Question 1

All of the following factors affect the required rate of return except

Accepted Answer

All of the other factors listed (economy's risk free rate, corporate business risk, country risk, and expected rate of inflation) can influence the required rate of return. However, the return on equity is a component of the calculation used to determine the required rate of return, not a separate factor that affects it.

Question 2

The dividend payout ratio, the required rate of return on common equity and the expected growth rate of stock dividends are the major variables that affect

Accepted Answer

The dividend payout ratio, required rate of return on common equity and expected growth rate of stock dividends all affect the earnings multiplier for common stock. The dividend payout ratio reflects the percentage of earnings that a company pays out to its shareholders as dividends, and a higher payout ratio typically results in a lower earnings multiplier. The required rate of return on common equity reflects the rate of return that investors require for investing in a company's common stock, and a higher required rate of return typically results in a lower earnings multiplier. The expected growth rate of stock dividends reflects the rate at which a company's dividends are expected to grow in the future, and a higher growth rate typically results in a higher earnings multiplier. Therefore, these variables are important factors that affect the valuation of common stock.

Question 3

A microeconomic estimate of the market earnings multiple requires an estimate for which of the following variables?

Accepted Answer

A microeconomic estimate of the market earnings multiple requires an estimate for all of the variables listed. The dividend payout ratio is important because it affects how much of the company's earnings are distributed as dividends, which can affect the perceived value of the company. The return on equity (ROE) is important because it measures the profitability of a company relative to its equity, and this also affects the perceived value of the company. The real risk-free rate (RFR) is important because it is used as a benchmark to determine the required rate of return for equity investments, which in turn affects the market earnings multiple.

Question 4

An examination of the relationship between stock prices and the economy has shown that the relationship is

Accepted Answer

The relationship between stock prices and the economy is generally considered strong because stock prices often act as leading indicators. This means they tend to turn before the economy does, reflecting investors' expectations about future economic activity.

Question 5

Which of the following statements concerning asset allocation is false?

Accepted Answer

Severe currency blockages can impact global diversification selections. This is because currency fluctuations can have a significant impact on the returns of international investments. Therefore, investors should consider the potential impact of currency movements when making global diversification decisions.

Question 6

Which of the following is not a determinant of the aggregate gross profit margin?

Accepted Answer

The answer of Which of the following is not a...

Question 7

Which of the following variables was considered not significant in explaining stock returns?

Accepted Answer

The variable of consumption was considered not significant in explaining stock returns.

Question 8

If interest rates rise due to inflation, and expected cash flows to a firm rise, then you would expect stock prices to

Accepted Answer

The answer of If interest rates rise due to inflation,...

Question 9

Which of the following is not a reason given for why forecasters are so often incorrect?

Accepted Answer

Some economic forecasters are too broad-minded, trying to include a number of ideas in their forecasts.

Question 10

The index of leading indicators includes all of the following, except:

Accepted Answer

The answer of The index of leading indicators includes all...

Question 11

Jensen, Johnson, and Mercer showed that the relationship between stock returns and size and price-to-book ratio holds in periods when monetary policy is

Accepted Answer

Jensen, Johnson, and Mercer found that the relationship between stock returns and size and price-to-book ratio is significant during periods when monetary policy is easy, meaning when interest rates are low and monetary conditions are accommodative.

Question 12

You are attempting to estimate expected earnings per share for a major stock market series. You have determined an appropriate estimate for sales per share. Which of the following methods can be used to estimate the profit margin?

Accepted Answer

The answer of You are attempting to estimate expected earnings...

Question 13

If a diffusion index for new orders went from 87 to 74 and then to 68, it would indicate ____ receipt of new orders and indicate a ____ in breadth and the possibility of a future ____ in the series.

Accepted Answer

A decrease in the diffusion index from 87 to 68 indicates a widespread weakening in the receipt of new orders. The decline in the breadth of the index (from 87 to 74 to 68) suggests that the weakness in new orders is becoming more widespread. This could signal a possible future decline in the series of new orders.

Question 14

Expected earnings per share estimates require all of the following except

Accepted Answer

The answer of Expected earnings per share estimates require all...

Question 15

There are three techniques available to help an investor make a market decision. Which of the following is not such an analysis technique?

Accepted Answer

Fundamental analysis, as described in the question, does not directly involve analyzing market movements to make investment decisions. Instead, it focuses on evaluating the financial and economic factors that affect a particular security or company. Therefore, it is not a market analysis technique per se, but rather a method of evaluating the underlying factors that influence market performance. A, B, and C are all common techniques used by investors to make market decisions.

Quiz 10: Macroanalysis and Microvaluation of the Stock Market