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FIN 351 DeVry Week 1 Discussion 1
Primary and Secondary Markets (graded)
What is the difference between a primary market and a secondary market? Provide examples of well-known markets and categorize them appropriately. What are several exa
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What is the difference between a primary market and a secondary market? Provide examples of well-known markets and categorize them appropriately. What are several examples of different types of indices, and what do they measure?
FIN 351 DeVry Week 1 Discussion 2
Financial Data (graded)
Go to .yahoo.com/">http://finance.yahoo.com/, and tell us what kinds of financial data you can find on the site. Are there other sites where you can find similar data? Please share with the class the sites you find.
FIN 351 DeVry Week 2 Discussion 1
Industry Life Cycles (graded)
What are the five stages of industry life cycles? Choose five industries that you believe represent each part of the cycle, and explain why each industry may fall under each respective stage. How will investor expectations related to capital needs, dividend payments, and returns change under each stage?
FIN 351 DeVry Week 2 Discussion 2
P/E Ratios and Stocks (graded)
What is a P/E ratio, and why is it important in stock valuation? Choose a company stock, and discuss its P/E ratio. Do you believe the P/E ratio provides an accurate assessment of the company’s performance?
FIN 351 DeVry Week 3 Discussion 1
Special Events in Investing (graded)
Under what special situations do you think it is best to invest? Please explain and support your reasoning. This section lists options that can be used to view responses.
FIN 351 DeVry Week 3 Discussion 2
Technical Analysis in Investing (graded)
Is technical analysis (charting) a valid way to manage your investments? Why or why not? Please support your answer with class material or material that you find on the Internet.
FIN 351 DeVry Week 4 Discussion 1
Bonds Versus Stocks (graded)
Why would you want to invest in a bond over a stock? What are some of the risks associated with investing in bonds?
FIN 351 DeVry Week 4 Discussion 2
How can duration be used to determine a rough measure of the percentage change in the price of a bond as a result of interest rate changes?
FIN 351 DeVry Week 5 Discussion 1
What are Derivatives and Convertibles? (graded)
What are some derivative products? Illustrate their use as investment vehicles. What are convertible securities? What are the advantages and disadvantages of owning a convertible security?
FIN 351 DeVry Week 5 Discussion 2
Options Trading and Financial Futures (graded)
What is the difference between writing a covered and a naked call option? Do you think naked options are more of an investment or purely used for speculation? Please support your reasoning. This section lists options that can be used to view responses.
FIN 351 DeVry Week 6 Discussion 1
Mutual Funds (graded)
What are some of the advantages and disadvantages of investing in a mutual fund? Explain why the vast array of mutual funds available may be a partial drawback for investors. How can investors assess mutual fund performance? This section lists options that can be used to view responses.
FIN 351 DeVry Week 6 Discussion 2
Real-Asset Investing (graded)
What real asset do you think is best to invest in for the present environment and why? Explain why investor choices may have changed over the last several decades.
FIN 351 DeVry Week 7 Discussion 1
Systematic and Unsystematic Risk (graded)
Discuss systematic risk and unsystematic risk, and how they are measured. Is it possible to neutralize or lessen the effects of each of these risks? If yes, how can this be accomplished?
FIN 351 DeVry Week 7 Discussion 2
What is the advantage of a diversified portfolio? Why invest in different types of asset classes? Are there any disadvantages associated with a diversified portfolio?
FIN 351 DeVry Week 1 Homework Assignment
Answer the following items from your textbook:
Chapter 1 Discussion Question 13
Chapter 1 Problem 5
Chapter 2 Discussion Question 2
Chapter 3 Discussion Question 17
Chapter 3 Problem 5
Chapter 3 Problem 12
Submit your answers in a Word document to the Week 1 Assignments Dropbox. Grading rubric may be found in Doc Sharing. Follow APA format.
Submit your assignment to the Dropbox, located at the top of this page. For instructions on how to use the Dropbox, read these
See the Syllabus section "Due Dates for Assignments & Exams" for due date information.
Chapter 1 Q#13
Many people think of risk as the danger of losing money. Is this the same way that risk is defined in finance?
Chapter 1 Q #5
Sally is reviewing the performance of several portfolios in the family trusts. Trust A is managed by Wall Street Investment Advisors and Trust B is managed by LaSalle Street Investment Advisors. Both trusts are invested in a combination of stocks and bonds and have the following returns:
a. Calculate the annualized geometric and arithmetic returns over this 5-year period.
b. Which manager performed the best, and is there a significant enough difference for Sally to move her money to the winning manager?
c. Explain the difference between the geometric and arithmetic returns.
