Concepts

Question 1

Bond holders face 2 specific risks, what are they?

Answer 1

Price risk and reinvestment risk.

Question 2

2 types of technical trading

Answer 2

Relative strength: PERFORMANCE OF 1 STOCK COMPARED TO AN INDEX.

Short interest: Total # sold short in the market.

Question 3

Bid vs. Ask price

Answer 3

Bid price: Price that a buy is willing to pay for stock.

Ask Price: Price at which a seller is willing to sell their stock at.

Question 4

Weak form efficiency:

Answer 4

Includes past information

Question 5

Semi-strong form efficiency

Answer 5

Includes all past info and all current public info

The market is mostly this.

Question 6

Strong-form efficiency

Answer 6

All information is incorporated into price

Question 7

High P/E ratio indicates

Answer 7

Suggests that the market expects high growth.

Question 8

“Extra cash” dividend

Answer 8

Extra amount MAY not be repeated next time.

Question 9

“Special Cash” dividend

Answer 9

Extra amount WILL NOT be repeated again.

Question 10

Stock Price (NO GROWTH)

Answer 10

Price = Do/(1+r) + Do/(1+r)^2 …..

Question 11

Stock Price (CONSTANT GROWTH)

Answer 11

Set up like a Gordon growth Do*(1+g)/(r-g) …..

Question 12

Stock Price (TWO STAGE MODEL)

Answer 12

Price =

[Do * SUM (1+g)/(1+k)^t] +

[Dt *(1+g2)/(k-g2)(1+k)^t]