T/F

1. If a company's revenues and earnings are highly predictable, it's stock price will also be highly predictable.

2. One advantage of the dividend valuation model is that it does not need a required rate of return.

3. The efficient market hypothesis means that trades can be executed quickly, easily, and inexpensively.

1. The intrinsic value of a stock provides a purchase price for the stock

A) which will assuredly yield the anticipated capital gain.

B) which will guarantee the expected rate of return.

C) that is always below the market value but yet yields the expected rate of return.

D) that is reasonable given the associated level of risk.

2. Behavioral finance would explain many market anomalies to

A) random price movements that only appear to have a rational explanation.

B) illegal manipulation of securities prices.

C) the influence of human emotions and biases on securities markets.

D) poorly understood aspects of market efficiency.

3. Marti is 31 years old and is saving for retirement. Which one of the following portfolio allocations might best suit her situation if she is willing to accept a fair amount of risk in exchange for long-term capital appreciation?

A) 60% bonds, 15% money funds and 25% real estate

B) 50% mortgage bonds, 5% money market, 45% municipal bonds

C) 25% bank CDs, 40% corporate bonds, 15% money market, 20% value stocks

D) 5% money funds, 10% bonds and 85% growth stocks

4. P/E ratios could rise even as earnings fall if

A) investors expect lower stock prices to be permanent.

B) investors expect lower earnings to be permanent.

C) earnings fall at a faster rate than stock prices.

D) earnings fall at a slower rate than stock prices.