Multiple Choice Questions

corporation
  • Why is it risky to invest in a commodity?
  • How is a savings account most useful?
  • Which investment is best for someone who is likely to need cash soon?
  • Which investment has the least liquidity?
the practice of putting money into more than one kind of investment at a time
  • commodity
  • diversification
  • liquidity
  • return
The commodity's price might drop significantly very quickly.
  • Why is it risky to invest in a commodity?
  • What is the definition of liquidity?
  • What is the relationship between risk and return?
  • How is a savings account most useful?
the period of time after people end their working careers
  • retirement
  • What does the information demonstrate about Alex's investments?
  • What does the information demonstrate about Gale's investments?
  • In what way does a 401(k) differ from an individual retirement account (IRA)?
the money earned on an investment in a certain time period
  • diversification
  • risk
  • liquidity
  • return
If she had purchased only the stock and had not diversified her investments, she would have lost money.
  • What does the information demonstrate about Alex's investments?
  • Someone who diversifies investments is more likely to
  • What does the information demonstrate about Gale's investments?
  • In what way does a 401(k) differ from an individual retirement account (IRA)?
offset their losses with gains.
  • What does the information demonstrate about Gale's investments?
  • Someone who diversifies investments is more likely to
  • What does the information demonstrate about Alex's investments?
  • In what way does a 401(k) differ from an individual retirement account (IRA)?
A higher risk often means a higher return.
  • Why is it risky to invest in a commodity?
  • What is the definition of liquidity?
  • What is the relationship between risk and return?
  • What is the definition of risk?
the chance or possibility of loss
  • return
  • diversification
  • liquidity
  • risk
news that a company is about to release a promising product
  • Why is it risky to invest in a commodity?
  • What might convince an investor to buy stock or mutual funds?
  • What is the relationship between risk and return?
  • What is the definition of liquidity?
an economic good or material, such as those produced in agriculture or mining
  • diversification
  • commodity
  • return
  • liquidity
Company A pays a dividend of 2%. Company B's stock price increases 1% plus the inflation rate every year. Company C pays 3% dividends, and its stock price decreases every year by 2%. Company D pays 0% dividends, an its stock price does not increase year over year. If the companies are otherwise identical, which would you invest in?
  • You enter into a EUR/USD forward contract
  • A comparison of the commercial prospects of new aircraft models
  • Deceleration
  • Company B
Here is a chart displaying estimates of the initial jobless claims indicator, one of the main unemployment statistics in the U.S. It measures the number of new applicants for unemployment benefits. What was the level of the analyst with the most optimistic outlook?
  • Russia
  • 220
  • CPI
  • PMI
In early 2016, the same Germany machinery company has interest from four prospective clients from emerging markets: Indonesia, Brazil, Russia, and South Africa. They all want to buy ten machines, but the factory can only produce ten in time. Therefore, the company has to choose only one client. Given the volatility of the domestic currencies of the four prospective clients, the CFO would like to choose the client which is least likely to cancel the order due to currency volatility. The invoice comes due on June 30,According to volatility alone, which prospective client would be most likely to cancel the order?
  • Russia
  • Deceleration
  • Inflation
  • $154
Which of the following is most likely to e the most challenging part of this fist step of the absolute valuation process?
  • Hong Kong dollar against the U.S. dollar in 1997.
  • Making the assumptions upon which to project future performance.
  • Defines the industry or industries in which the company operates.
  • Surprise changes in interest rates, inflation, and trade.
If the earnings per share of a company is $3.85 and the earnings yield is 2.5%, what is the price per share?
  • $154
  • CPI
  • $125M
  • 38 yen
Review the currency pair charts for the Barbadian dollar against the Jamaican dollar, the Czech koruna against the Polish zloty, the Ingerian naira against the Ghanaian cedi, and the Hong Kong dollar against the Macanese pataca. Which pair is pegged?
  • The Hong Kong dollar against the Macanese pataca
  • Federal Funds Target Rate, the main U.S. interest rate.
  • Hong Kong dollar against the U.S. dollar in 1997.
  • There is not enough information to tell.
How have economic forecasts for this country evolved as shown in the chart below?
