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The analysis of the determinants of firm value is called
fundamental analysis
Which of the following is the rate at which the general level of prices for goods and services is rising?
The inflation rate
You buy a call option and a put option on General Electric. Both the call option and the put option have the same exercise price and expiration date. This strategy is called a
long straddle
If a stock price increases, the price of a put option on the stock will ________ and the price of a call option on the stock will __________.
decrease; increase
Firm A is high-risk, and Firm B is low-risk. Everything else equal, which firm would you expect to have a higher P/E ratio?
Both would have the same P/E if they were in the same industry.
The federal funds rate is the interest rate
banks charge each other for overnight loans of deposits on reserve at the Fed
Which of the following valuation measures is often used to compare firms that have no earnings?
Price-to-sales ratio
Which one of the following is a common term for the market consensus value of the required return on a stock?
Market capitalization rate
The initial maturities of most exchange-traded options are generally
less than 1 year
The accounting measure of a firm's equity value generated by applying accounting principles to asset and liability acquisitions is called
book value
If the economy is going into a recession, a good industry to invest in would be the __________ industry.
medical services
According to __________ economists, the growth of the U.S. economy in the 1980s can be attributed to lower marginal tax rates, which improved the incentives for people to work.
supply-side
You buy a call option on Summit Corporation with an exercise price of $40 and an expiration date in September, and you write a call option on Summit Corporation with an exercise price of $40 and an expiration date in October. This strategy is called a
time spread
The Option Clearing Corporation is owned by
the exchanges on which stock options are traded
A firm in the early stages of its industry life cycle will likely have low
dividend payout rates
An example of a highly cyclical industry is the
automobile industry
A firm cuts its dividend payout ratio. As a result, you know that the firm's
earnings retention ratio will increase
The ratio of the purchasing power of two economies is termed the
real exchange rate
The goal of supply-side policies is to
create an environment where workers and owners of capital have the maximum incentive and ability to produce and develop goods
A European put option gives its holder the right to
sell the underlying asset at the exercise price only at the expiration date
The yield curve spread between the 10-year T-bond yield and the federal funds rate is a __________ economic indicator.
leading
In macroeconomic terms, an increase in the price of imported oil or a decrease in the availability of oil is an example of a
supply shock
Strips and straps are variations of
straddles
Inflation is caused by
rapid growth of the money supply
The delta of an option is the
change in the dollar value of an option for a dollar change in the price of the underlying asset
A top-down analysis of a firm's prospects starts with an analysis of the
U.S. economy or even the global economy
An American put option gives its holder the right to
sell the underlying asset at the exercise price on or before the expiration date
__________ is the riskiest transaction to undertake in the stock-index option markets if the stock market is expected to fall substantially after the transaction is completed.
Writing an uncovered put option
An investment strategy that entails shifting the portfolio into industry sectors that are expected to outperform others based on macroeconomic forecasts is termed
sector rotation
Cash cows are typically found in the __________ stage of the industry life cycle.
maturity
The intrinsic value of a call option is equal to the
stock price minus the exercise price
