
Q

It’s 20 year US treasury zero coupon bond is most acceptable to ________ risk.

A

Inflation

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52
Q

The _________ rate of return is used to calculate the anticipated return for portfolio of securities.

A

Expected

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53
Q

What does uses the basic measure of risk for an investment?

A

Standard deviation

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54
Q

Identify the risk: in particular enterprise may not perform well due to poor management, or increased competition.

A

Business risk

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55
Q

And investment earns 10%, 50%, and 30% in three years. How would the annualized average rate of return be calculated?

A

When calculating and annualized rate of return overtime, the geometric mean as used.

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56
Q

Which return measures investment performance by including all cash, inflows and outflows?

A

Dollar weighted returns

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57
Q

T/F: alpha, represents an investment actual return, an excess of it’s expected return.

A

True

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58
Q

If an advisor attempts to exceed the performance of the market, it is using _______ portfolio management.

A

Active

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59
Q

How much principal, compounding at 3% annually, is needed to make an annual payments of $3000 in perpetuity?

A

$100,000 principal = $3000 annual payment ➗ by .03 rate of return.

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60
Q

Are inflationary periods characterized by rising or falling interest rates?

A

Rising

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61
Q

Sue bought a 6% bond at par. One year later, her bonds value as fallen to $970. What is her annual return?

A

Sue receives 6% rate of interest, but her bond lost 3% of its value. (-$30 + $60)➗$1,000 = 3%

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62
Q

What is the risk that certain circumstances are factors may have a negative impact on the profitability of a company?

A

Business risk

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63
Q

And investor needs an IRR, a 5%. His investment has a negative NPV. Is it’s IRR greater than, less than, or equal to 5%?

A

A negative NPV would indicate that an investment has an IRR that is less than required rate.

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64
Q

And investor needs an IRR of 5%. His investment has an NPV of zero dollars. Is it IRR greater than, less than, or equal to 5%?

A

A NPV of zero dollars would indicate that an investment has an IRR that is equal to the required rate

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65
Q

If an investor is short stock, a buy stop order can be used to limit ________ risk.

A

Upside

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66
Q

The Russell 2000 Index is a _______-cap index.

A

Small

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67
Q

Define negative financial leverage

A

It is when they return achieved is less than the cost of borrowing

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68
Q

What type of trading would be used if you believe markets are in efficient?

A

Active strategies, such as tactical asset, allocation, or sector rotation

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69
Q

Is an investor is attempting to maximize her portfolio growth over a long period, what is her strategy called?

A

Capital appreciation

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70
Q

The _____________ is often considered the most important measure of inflation

A

CPI

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71
Q

Another name for security’s risk adjusted return is its ________________

A

Alpha

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72
Q

A client notices that a thinly traded stock has a few daily trades affected. To what risk is it most susceptible?

A

Liquidity risk

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73
Q

Assuming at 12% rate of return, how long will it take $50,000 to double?

A

Six years. Using the rule of 72, 72 divided by the rate of return determines the number of years

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74
Q

__________ value projects what an investment will be worth at some point in the future.

A

Future

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75
Q

_____________ measures the degree to which the movement of two variables are related.

A

Correlation

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76
Q

Identify the range from the following set of numbers: 10, 12, 5, 1, 7, 7, 8, 4

A
  1. Range is calculated by starting with the largest value, and then subtracting the smallest value.
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77
Q

(Current Assets - ___________ ) ➗ Current Liabilities = Quick Asset Ratio (or Acid Test)

A

Inventory

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78
Q

What form of asset allocation of times to keep the asset percentage is balance over a long period?

A

Strategic asset allocation

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79
Q

T/s: dollar weighted returns, takes into account the deposits into or withdraws out of the portfolio.

A

True. Dollar weighted return includes the weighted value of cash flows into and out of the portfolio when calculating return.

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80
Q

What are TIPS?

A

Treasury inflation protected securities

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81
Q

__________ is the balancing of investment classes according to an investors investment objectives.

A

Asset allocation

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82
Q

Which form of market efficiency declares that only insiders can regularly beat the market?

A

Semi strong

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83
Q

_________ investors look for stocks of companies that are intrinsically undervalued.

A

Value

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84
Q

Identify the range from the following set of numbers: 7, 3, 5, 4, 4, 6

A

4

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85
Q

To find a stocks current yield, the formula is: _________➗__________

A

Annual Dividend ➗ Current Market Price

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86
Q

What is the formula for the sharpe ratio?

