Final Exam Contributions

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A discount bond has a coupon rate that is less that the bonds yield to maturity. The breakdown of U.S. Gross Domestic product into its major categories is usually as: Personal consumption, government purchases, gross private domestic investment, net exports. Major leading indicators: Money supply M2, consumer expectations, and stock prices S&P500 All are goals of monetary policy except: Stable prices, business stability, sustained economic growth, but NOT a balance in domestic payments. Fiscal policy concerns the governments: spending and taxing plans. Capacity util measures current manufacturing output against potential output ALL OF THESE: 1. when capacity utilization is low, companies use their most productive and efficient plants and equip. 2. As capacity utilization increases, companies bring less efficient plants and equipment on line. 3. When the capacity utilization rate move above 80%, inflationary pressures may start to build in the economy. Why an investor would use the rotational investing method? To attempt to profit from movements in the economic cycle. In what stage in industry life cycle are companies likely to be privately owned? DEVELOPMENT. The crossover point on the life cycle curve is the point where: THE COMPANYS INDUSTRY MOVES FROM THE GROWTH STAGE TO THE EXPANSION STAGE. Industries in the maturity stage will have growth rates comparable to which: Equal to the long term trend in the gross domestic product GOP Michael Porter divides competitive structure into five basic competitive forces. Which doesn’t belong? THE RELATIVE PROFIT MARGINS BETWEEN COMPETITORS. In general the P/E ratio of a stock INCREASES as inflation DECREASES Which of the lfollowing would most likely affect the P/E ratio of the market in general?1. A significant change in government policy.2. Declining earnings of the S&P 500 companies.3 Investors expectations about inflation changes and becomes either more positive or more negative. The P/E ratio of a particular firm would probably be affected by ALL OF THESES :1. Investors perception of the quality of the firms management. 2. The firms accounting practices. 3. Supply and demand for the security. What are characteristics of a growth company. 1. The company has a relatively high average expenditures on research and development.2. The company has consistently stable and high profit margins. 3. The company has a growth rate that is significantly higher than the growth of GDP. NOT A CHARACTERISTIC : The company USUALLY pays a dividend equal to 40-50% of earnings. Cash inflows arise from DECREASING assets, INCREASING liabilities, and INCREASING stockholders equity. A high payout ratio indicates that : The firm is probably in the mature phase of its life cycle and does not have many growth options available. In an inflationary economy, many firms use the LIFO method of inventory valuation to reduce distortion of profits. Corporate pension funds pose a threat to future earnings of the company because :ALL OF THESE 1. The company is liable for all payments 2. Unfunded pensions will be paid from future earnings.3. The firm may be unable to reinvest in new assets. The small firm effect is the theory that: Firms with small market capitalization outperform the market. The study by Fama and French maintains that the lower the ratio of market value to book value the : Higher the potential return on the stock. The week end effect indicates that stocks tend to PEAK on Friday and DECLINE on Mondays. The WEAK FORM of the efficient market hypothesis suggests that there is little or nothing to be gained from studying past stock price trends. The semi strong form of the efficient market hypothesis maintains all of the following EXCEPT:1.There is no learning lag in the distribution of public info. 2 .All public info is immediately impounded into the value of a security. 3.TECHNICAL ANALYSIS IS HELPFUL IN DETEMINING WHETHER A SOTCK IS OVERVALUED OR UNDERVALUED. 4. Fundamental analysis cannot outperform the...
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