Security Analysis——MULTIPLE CHOICE QUESTIONS.doc

MULTIPLE CHOICE QUESTIONS (d) 1 There are three techniques available to help an investor make a market decision. Which of the following is not such an analysis technique? a) Macro techniques that are based on the strong relationship between the economy and security markets. b) Micro techniques that estimate future market values by applying one of several basic valuation models to equity markets. c) Technical analysis where an investor analyzes past and recent market movements for indications of future performance. d) Fundamental analysis that considers the effect of market on the entire portfolio. e) None of the above (that is, all are techniques available to make market decisions) (d) 2 Which of the following is not a factor under the Free Cash Flow to Equity (FCFE) Model? a) Depreciation expense b) Capital expenditure c) Change in working capital d) Principal debt repayment e) Earnings multiplier (e) 3 Between 1975 and 1998, stock price movement of the SP 400 and changes in earnings during the same year . a) Were always in the same direction. b) Were never in the same direction. c) Always increased. d) Always decreased. e) Were often in opposite directions (d) 4 Expected earnings per share estimates requires all of the following except a) A sales per share estimate. b) A GDP estimate. c) An aggregate operating profit margin estimate d) An estimate of the real risk-free rate. e) A tax rate estimate. (c) 5 Since 1977, the SP 400 tax rate has a) Steadily increased. b) Generally remained unchanged. c) Generally declined. d) Generally risen until 1991 and then declined. e) Declined until 1992, when Clinton was elected, then increased dramatically. (b) 6 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 a) The profit margin for the SP 400. b) The earnings multiplier for common stock. c) Aggregate tax revenues. d) Capital