A

(ROI - Risk free return) ➗ standard deviation

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87
Q

What is the sharpe ratio used to determine?

A

The sharpe ratio is used to determine if returns are from wise investment or the result of excess risk

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88
Q

What are two assumptions of MPT

A

Investors want to minimize risk and maximize returns

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89
Q

What are micro cap socks?

A

Stocks of emergent companies that would generally be suitable only for speculative investors

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90
Q

If a securities beta is more than one, is it considered more or less volatile in the market as a whole?

A

The higher, the better, the greater volatility

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91
Q

What is the time weighted return?

A

A time we did return is a geometric mean or average that eliminates the effective varying cash inflows or dividends

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92
Q

A bond is yielding 8% and the rate of inflation is 3%. What is the bonds real interest rate?

A

5%. Real interest rate measures the true yield once inflation is factored out.

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93
Q

Define holding period return.

A

The total return receipt from holding an asset or portfolio of assets

94
Q

What is considered an optimal portfolio?

A

One that has the highest expected return given the clients tolerance for risk

95
Q

What is an advantage to buy and hold portfolio management?

A

Transaction cost in tax consequences are minimized

96
Q

Sell limit orders are placed _______ the market.

A

Above

97
Q

T/F: with a buy and hold strategy, investors are consistently rebalancing their portfolios.

A

False. Buy and hold it involves no rebalancing.

98
Q

What is the better of the market S&P 500?

A

One

99
Q

Define sector rotation.

A

A strategy that anticipates the next turn in the business cycle and shifts assets into the sectors that will benefit.

100
Q

What is another name for non-diversifiable risk?

A

Systematic risk

101
Q

An investor needs an IRL 5%. Her investment has a positive NPV. Is it I are are greater than, less than, or equal to 5%?

A

A positive NPV would indicate that an investment has an IRR that is greater than the required rate

102
Q

The principal value of TIPS may be adjusted based on the changes to the ___________.

A

CPI

103
Q

If there is no relationship between the movement of two investments, they are considered to be ____________.

A

Uncorrelated

104
Q

Is market risk considered a form of diversifiable or non-diversifiable risk?

A

Non-diversifiable risk

105
Q

List some formula is used to measure liquidity.

A

Working capital, current ratio, an quick asset ratio (acid test)

106
Q

___________ stock fluctuates with the business cycle.

A

Cyclical

107
Q

__________value is the amount of money that must be invested today to result in a certain sum at a future time

A

Present value

108
Q

Identify the acronym: CPI

A

Consumer price index

109
Q

_________ investors are concerned with a company’s future earnings potential.

A

Growth

110
Q

In a rising market, is a low beta security, expected to outperform or under perform the market as a whole?

A

Underperform

111
Q

Working capital, current ratio, and the quick asset ratio are examples of ___________ ratios.

A

Liquidity ratios

112
Q

What is a major disadvantage when using an arithmetic mean to measure investment performance?

A

Arithmetic means or averages can misrepresent compounding effects on an investment return

113
Q

Which market is considered negotiated?

A

The over-the-counter market in which market makers negotiate prices

114
Q

To determine a bonds, real interest rate, the bonds yield is subtracted by the rate of __________.

A

Inflation

115
Q

For a person with a diversified portfolio of large cap stocks, what type of risk may be reduced by using index options?

A

Systematic risk

116
Q

T/F: a buy hold strategy is considered an active/tactical investment strategy.

A

False. By hold strategy is a passive strategy.

117
Q

What is the formula for determining a bonds current yield?

A

Annual interest ➗ current market value of the bond

118
Q

Define positive financial leverage.

A

It is when the return achieved is greater than the cost of borrowing

119
Q

What are some of the characteristics of value stock?

A

Low PE ratios, history of profitability, high dividend payout, and low market to book ratio.

120
Q

MPT has found that having asset classes with slight __________ correlation provides the best long-term performance.

A

Negative

121
Q

A company with more debt than equity outstanding is considered __________.

A

Leveraged

122
Q

What rule can be used to determine the annual rate of return needed for funds to double if given a number of years?

