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Economic and Busines
Series 65 Section 1
| Question | Answer |
|---|---|
| Which of the following is considered the measure of the overall cost of goods and services purchased by a U.S. citizen? | Consumer Price Index (CPI) |
| Unsystematic risk can be reduced the most by: | Diversification |
| A company’s financial statements report $1 million cash and cash equivalents, $400,000 accounts receivable, $200,000 marketable securities It has accounts payable due in 3 months of $400,000. What is the company's quick ratio? | 4 |
| A yield curve represents bond yields: | of a similar credit quality across a range of maturities |
| A U.S. trade deficit is typically the result of the U.S. dollar: | appreciating against foreign currencies causing demand for foreign goods in US markets to increase |
| Tiffany’s diversified portfolio contains government fixed income securities. The risk involved with owning these securities in a diversified portfolio is: | interest rate. |
| An asset remains the same while liabilities decrease. Under these circumstances, which of the following will increase? | Owner’s equity |
| Which of the following quantitative tools would be used to calculate an investment's dispersion around its mean or expected return? | standard deviation |
| An investor with a federal marginal tax rate of 28% purchases a corporate bond with a coupon rate set at 7%. This investor’s after-tax yield would be: | The correct answer is “5.04%”. Since the investor is in a 28% tax bracket, we compute that after tax he/she will keep 72% of the 7% yield. To calculate, simply convert percentages to decimals and multiply .72 X .07 = 0.0504 or 5.04% |
| Omar purchases an equity security and is told of the unsystematic regulatory risk involved with owning this security. Which of the following best describes this risk? | The chance that Congress will make unfavorable changes to capital gains and taxation laws |
| A retired couple’s portfolio, containing predominantly fixed investments, is losing ground relative to the purchasing power of the underlying currency. What type of risk would the IA need to explain to this couple? | Inflation risk |
| Which of the following are general indicators of a recession? | High inflation and high unemployment; declining cost of services and decline in corporate profits |
| A high-school sophomore has decided to attend an Ivy League college. The parents have decided to invest the entire college fund in S&P Index Fund, and will withdrawing the money in 3 years. Why might their investment adviser discourage this investment? | The correct answer is "Systematic risk." Systematic, aka market risk, can affect the value of share prices no matter how financially strong the company is. This risk cannot be diversified. Thus, in a falling tide, all boats fall. |
| Other than revenues, which of the following elements is used to determine gross profit? | Correct. Gross profit = Revenue minus Cost of Goods Sold Cost of Goods Sold (COGS) is the direct cost attributed to the production of the goods sold by the company. It excludes indirect expenses such as distribution costs and sales force compensation |
| A fundamental analyst would consider which of the following factors when calculating common stock evaluations? I. Trading volume II. Revenue and net income III. Price/earnings ratios (P/E) IV. Moving price averages | II and III only. Fundamental analysts look quantitatively at a company’s financial statements. Revenue, net income, and P/E ratios are critical in their analysis. |
| Price-to -book value can be defined as a measure of share price relative to the: | Per share value of total assets. On the company’s balance sheet, assets are divided into three categories: current assets, fixed assets and intangible assets. |
| As opposed to a speculator, a hedger’s main goal is: | to reduce the risk associated with a long position |
Created by:
tonyramirez
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