Ch.15 S7

Question 1

If there is a lack of liquidity in a security, the spread between the bid and asked price would be expected to ____________.

Answer 1

Widen

Question 2

The Visible Supply Figure indicates the number of municipals expected to reach the market within the next ____ days.

Answer 2

30 days

Question 3

Where can Visible Supply figured and the Placement Ratio for municipals be found?

Answer 3

The Bond Buyer

Question 4

T/F: The Wiltshire Associates Index is considered the broadest of the broad based indexes.

Answer 4

T

Question 5

__________ level is the price level at which point a stock stops decreasing.

Answer 5

Support

Question 6

T/F: The head and shoulders patterns are indicative of the reversal of a trend.

Answer 6

T

Question 7

T/F: Systematic risk may be avoided through diversification.

Answer 7

F

Question 8

Is the average credit rating of the 11 GO Bond Index higher or lower than the 20 GO Bond Index?

Answer 8

Higher; the average is AA+/Aa1

Question 9

Is the DJIA considered broad or narrow?

Answer 9

Broad

Question 10

An increase in odd lot selling is a _______ indicator.

Answer 10

Bullish

Question 11

What theory analyzes the amount of a company’s stock that has been shorted and not yet covered?

Answer 11

Short interest Theory

Question 12

The index showing the average yield on 25 revenue bonds with 30 year maturities is called the ___________.

Answer 12

Revenue Bond Index

Question 13

T/F: Diversification is one method by which an investor may avoid non systematic risk.

Answer 13

T

Question 14

What is the beta of the market (S&P 500)?

Answer 14

1

Question 15

A large short interest is a ________ indicator.

Answer 15

Bullish

Question 16

T/F: According to CAPM, a security’s return equals a risk free return (T-bill return) plus a risk premium.

Answer 16

T

Question 17

According to the Dow Theory, what two average must reach a new high or new low to confirm a major trend?

Answer 17

DJIA and DJTA

Question 18

Is the average credit rating of the Revenue Bond Index higher or lower than the GO bond indexes?

Answer 18

Lower; average is A+/A1

Question 19

Is the head and shoulders bottom formation the reversal of an upward or downward trend?

Answer 19

Downward

Question 20

T/F: when formulating a financial plan, it is always important to consider the clients liquidity needs.

Answer 20

T

Question 21

Are Visible Supply figures compiled daily or weekly?

Answer 21

Daily

Question 22

Business, regulatory, political, and liquidity risk are all types of ________ risk.

Answer 22

Non-systematic

Question 23

Is the head and shoulders top formation the reversal of an upward or downward trend?

Answer 23

Upward

Question 24

T/F: Systematic risk is the risk of owning an individual security.

Answer 24

F; systematic risk is market risk

Question 25

The average rating for the 20 GO Bond Index is __________.

Answer 25

AA or Aa2

Question 26

A head and shoulders top formation is considered a _________ indicator.

Answer 26

Bearish

Question 27

Which risk is diversifiable, systematic or nonsystematic risk?

Answer 27

Non systematic

Question 28

The ________ Theory states that small public investors are generally wrong.

Answer 28

Odd Lot

Question 29

How could non systematic risk be reduced?

Answer 29

Diversify your portfolio of stocks.

Question 30

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

Answer 30

It’s beta must be greater than 1.00

Question 31

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

Answer 31

Beta

Question 32

What theory states that all known and relevant information is reflected in a security’s price?

Answer 32

Efficient Market Theory (Random Walk Theory)

Question 33

_________ level is the price level at which point a stock stops increasing.

Answer 33

Resistance

Question 34

What is the Capital Asset Pricing Model (CAPM)?

Answer 34

A model of the relationship between expected risk and expected return

Question 35

The breakout of an area of support is a _______ indicator.

Answer 35

Bearish

Question 36

The 20 GO Bond Index is composed of _____ GO Bonds with _____ year maturities.

Answer 36

20 ; 20

Question 37

What does the Placement Ratio indicate?

Answer 37

The number of bonds that were sold during the week compared to what was available for sale (the demand side)

Question 38

The breakout of an area of resistance is a __________ indicator.

Answer 38

Bullish

Question 39

T/F: The 11 GO Bond Index is composed of 11 of the 20 bonds in the 20 GO Bond Index.

Answer 39

T

Question 40

T/F: The Efficient Market Theory indicates that, thought analysis, undervalued situations can be discovered.

Answer 40

F

Question 41

List some examples of systematic risk.

Answer 41

Market, interest rate, inflation, and event risk are all systematic risk

Question 42

Is the Placement Ratio compiled daily or weekly?

Answer 42

Weekly

Question 43

If a client eliminates unsystematic or diversifiable risk in his portfolio, he is willing to accept ______ risk.

Answer 43

Market

Question 44

The Dow Jones Composite Average comprises _____ industrial stocks, _____ transportation stocks, and ______ utility stocks.

Answer 44

30; 20 ; 15

Question 45

A head and shoulders bottom formation is considered a ________ indicator.

Answer 45

Bullish

Question 46

An increase in odd lot buying is a ________ indicator.

Answer 46

Bearish