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An Asian call option gives its holder the right to
buy the underlying asset at a price determined by the average stock price during some specified portion of the option's life
If you have an extremely "bullish" outlook on the stock market, you could attempt to maximize your rate of return by
purchasing out-of-the-money call options
Which one of the following will increase the value of a put option?
An increase in the volatility of the underlying stock
A put option on Dr. Pepper Snapple Group, Incorporated, has an exercise price of $45. The current stock price is $41. The put option i
in the money
A time spread may be executed by
selling an option with one expiration date and buying a similar option with a different expiration date
If you are going to earn abnormal returns based on your macroeconomic analysis, it will most likely have to be because you
are a better analyst than others
Advantages of exchange-traded options over OTC options include all but which one of the following?
Contracts that are tailored to meet the needs of market participants
The hedge ratio is often called the option's
delta
All else equal, call option values are __________ if the __________ is lower.
higher; exercise price
To obtain an approximate estimate of the real interest rate, one must __________ the __________ the nominal risk-free rate.
subtract; expected inflation from
An Asian put option gives its holder the right to
sell the underlying asset at a price determined by the average stock price during some specified portion of the option's life
The market value of all final goods and services produced within the borders of a country during a given period is called
GDP
The PEG ratio normalizes the P/E ratio by the
growth rate.
An American call option gives the buyer the right to
buy the underlying asset at the exercise price on or before the expiration date
An industry analysis for manufacturers of a small personal care gadget observed the following characteristics:
1. Industry sales have grown at 15%-20% per year in recent years and are expected to grow at 10%-15% per year over the next 3 years, still well above the economic growth rate.
2. Some U.S. manufacturers are attempting to enter fast-growing non-U.S. markets, which remain largely unexploited.
3. Some manufacturers have created a new niche in the industry by selling directly to customers through mail order. Sales for this industry segment are growing at 40% per year.
4. The current penetration rate in the United States is 60% of households and will be difficult to increase.
5. Manufacturers compete fiercely on the basis of price, and price wars within the industry are common.
Characteristics 4 and 5 would indicate that the industry is in the __________blank stage.
maturity
Which one of the following stocks represents industries with below-average sensitivity to the state of the economy?
Food and beverage
The price-to-sales ratio is probably most useful for firms in which phase of the industry life cycle?
Start-up phase
An analyst starts by examining the broad economic environment and then considers the implications of the economy on the industry in which the firm operates. Finally, the firm's position within the industry is examined. This is called __________ analysis.
top-down
The constant-growth dividend discount model (DDM) can be used only when the growth rate is __________.
less than the required return
The term residual claimant refers to
equity or shareholders.
The divergence between an option's intrinsic value and its market value is usually greatest when
the option is approximately at the money
The writer of a put option
agrees to buy shares at a set price if the option holder desires
You would expect the beta of cyclical industries to be __________ and the beta of defensive industries to be __________.
greater than 1; less than 1
Which of the following describes the percentage of the total labor force that has yet to find work?
The unemployment rate
Which of the following would not be considered a supply shock?
An increase in the level of government spending
The supply of funds in the economy is controlled primarily by
the Federal Reserve System
The greatest value to an analyst from calculating a stock's intrinsic value is
how the process forces analysts to understand the critical variables that have the greatest impact on value
An underpriced stock provides an expected return that is __________ the required return based on the capital asset pricing model (CAPM).
greater than
Everything else equal, if you expect a larger interest rate increase than other market participants, you should buy
short-term bonds
__________ is the amount of money per common share that could be realized by breaking up the firm, selling its assets, repaying its debt, and distributing the remainder to shareholders.
Liquidation value per share
Which one of the following statements about market and book value is correct?
Most firms have a market-to-book ratio above 1.
