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Investments, 4th Canadian Edition, 4/e

Zvi Bodie, Boston University School of Management
Alex Kane, University of California, San Diego
Alan Marcus, Boston College
Stylianos Perrakis, Concordia University
Peter Ryan, University of Ottawa

Security Analysis

Multiple Choice Quiz

Prepared by William Lim, University of New Brunswick.


1	An example of a highly cyclical industry is
		A)	the tobacco industry
		B)	the automobile industry
		C)	the food industry
		D)	a and c
		E)	b and c


2	Monetary policy is determined by
		A)	the provincial government
		B)	government budget decisions.
		C)	Parliament Hill.
		D)	the Bank of Canada.
		E)	none of the above


3	GDP refers to _________.
		A)	the amount of personal disposable income in the economy.
		B)	the total production of goods and services in the economy
		C)	the total manufacturing output in the economy.
		D)	the difference between government spending and government revenues.
		E)	none of the above


4	The stock price index and contracts and new orders for non-defense capital goods are
		A)	lagging economic indicators.
		B)	coincidental economic indicators.
		C)	leading economic indicators.
		D)	not useful as economic indicators.
		E)	none of the above.


5	The process of estimating the dividends and earnings that can be expected from the firm based on determinants of value is called
		A)	business cycle forecasting.
		B)	macroeconomic forecasting.
		C)	fundamental analysis.
		D)	technical analysis.
		E)	none of the above.


6	Historically, P/E ratios have tended to be
		A)	lower when inflation has been high
		B)	higher when inflation has been high
		C)	uncorrelated with inflation rates but correlated with other macroeconomic variables
		D)	uncorrelated with any macroeconomic variables including inflation rates
		E)	none of the above


7	Recent empirical research indicates
		A)	that real rates of return on stocks are negatively correlated with inflation
		B)	that real rates of return on stocks are uncorrelated with inflation
		C)	that real rates of return on stocks are positively correlated with inflation
		D)	nothing about real rates of return on stocks
		E)	the ratio of the real rate of return on stocks to inflation is 1.0.


8	One of the problems with attempting to forecast stock market values is that
		A)	there are no variables that seem to predict market return.
		B)	the earnings multiplier approach can only be used at the firm level.
		C)	dividend payout ratios are highly variable.
		D)	the level of uncertainty surrounding the forecast will always be quite high.
		E)	none of the above.


9	A firm's earnings per share rose from $12 to $15, dividends rose from $3.00 to $3.60, and the share price rose from $70 to $80. Given this information, it follows that
		A)	the firm increased the number of shares outstanding
		B)	the firm had a decrease in dividend payout ratio
		C)	the stock experienced a drop in the P/E ratio
		D)	the required rate of return decreased
		E)	none of the above


10	The ratio of market price to replacement cost is known as
		A)	Tobin's q
		B)	the P/E ratio.
		C)	the plowback ratio
		D)	the dividend payout ratio
		E)	the liquidation value

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