Chapter 2 Q#2
What is an efficient market?
Chapter 3 Q#17
If you did not wish a high-priced or heavily capitalized firm (one with high total market value) to overly influence your index, which of the weighting systems described in this chapter would you be likely to use?
Chapter 3 Q#5
You sell 100 shares of Norton Corporation short. The price of the stock is $60 per share. The margin requirement is 50 percent.
a. How much is your initial margin?
b. If stock goes down to $42, what is your percentage gain or loss on the initial margin (equity)?
c. If stock goes up to $67.50, what is your percentage gain or loss on the initial margin (equity)?
d. In part c, if the minimum margin standard is 30 percent, will you be required to put up more margin? (Do the additional necessary calculations to answer this question.)
Chapter 3 Q#12
Assume the following five companies are used in computing an index:
a. If the index is price weighted, what will be the value of the index on December 31, 2007? (Take the average price on December 31, 2007, and divide by the average price on January 1, 1984, and multiply by 100.) The value of the index on December 31, 2007? (Take the total market value on December 31, 2007, and divide by the total market value on January 1, 1984, and multiply by 100.)
c. Explain why the answer in part b is different from the answer in part a.
FIN 351 DeVry Week 2 Homework Assignment
Answer the following items from your textbook.
Chapter 5 Discussion Question 10
Chapter 5 Discussion Question 12
Chapter 6 Discussion Question 2
Chapter 6 Discussion Question 3
Chapter 7 Discussion Question 9
Chapter 7 Problem 5
Chapter 7 Problem 10
Chapter 7 Problem 14
Chapter 8 Discussion Question 12
Chapter 8 Discussion Question 13
Chapter 8 Problem 5
Chapter 8 Problem 15
Submit your answers in a Word document to the Week 2 Assignments Dropbox. Grading rubric may be found in Doc Sharing. Follow APA format.
Submit your assignment to the Dropbox, located at the top of this page. For instructions on how to use the Dropbox, read these .equella.ecollege.com/file/8ff9f27a-3772-48cf-9855-4bec4e6706bf/1/Dropbox.html">step-by-step instructions.
1. What is the advantage of using a composite of indicators (such as the 10 leading indicators) over simply using an individual indicator?
2. Comment on whether each of the following three industries is sensitive to the business cycle. If it is sensitive, does it do better in a boom period or a recession?
3. List the five stages of the industry life cycle. How does the pattern of cash dividend payments change over the cycle? (A general statement is all that is required.)
4. Why might a firm begin paying stock dividends in the growth stage?
5. For cyclical companies, why might the current P/E ratio be misleading?
6. Assume D1 = $1.60, Ke = 13 percent, g = 8 percent. Using Formula 7–5 on page 168, for the constant growth dividend valuation model, compute P0.
7. Leland Manufacturing Company anticipates a nonconstant growth pattern for dividends. Dividends at the end of year 1 are $4.00 per share and are expected to grow by 20 percent per year until the end of year 4 (that’s three years of growth). After year 4, dividends are expected to grow at 5 percent as far as the company can see into the future. All dividends are to be discounted back to present at a 13 percent rate (Ke = 13 percent).
a. Project dividends for years 1 through 4 (the first year is already given). Round all values that you compute to two places to the right of the decimal point throughout this problem.
b. Find the present value of the dividends in part a. Year Dividends (20% growth) P.V. Factor 13%
c. Project the dividend for the fifth year (D5).
d. Use Formula 7–5 on page 168 to find the present value of all future dividends, beginning with the fifth year’s dividend. The present value you find will be at the end of the fourth year. Use Formula 7–5 as follows: P4 =
e. Discount back the value found in part d for four years at 13 percent. P.V. of $90.75 four years from now at 13%
f. Add together the values from parts b and e to determine the present value of the stock.
8. Mr. Phillips of Southwest Investment Bankers is evaluating the P/E ratio of Madison Electronics Conveyors (MEC). The firm’s P/E is currently 17. With earning per share of $2, the stock price is $34.
The average P/E ratio in the electronic conveyor industry is presently 16.
However, MEC has an anticipated growth rate of 18 percent versus an industry average of 12 percent, so 2 will be added to the industry P/E by Mr. Phillips. Also, the operating risk associated with MEC is less than that for the industry because of its long-term contract with American Airlines. For this reason, Mr. Phillips will add a factor of 1.5 to the industry P/E ratio.