A

The rule of 72

123
Q

___________ return allows an investor to compare the performance of two investment advisors.

A

Time weighted

124
Q

What uses computer simulations to present random outcomes of an investment strategy

A

Monte Carlo simulation

125
Q

Jim invested $25,000 in an annuity with a 6% return. How long will it take for the money to double?

A

Using the rule of 72, divide 72 by the rate of return. 12 years

126
Q

The greater the dispersion of historical returns of a security, the __________ is standard deviation.

A

Higher

127
Q

What risk is based on the possibility that new laws may have a negative impact on an investment value?

A

Legislative risk

128
Q

What is the dollar weighted returns?

A

A dollar weighted returns a geometric mean or average used to measure how a portfolio performed overtime

129
Q

Is indexing considered an active or passive portfolio management strategy?

A

Passive, since the composition of the benchmark index generally remains the same.

130
Q

What ratio Tessa companies ability to pay its current liabilities with its current assets, but excludes inventory?

A

The quick asset ratio (the acid test)

131
Q

Which type of risk is non-diversifiable?

A

Market risk

132
Q

Over the last three months, a sock rose from $50-$51 and paid a $.25 dividend. What is its annualized return?

A

The three month return is 2.5% ($1.25➗$50). Accordingly return is annualized by multiplying by 4. (2.5 x 4= 10%)

133
Q

A __________ is an annuity that never stops paying money

A

Perpetuity

134
Q

What is the risk that changes in tax law could impact security prices?

A

Legislative risk

135
Q

If an investor is long stock, a cell stop order can be used to limit what risk?

A

Downside

136
Q

__________ value determines how much a dollar amount invested today will be worth at a set point in the future.

A

Future

137
Q

T/F: inflation is a persistent rise in the general level of prices.

A

True

138
Q

Define capital risk.

A

The risk that an investor may lose a part or entire investment or principal. Capital risk as a form of diversifiable risk.

139
Q

Describe positive financial leveraging.

A

Paying less interest then earnings received. Example: client pays 4% on a margin loan, but earns 10% on stock gains.

140
Q

What type of trading strategy would be used if you believe markets are efficient?

A

Passive strategies, such as indexing are somatic rebalancing

141
Q

What is required to make the dollar weighted returns and the time we did return equal?

A

Remove or subtract any deposits into and or withdraws out of the portfolio

142
Q

____________ return allows an investor to measure the amount of money she has earned on her investments.

A

Dollar weighted

143
Q

Security is appreciated from $10-$15 over three months and his paid know Devin. What is the annualized return?

A

200%, which is calculated by multiplying the holding period returns (50%) by four quarters.

144
Q

The quick asset ratio is calculated by excluding _____________ from a company’s current assets.

A

Inventory

145
Q

What is the present value of a perpetual monthly payment of $1000 are in 5% a year?

A

$240,000 = ($1,000 x 12 mo.)/.05

146
Q

What return will an investment have if it’s net present value is less than zero?

A

The investment will generate a negative return

147
Q

Define currency risk.

A

The risk that for an investment will be worth less in the future due to changes in exchange rates

148
Q

T/off: systematic, rebalancing, involves buying and selling on a periodic basis

A

True

149
Q

What is the proper order of liquidation for a corporation of bankruptcy?

A

Secured, creditors, unpaid workers, IRS, unsecured, creditors, preferred, and then common

150
Q

T/F: strong for market, efficiency, advocates, believe they can beat the market.

A

False. Strong for market efficiency states that no person can beat the market.

151
Q

In a declining market, is a high better security expected outperform are under perform the market as a whole?

A

Underperform

152
Q

Which would have the least risk large mid or small cap companies?

A

Large cap stocks, have a least risk

153
Q

$10,000 has become $80,000 and 36 years. What is the internal rate of return?

A

The money doubled every 12 years. The 10 groups of 2020 grew to 40 and 40 go to 80 using the rule of 72, 72÷12 = 6%

154
Q

Define expected return.

A

The possible return of an asset, multiplied by the likelihood of occurrence

155
Q

What is the risk that environmental regulations could impact the prices of securities?

A

Regulatory risk

156
Q

Describe a value investor.

A

One second stocks that are undervalued in relation to their earnings, and have a low PE ratio

157
Q

What is the formula for determining hold period Return?