  • Central bank interest rates
  • United States
  • Minimal Change
  • Creditworthiness
Why is fixed income called fixed income?
  • To halt the vicious cycle of deflation.
  • A surprise change in inflation expectations
  • Surprise changes in interest rates, inflation, and trade.
  • Because the repayment amounts and timings are fixed for ordinary bonds.
What are the three main transmission mechanisms by which the yield curve affects the economy?
  • Corporate impact, global impact, consumer impact
  • Investors prefer cash flows today to cash flows in the future.
  • U.S. government bonds are considered low risk.
  • Because it has the right to tax the wealthiest population on earth.
GDP per capita is a measure of prosperity because it divides the total GDP of a country by its population. Which of the below forecasts for a country would result in the highest GDP per capita growth?
  • A comparison of the commercial prospects of new aircraft models
  • "The Sum of the Share Prices of All 30 Dow Jones Members Will Triple"
  • An increase of 2% in GDP and a population growth of 0%
  • Defines the industry or industries in which the company operates.
Which driver weakened the Swiss fanc?
  • Surprise changes in interest rates, inflation, and trade.
  • A surprise change in inflation expectations
  • Hong Kong dollar against the U.S. dollar in 1997.
  • Enterprise Value = market cap - cash + debt
If the yield on a fixed-coupon bond goes up, does the borrower have to pay more interest?
  • Both countries had large dollar-denominated debts.
  • No, the price goes down. The payments are fixed.
  • Her mortgage payments and necessities are fixed.
  • A stock's P/E ratio can remain above or below market average for extended periods.
How much will the Peruvian government spend on servicing its current debt outstanding for the give bond in 2025 according to this chart captured in 20009?
  • The price of wood products and long-term interest rates.
  • 4,000 million Peruvian sol
  • Timeliness of release
  • Minimal Change
These charts show data for four countries as of earlyFor each country, the purple line denotes historic real GDP growth. The white line denotes the consensus estimated real GDP growth. The red line denotes the most pessimistic analyst forecast. The green line denotes the most optimistic analyst forecast. For which country does the analyst community exhibit the widest disagreement about 2016 growth prospects?
  • Deceleration
  • Company B
  • Its storage costs.
  • Russia
Engines are the most expensive, heavy component on an aircraft and are designed with detailed specifications. Which of the following would likely be the best theme for a Rolls-Royce analyst research note to help a portfolio manager decide between investing in Rolls-Royce or Unite Technologies?
  • The bond with the highest yield if the two bonds have the same maturity date.
  • You enter into a EUR/USD forward contract
  • A comparison of the commercial prospects of new aircraft models
  • The company's bonds are outperforming the benchmark yield.
What do the red bars at the bottom signify?
  • Inflation
  • Deficit
  • Both are scheduled in advance
  • PMI
What is the most common measure central banks seek to target directly?
  • Timeliness of release
  • Government bonds form a large proportion of investor holdings, and corporate bonds are often priced relative to corporate bonds.
  • Apartment
  • Inflation
Were the two oil crises in the 1970s linked to deflation or inflation?
  • Apartment
  • Inflation
  • Deceleration
  • Central bank interest rates
Why do companies do IPOs
  • IPOs incentivize entrepreneurs to innovate as IPOs provide a way for entrepreneurs to monetize their work.
  • A 5% annual yield on an investment in 10-year U.S. government bonds.
  • Government bonds form a large proportion of investor holdings, and corporate bonds are often priced relative to corporate bonds.
  • To compensate lenders for the greater risk of long-term loans compared to short-term loans
A drop in which of the following measures would typically send a government bond price down?
  • Earnings estimated
  • Creditworthiness
  • Short-term forecasts.
  • Company revenues decline.
What does it mean when a company's corporate spread tightens?
  • The company's bonds are outperforming the benchmark yield.
  • They are not sufficiently timely to make informed investment decisions.
  • How currencies may be overvalued or undervalued
  • Because it has the right to tax the wealthiest population on earth.
Use the chart below to answer the question. How many Danish crowns (DDK) will buy 100 Japanese yen (JPY)?
