Which of the following statements are correct? |- Following a stock substitution or stock split, a price-weighted index remains the same and only its divisor will change. II- Dow Jones Industrial average is a value-weighted index. III- In a value weighted index, large companies have a disproportionate influence on the index. IV- In equally-weighted index, the movements are influenced by differential prices of the index components. O 1) 1, Il only O 2) I and II only 3) 1II and IV only O 4) 1, III and IV only O 5) 1I, Il and IV only

Which of the following statements are correct? |- Following a stock substitution or stock split, a price-weighted index remains the same and only its divisor will change. II- Dow Jones Industrial average is a value-weighted index. III- In a value weighted index, large companies have a disproportionate influence on the index. IV- In equally-weighted index, the movements are influenced by differential prices of the index components. O 1) 1, Il only O 2) I and II only 3) 1II and IV only O 4) 1, III and IV only O 5) 1I, Il and IV only

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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b) “There is no alpha in an efficient market”. In light of this statement, briefly describe market efficiencyand its forms and why an investor may not be able to locate stocks that provide a positive alpha(undervalued stocks) consistently. (150 – 200 words)
Question 6 Which of the following statements about the Dow Jones Industrial Average is INCORRECT? I. Lower-priced stocks tend to affect the index less than higher-priced stocks. II. The empirical performance of the DJIA is always better than the performance of the S&P 500 during periods of crisis. III. The DJIA divisor increases after a stock split. O I and III only O I and II only O I, II and III O II and III only
Q1: According to the strong-form efficient market hypothesis, stock prices fully reflect a. all security market information only. b. limited public and private information. c. all public and private information. d. all public information only. e. all private information only.
Which of the following is true with Money Market? Select one: a. Attracts long term investor and borrower b. None of the options c. Deals with old stocks issued by companies d. Needs fixed place for trading e. Provides long term instruments which are already issued by companies The project is accepted Select one: a. If the profitability index is negative b. None of the option c. if the profitability index is less than one d. If the profitability index is greater than hundred e. If the profitability index is zero
All else equal, a higher required rate of return would reduce the price of: I. Corporate bondsII. Preferred stockIII. Common stock Select one: A. I only B. I and II only C. I and III only D. I, II, and III
The broad stock market's P/E ratio (the inverse of its earnings yield) tends to rise as treasury yields O rise O remain stable O no relationship O fall
Particulars 1. Discount rate АВС XYZ 18.5% 14.25% Not 2. Historical growth rate 2.2218% available 3. Sustainable growth 4.5% 20% rate 4. Fundamental value of stock using dividend growth model through historical growth rate 5. Fundamental value of stock using dividend growth model through sustainable growth rate 6. Fundamental value of stock using residual income growth model through historical growth rate 7. Fundamental value of stock using residual income growth model through sustainable growth rate Not Tavailable 3395 Not available 3953 Not 427.30 available 420.35 1 96.5
Suppose we observe from market data that, for a given non-dividend paying stock, F, ± Soer. What might explain the inequality in this relationship (i.e. why don't we observe Fo = Soe"T) if markets are efficient? Hint: try to identify real-world market frictions that might cause cases where Fo + Soe™" does not result in arbitrage opportunities
Rebalancing of an index will occur most frequently for a(n): Price-weighted index. Equal-weighted index. Market-capitalization-weighted index. All of the indexes will be rebalanced with the same frequency. The answer cannot be determined from the information given.
8. Is the following statement correct, wrong or partially correc? Why? "If the volatility of Stock A is higher than that of Stock B, the expected return of Stock A should be higher than that of Stock B." [8]
None
The Standard & Poor's 500 is Multiple Choice O O an equally a share- a price- a value- weighted index.

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