A

(Ending value -Beginning value + dividends/interest) ➗ beginning value

158
Q

Center deviation is a measure of the dispersion of ___________ returns.

A

Expected

159
Q

Identify the acronym: CAPM

A

Capital asset pricing model

160
Q

What type of risk does beta measure?

A

Non-diversifiable

161
Q

What type of security send to have a high beta?

A

Growth stocks

162
Q

A stock with a positive alpha is generally considered a ________________ opportunity by an analyst.

A

Buying

163
Q

T/off: an interest rate on TIPS is fixed, but the principal may be adjusted.

A

True

164
Q

Bond a yield is 7.5% when inflation is 3%. Bond b yields 8% when inflation is 4%. Which has a higher real interest rate?

A

Bond a. The real interest rate is 4.5%.

165
Q

What is an efficient market?

A

A market, in which process reflect all known information; therefore, nothing will be overvalued or undervalued.

166
Q

What are small cap stocks?

A

Typically stocks of new companies with more volatility, but also with more growth potential

167
Q

T/F: diversification, is one method by which an investor may avoid nonsystematic risk

A

True

168
Q

T/F: a low beta security would be expected to rise more than a high, beta security in a Bull market.

A

False. An asset with a low beta would be less volatile and wood, therefore, be expected to rise in a rising market.

169
Q

T/F: systematic risk may be avoided through diversification

A

False. Systematic risk may not be avoided through diversification.

170
Q

What method of investing is characterized by regularly investing a set amount of money, regardless of share prices?

A

Dollar cost averaging

171
Q

An investor buys stock that returns 2% for the year rather than a T-bond yielding 6%. The ________ cost is 4%.

A

Opportunity

172
Q

The S&P 500 index is a _____-cap index.

A

Mid

173
Q

Identify the acronym: MPT

A

Modern portfolio theory

174
Q

The interest rate on the UST bill is completely used to measure an assets ________ rate of return.

A

Risk-free

175
Q

Find gold or gold futures, may protect an investor against __________ risk.

A

Inflation

176
Q

My limit orders are placed ________ the market.

A

Below

177
Q

T/F: according to CAPM, a securities return equals a risk free return or T-bill return plus a risk premium.

A

True

178
Q

If an investment has increased in value, when would its annualize return, be greater than it’s holding period return?

A

An investment annualized return would be greater than it’s holding period Return if it was held for less than one year.

179
Q

What is the risk that congressman act a law change that negatively impacts the value of an investment?

A

Legislative risk

180
Q

T/S: the S&P 500 is a large cap index

A

True

181
Q

How is the market capitalization determined?

A

Accompanies current share price multiplied by the number of shares, outstanding

182
Q

What are two measures of liquidity?

A

Current ratio in the quick asset ratio Both measure companies liquidity

183
Q

____________ is the term that best describes the process used to calculate and investments future value.

A

Compounding

184
Q

Identify the risk: investors miss out on receiving a better return by placing their funds elsewhere.

A

Opportunity risk

185
Q

What is the formula for calculating the risk premium?

A

Risk premium = total return - risk free rate

186
Q

A _________ is a stream of cash flows that continues forever

A

Perpetuity

187
Q

Do investors who favor, passive strategies, believe marketer, efficient, or inefficient?

A

Efficient. Rather than trying to time the market, they rebalance to portfolios periodically.

188
Q

T/F: the longer bonds duration, the less sensitive the bonds prices is to changes in interest rates.

A

False. The longer the duration, the greater the bonds price sensitivity to changes in interest rates.

189
Q

What is the risk of having an excessive portion of a portfolio invested in one particular security or asset class?

A

Concentration risk

190
Q

T/F: the S&P 500 is an asset class.

A

False. Stocks, bonds real estate and cash are all asset classes.

191
Q

T/F: bottom of approach to investing uses the economy as a main factor in determining which stocks to buy.

A

False. Bottom up, investing uses company, specific items, such as earnings and dividend payments to pick stocks.

192
Q

What are the three main concepts underlying the modern portfolio theory?

A

Expected, return quote, standard deviation, and correlation

193
Q

Market, interest rate, and inflation risk are all types of _________ risk.

A

Systematic

194
Q

T/S: investors who are planning to hold bonds until maturity, have no risk

A

False. Opportunity risk, or the risk of missing out on a superior investment is a risk these types of investors face.