  • 220
  • 7%
  • 5.868
  • Both are scheduled in advance
In 1994, the Mexican peso declined against the U.S. dollar during the so-called "Tequila Crisis." What exacerbating factor did Mexico's "Tequila Crisis" have in common with the Argentine crisis of 2002?
  • Both countries had large dollar-denominated debts.
  • Hong Kong dollar against the U.S. dollar in 1997.
  • The country has inflation. The top line is nominal growth and the bottom line is real growth.
  • The Hong Kong dollar against the Macanese pataca
What generally happens when a central bank unexpectedly decreases interest rates?
  • How currencies may be overvalued or undervalued
  • The currency weeakens
  • Timeliness of release
  • Central bank interest rates
Widget Co. has a market capitalization of $125M. It does a 5-for-1 stock split. It then does a 1-for-25 reverse stock split. Finally, it does 35-for-1 stock split. Nothing else changes. What's the new market cap?
  • $154
  • Russia
  • $125M
  • Gold
In 2015, an accounting gimmick gave Ireland a 26% growth rate in GDP. What does this event reflect about the nature of GDP?
  • Defines the industry or industries in which the company operates.
  • Making the assumptions upon which to project future performance.
  • "The Sum of the Share Prices of All 30 Dow Jones Members Will Triple"
  • If the measurement of economic activity evolves, GDP can change.
Examine China's predicted economic activity on the below table captured in AprilAs of that date, which of the following terms would have best described the predicted growth in the Chinese economy for 2021? (graph)
  • United States
  • Deceleration
  • Dollar
  • Inflation
What are possible weaknesses of this peer approach to valuation?
  • Because it has the right to tax the wealthiest population on earth.
  • The chosen peers might not be true competitors, the company might have multiple divisions, and the most appropriate competitors might not have P/E multiples.
  • Investors prefer cash flows today to cash flows in the future.
  • Government bonds form a large proportion of investor holdings, and corporate bonds are often priced relative to corporate bonds.
At the end of January 2019, the total actively traded U.S. debt is $16T. According to the table, approximately what percent of U.S. debt does China own at this time>
  • CPI
  • $154
  • 7%
  • $125M
In 1999, James Glass-man and Kevin Hassett published a book called "Dow 36,000." At the time, the Dow Jones Industrial Average Index was just under 12,Which of the following is a potential substitute for the book title?
  • The price of wood products and long-term interest rates.
  • Both countries had large dollar-denominated debts.
  • Federal Funds Target Rate, the main U.S. interest rate.
  • "The Sum of the Share Prices of All 30 Dow Jones Members Will Triple"
which of the following is an example of a successful peg?
  • Corporate impact, global impact, consumer impact
  • Hong Kong dollar against the U.S. dollar in 1997.
  • Surprise changes in interest rates, inflation, and trade.
  • Making the assumptions upon which to project future performance.
Samsung is based in South Korea and reports in South Korean won. Samsung sells its products around the world and the geographic breakdown of its 2015 revenues is in the first chart. The other charts show how some major world currencies moved against the South Korean won through the course ofOf the currencies shown, which currency movement boosted Samsung's revenue growth the most.
  • Company B
  • Gold
  • Deceleration
  • Dollar
Here is the vicioius deflationary cycle. What step connects the upper right blue arrow to the lower left gray arrow?
  • Timeliness of release
  • Central bank interest rates
  • Company revenues decline.
  • Both are scheduled in advance
which would you prefer?
  • A surprise change in inflation expectations
  • When you buy an equity, the most you can lose is 100% and your potential gain is unlimited.
  • A 4% annual yield on a credit risk-free 10-year government bond from the mythical country of Utopia.
  • A fishery exceeding fishing quotas, because it values short-term income more than long-term fishing stock.
You are a euro-based portfolio manager and you have invested in the technology sector of the U.S. stock market. You want to keep your exposure to tech stocks but are worried about an impending financial crisis in the United States. What is the best way to manage your dollar currency risk?
  • Both countries had large dollar-denominated debts.
  • Company B
  • You enter into a EUR/USD forward contract
  • There is not enough information to tell.
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Multiple Choice Questions
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