Question

1.

The Dow Jones Industrial Average is characterized by the following except

Select one:

a. None of the above

b. it is an unweighted average of the sum of the daily closing prices of the stocks that composed the index.

c. it was created in 1896 and today is composed of 30 industrial companies.

d. it measures movement of the average of 500 stocks traded in the NYSE.

2.

In 1971, the first electronic stock market was founded called the

Select one:

a. NASD.

b. NYSE.

c. NASDAQ.

d. Amex.

3.

The earnings report and cash flows of firms are important in stock valuation because

Select one:

a. it can be forecasted with certainty to provide accurate valuation of stocks.

b. discounted expected cash flows are used in forecasting stock prices and any deviations affect the stock price.

c. it provides the information needed to forecast the future cash flows with certainty.

d. the earnings and cash flows are predictable and provide the information to provide valuation of the stocks.

4.

____ and ____ are government-sponsored enterprises that pool mortgages together and resell them as mortgage backed securities.

Select one:

a. Fannie Mae, Freddie Mac

b. Participation certificates, conforming loans

c. GNMA, FHA

d. VA, FHA

5.

The current exchange rate of the U.S dollar

Select one:

a. is pegged to gold at a rate of 1 ounce of gold to $42.

b. is fixed and controlled by the Federal Reserve Bank according to the government economic policy.

c. All of the above

d. is determined by the demand and supply of dollars in the world market.

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Please answer ALL correctly!

I will THUMB UP :)

Answer 1

1) Dow Jones Industrial Average

The answer is d. it measures the movement of the average of 500 stocks traded in the NYSE.

This statement is false. Dow Jones measures the performance of 30 large companies listed on the stock exchange.

All other statements are true.

2) electronic market

The answer is c) NASDAQ

Founded on Feb 8th, 1971, the world's first electronic stock market was NASDAQ

3) earnings report and cash flows of firms

The answer is b. discounted expected cash flows are used in forecasting stock prices and any deviations affect the stock price.

Earnings reports include the financial statements of the company. Stock's are valued by discounting the future expected cash flow of the company and hence when the earnings report is published, any deviations from expected cash flows affect the stock price.

4) government-sponsored enterprises

The answer is a. Fannie Mae, Freddie Mac

A government-sponsored enterprise is a quasi-governmental entity established to enhance the flow of credit to specific sectors of the American economy. The 2 enterprises which do such things are the agency Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association (Fannie Mae).

5) current exchange rate of the U.S dollar

The answer is d. is determined by the demand and supply of dollars in the world market.

The US follows a floating rate regime wherein the currency value is allowed to fluctuate according demand and supply and also in response with foreign exchange market events.

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