Question

In: Finance

1. Followers of the random walk hypothesis believe that Select one: a. security analysis is the...

1. Followers of the random walk hypothesis believe that

Select one:

a. security analysis is the best tool to utilize when investing in the stock market.

b. the price movements of stocks are unpredictable, and therefore security analysis will not help to predict future market behavior.

c. support levels and resistance lines, when combined with basic chart formations, yield both buy and sell signals.

d. that traders can earn higher than normal returns by exploiting market anomalies such as the small-firm effect.

2. If a corporation declares a 10% stock dividend, then Select one:

a. the share price of the stock will most likely decline 10%.

b. each share holder will get a 10% cash rebate off his or her next round lot purchase of stock.

c. the share price of the stock will most likely remain unchanged.

d. the share price of the stock will most likely increase 10%.

3. When investors say that the market is efficient, they mean that

Select one:

a. the closing prices of all stocks can be found quickly and easily in the Wall Street Journal and in most daily newspapers.

b. the business cycles that underlie stock fluctuations occur in a somewhat predictable fashion.

c. securities consistently trade at prices very close to their intrinsic values.

d. industrial production, and overall productivity in the economy, is growing at a constant pace.

4. An internal rate of return (IRR) is the discount rate that

Select one:

a. produces a present value of future benefits equial to the market price of the stock.

b. produces a future value equal to or greater than an investor's require rate of return.

c. represents the minimal rate than an individual investor will accept.

d. is the minimal rate that a buy-and-hold linvestor will accept.

5. As a general rule, which of the following statements concerning the various values of common stock is correct?

Select one:

a. Par values are usually above book values.

b. Market values are usually below par values.

c. Book values are usually below market values.

d. Market values are usually below book values.

Solutions

Expert Solution

1. Followers of the random walk hypothesis believe that

Select one:

correct answer b. the price movements of stocks are unpredictable, and therefore security analysis will not help to predict future market behavior.

2. If a corporation declares a 10% stock dividend, then Select one:

correct answer  a. the share price of the stock will most likely decline 10%.

3. When investors say that the market is efficient, they mean that

Select one:

correcr answer a. the closing prices of all stocks can be found quickly and easily in the Wall Street Journal and in most daily newspapers.

4. An internal rate of return (IRR) is the discount rate that

Select one:

Correct answer c. represents the minimal rate than an individual investor will accept.

5. As a general rule, which of the following statements concerning the various values of common stock is correct?

Select one:

Correcr answer c. Book values are usually below market values.


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