HS 328 - Investments Test Study Guide
Ian Chesterton, chartered financial analyst®, uses fundamental analysis to evaluate
equity securities. Chesterton has been able to use inflation data, historical dividend
information, and price-to-book ratios to consistently outperform a broad equity index.
Chesterton would most likely identify markets as being
A)
weak-form efficient.
B)
strong-form efficient.
C)
semistrong-form efficient.
D)
all of the above - ANSWER A
One investor uses fundamental analysis to form a portfolio of equity securities and
outperformed his benchmark for almost a decade. Another investor forms a portfolio
using technical analysis but has never beat her benchmark. The market under these
conditions is most likely
A)
inefficient.
B)
weak-form efficient.
C)
semistrong-form efficient.
D)
strong-form efficient. - ANSWER B
Firms are least likely to use the primary equity market to raise capital for
A)
global expansion.
,B)
research and development investments.
C)
the launch of new product lines.
D)
a desire to increase its financial leverage. - ANSWER D
Which of the following is true of over-the-counter markets but not of organized
exchanges?
A)
Trading may occur after regular business hours.
B)
They allow investors to trade in equities.
C)
Retail investors may trade with both each other and with institutional investors.
D)
Trading happens electronically. - ANSWER A
Which type of underwriting arrangement is the riskiest to the underwriter?
A)
A best-efforts agreement
B)
A firm commitment
C)
A private placement
D)
A standby underwriting - ANSWER B - in a firm commitment the underwriter buys the
shares up front
,Which of the following is not part of the U.S. Securities and Exchange Commission's
mission?
A)
Protect investors.
B)
Insure against large losses for issuers in the primary market.
C)
Maintain fair, orderly, and efficient markets.
D)
Facilitate capital formation. - ANSWER B
When must investment advisors register with the SEC?
A)
All investment advisors must register with the SEC.
B)
When their assets under management exceeds $1 million.
C)
When their assets under management exceeds $10 million.
D)
When their assets under management exceeds $100 million. - ANSWER D
Which of the following statements is (are) correct in regard to the functions of a
broker-dealer?
I. To act as intermediaries that help clients buy and sell securities
II. To hold an inventory of securities they believe are undervalued in order to sell them
later for a profit
A)
, I only
B)
II only
C)
Both I and II
D)
Neither I nor II - ANSWER C
Harriet owns many shares of a company. She wants to sell those shares because she
needs cash to pay for repairs to her home. Which of the following individuals is most
well-suited for helping her to liquidate her shares?
A)
A broker-dealer who works in the primary market
B)
A broker-dealer who works in the secondary market
C)
An underwriter who utilizes the best-efforts method
D)
An underwriter who utilizes the firm commitment method - ANSWER B
Compared to money-market instruments, an advantage of equities is their relatively high
A)
liquidity.
B)
expected return.
C)
risk level.
D)
Ian Chesterton, chartered financial analyst®, uses fundamental analysis to evaluate
equity securities. Chesterton has been able to use inflation data, historical dividend
information, and price-to-book ratios to consistently outperform a broad equity index.
Chesterton would most likely identify markets as being
A)
weak-form efficient.
B)
strong-form efficient.
C)
semistrong-form efficient.
D)
all of the above - ANSWER A
One investor uses fundamental analysis to form a portfolio of equity securities and
outperformed his benchmark for almost a decade. Another investor forms a portfolio
using technical analysis but has never beat her benchmark. The market under these
conditions is most likely
A)
inefficient.
B)
weak-form efficient.
C)
semistrong-form efficient.
D)
strong-form efficient. - ANSWER B
Firms are least likely to use the primary equity market to raise capital for
A)
global expansion.
,B)
research and development investments.
C)
the launch of new product lines.
D)
a desire to increase its financial leverage. - ANSWER D
Which of the following is true of over-the-counter markets but not of organized
exchanges?
A)
Trading may occur after regular business hours.
B)
They allow investors to trade in equities.
C)
Retail investors may trade with both each other and with institutional investors.
D)
Trading happens electronically. - ANSWER A
Which type of underwriting arrangement is the riskiest to the underwriter?
A)
A best-efforts agreement
B)
A firm commitment
C)
A private placement
D)
A standby underwriting - ANSWER B - in a firm commitment the underwriter buys the
shares up front
,Which of the following is not part of the U.S. Securities and Exchange Commission's
mission?
A)
Protect investors.
B)
Insure against large losses for issuers in the primary market.
C)
Maintain fair, orderly, and efficient markets.
D)
Facilitate capital formation. - ANSWER B
When must investment advisors register with the SEC?
A)
All investment advisors must register with the SEC.
B)
When their assets under management exceeds $1 million.
C)
When their assets under management exceeds $10 million.
D)
When their assets under management exceeds $100 million. - ANSWER D
Which of the following statements is (are) correct in regard to the functions of a
broker-dealer?
I. To act as intermediaries that help clients buy and sell securities
II. To hold an inventory of securities they believe are undervalued in order to sell them
later for a profit
A)
, I only
B)
II only
C)
Both I and II
D)
Neither I nor II - ANSWER C
Harriet owns many shares of a company. She wants to sell those shares because she
needs cash to pay for repairs to her home. Which of the following individuals is most
well-suited for helping her to liquidate her shares?
A)
A broker-dealer who works in the primary market
B)
A broker-dealer who works in the secondary market
C)
An underwriter who utilizes the best-efforts method
D)
An underwriter who utilizes the firm commitment method - ANSWER B
Compared to money-market instruments, an advantage of equities is their relatively high
A)
liquidity.
B)
expected return.
C)
risk level.
D)