195
Q

If a bond is trading at a discount to its value, based on DCF, will an investor earn more or less than a comparable bond?

A

About trading at a discount to its DCF value will earn more than a comparably priced bond

196
Q

If a bond is trading at a premium to its value, based on DCF, will an investor and more or less than a comparable bond?

A

A bond trading at a premium to his DCF value will earn less than a comparably priced bond

197
Q

What is the formula for calculating a bonds current yield?

A

Annual interest divided by current market price

198
Q

What is used to determine how a given present value will become a needed future value.

A

The internal rate of return or IRR

199
Q

T/F: the longer and investors time horizon, the more concerned he is with the market fluctuations.

A

False. The longer the time horizon, the less concerned, he is with market fluctuations.

200
Q

What is the present value of an annuity that pays $2000 per year in earns 5% a year?

A

$40,000= $2,000/.05

201
Q

Stop orders become __________ order once they are triggered/activated.

A

Market

202
Q

What is the difference between the current ratio in the quick asset ratio?

A

The quick asset ratio is more stringent since it excludes inventory from the current assets

203
Q

____________ value is the dollar amount to be invested today to meet a specific dollar objective at a set future point.

A

Present

204
Q

What is the risk of foreign investors losing money due to changes with a country’s government or regulatory environment?

A

Political risk

205
Q

What is the capital asset pricing model?

A

A model of the relationship between expected risk and expected return

206
Q

What is a common method used to calculate the returns on an equity indexed annuity?

A

Point-to-point indexing

207
Q

Stop and stop limit orders are triggered when a round lot trades at, or through, the ________.

A

Stop price

208
Q

If two investments, closely track, one another, this is referred to as ___________ correlation.

A

Positive

209
Q

What is the formula for PE ratio?

A

Price divided by earnings per share

210
Q

What happens to the US trade deficit if the dollar is weakening?

A

The trade deficit will shrink as US goods become cheaper for foreign customers

211
Q

List, some forms of business risk that apply when investing in individual equity securities

A

Poor management, obsolete products, changing market conditions

212
Q

________ is the measure of an asset volatility compared to the market as a whole.

A

Beta

213
Q

T/F: tactical asset allocation is considered a passive asset allocation approach

A

False. Tactical asset allocation is considered an active approach.

214
Q

An investor, who follows the ________ style of investing bets against market trends.

A

Contrarian

215
Q

And investors not return is the gross return minus _______ paid.

A

Taxes

216
Q

Define range.

A

Range is the difference between the largest value in the smallest value of a given set of numbers.

217
Q

If a client, illuminates, unsystematic, or diversifiable risk in his portfolio, he is willing to accept_______ risk.

A

Market

218
Q

What is the formula for determining and assets Total return?

A

(Ending value - beginning value + dividends/interest) ➗ beginning value

219
Q

Highly regulated companies, such as utilities, Are subject to__________ risk.

A

Regulatory

220
Q

Gold coins, gold certificates, or gold futures may be purchased in an effort to avoid what type of risk?

A

Inflation risk

221
Q

What is the use of the capital asset pricing model?

A

To finding investors optimal portfolio by comparing expected risk with expected rate of return

222
Q

Name the three forms of market efficiency.

A

Strong, semi strong and weak form

223
Q

What is a perpetuity?

A

An annuity that pays out forever

224
Q

What is the risk our investors may be unable to dispose of securities position quickly and at a fair price?

A

Liquidity risk

225
Q

Both the Dow Jones industrial average in the S&P 500 index are______ cap indexes

A

Large

226
Q

Describe a growth investor.

A

One seeking stocks of companies with an above average growth rate, high PE, ratios, and low dividend payout ratio’s.

227
Q

To stop orders guarantee a specific price when buying or selling?

A

No, stop orders, execute at the market price, which is uncertain once they are activated

228
Q

What’s strategy involves moving a clients funds from one industry to another during defined periods?

A

Sector rotation

229
Q

___________ stock is resistant to recession.

A

Defensive

230
Q

If a stop order is activated, at what price for the trade be executed?

A

The next trade after activation

231
Q

_________ stock pays higher than average dividends.

A

Income

232
Q

What rule can be used to determine how long it takes for an amount of money to double at a given rate of return?

A

The rule of 72

S 66 (12 decks)

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