Chapter 4 Flashcards
Which one of the following best describes the requirements of an investment strategy?
a. opportunity, cooperation, goal
b. competencies and resources, goal, method
c. method, opportunity, commitment
d. ability, method, opportunity
b. competencies and resources, goal, method
Which one of the following industries would be expected to perform well in the early stage of an economic expansion?
a. chemicals
b. food
c. Consumer credit
d. equipment manufacturers
c. Consumer credit
Which of the following is true regarding value averaging?
a. can require a sale of the securities being averaged.
b. uses varying periods between investments
c. invests the same dollar amount each period
d. buys fewer shares in a bear market than dollar-cost averaging would
a. can require a sale of the securities being averaged.
John does not believe he can outperform the market, so he invests exclusively in index funds. He believes the only way one could ‘beat the market’ would be by knowing and using nonpublic, inside information.
John believes in which form of the efficient market hypothesis?
a. weak
b. semi-weak
c. strong
d. semi-strong
d. semi-strong
Weak form allows for fundamental analysis
Strong form does not allow for fundamental analysis or insider information
A bond investor buys $10,000 of one year bonds, $10,000 of two year bonds, and so on with the final $10,000 invested in 15 yr bonds.
What type of strategy is this investor using?
a. ladder
b. barbell
c. buy and hold
d. substitution swap
a. ladder
Economic stage - industries that are expected to do well:
Expansion: early stage
consumer credit, transportation, energy, and consumer cyclicals
Economic stage - industries that are expected to do well:
expansions: middle stage
basic materials
Economic stage - industries that are expected to do well:
expansion: late stage
capital goods
Economic stage - industries that are expected to do well:
recession
consumer staples and utilities