The debt-to-total-assets ratio is not as encouraging. It is 50 percent, while the industry ratio is 40 percent. In doing his evaluation, Mr. Phillips decides to subtract a factor of 0.5 from the industry P/E ratio. Other ratios, including dividend payout, appear to be in line with the industry, so Mr. Phillips will make no further adjustment along these lines.
However, he is somewhat distressed by the fact that the firm only spent 3 percent of sales on research and development last year, when the industry norm is 7 percent. For this reason he will subtract a factor of 1.5 from the industry P/E ratio.
Despite the relatively low research budget, Mr. Sanders observes that the firm has just hired two of the top executives from a competitor in the industry. He decides to add a factor of 1 to the industry P/E ratio because of this.
a. Determine the P/E ratio for MEC based on Mr. Phillips’s analysis. Industry P/E ratio
b. Multiply this times earnings per share, and comment on whether you think the stock might possibly be under- or overvalued in the marketplace at its current P/E and price.
The analysis would appear to be that the stock with a current P/E of 17 and price of $34 is undervalued.
9. What might a high dividend-payout ratio suggest to an analyst about a company’s growth prospects?
10. Explain the probable impact of replacement-cost accounting on the ratios of return on assets, debt to total assets, and times interest earned for a firm that has substantial old fixed assets.
11. A firm has assets of $1,800,000 and turns over its assets 2.5 times per year.
Return on assets is 20 percent. What is its profit margin (return on sales)?
12. The Multi-Corporation has three different operating divisions. Financial information for each is as follows:
a. Which division provides the highest operating margin?
b. Which division provides the lowest after-tax profit margin?
c. Which division has the lowest after-tax return on assets?
d. Compute net income (after-tax) to sales for the entire corporation.
e. Compute net income (after-tax) to assets for the entire corporation.
f. The vice president of finance suggests the assets in the Appliances division be sold off for $10 million and redeployed in Sporting Goods.
g. Explain why Sporting Goods, which has a lower return on sales than Appliances, has such a positive effect on return on assets.
FIN 351 DeVry Week 3 Homework Assignment
Chapter 9 Discussion Question 9
Chapter 9 Discussion Question 20
Chapter 10 Discussion Question 3
Chapter 10 Discussion Question 9
Chapter 10 Discussion Question 11
Chapter 10 Discussion Question 13
Submit your answers in a Word document to the Week 3 Assignments Dropbox. Grading rubric may be found in Doc Sharing. Follow APA format.
1. Define special or abnormal returns.
2. What does Table 9–5 on page 252 indicate about the relationship between a firm’s P/E ratio and its average quarterly return?
3. If you “buy straw hats in winter” or buy “when there is blood in the street,” what kind of investor are you?
4. What is technical analysis?
5. Outline the basic assumptions of technical analysis.
6. Also under the Dow Theory, what other average is used to confirm movements in the Dow Jones Industrial Average?
FIN 351 DeVry Week 4 Homework Assignment
Chapter 11 Discussion Question 3
Chapter 11 Discussion Question 11
Chapter 11 Problem 2
Chapter 11 Problem 6
Chapter 11 Problem 8
Chapter 12 Discussion Question 3
Chapter 12 Problem 2
Chapter 12 Problem 6
Chapter 12 Problem 7
Chapter 12 Problem 16
Chapter 18 Discussion Question 5
Chapter 18 Problem 5
Submit your answers in a Word document to the Week 4 Assignments Dropbox.
• Chapter 11 Discussion Question 3 (Page 308)- Explain how a sinking fund works.
• Chapter 11 Discussion Question 11 (Page 308)- What tax advantages are associated with municipal bonds?
• Chapter 11 Problem 2 (Page 309)- If an investor is in a 30 percent marginal tax bracket and can purchase a straight (nonmunicipal bond) at 8.37 percent and a municipal bond at 6.12 percent, which should he or she choose?
• Chapter 11 Problem 6 (Page 309)- Assume a $1,000 Treasury bill is quoted to pay 5 percent interest over a six-month period.
How much interest would the investor receive? 6 month period:
What will be the price of the Treasury bill?
What will be the effective yield?
• Chapter 11 Problem 8 (Page 309)- The price of a Treasury strip note or bond can be found using.vitalsource.com/books/0077637011/content/id/appC">Appendix C toward the back of the text. It is simply the present value factor from the table times the maturity (par) value of the Treasury strip. Assume you are considering a $10,000 par value Treasury strip that matures in 25 years. The discount rate is 7 percent. What is the price (present value) of the investment?
• Chapter 12 Discussion Question 3 (Page 332)- Why does a bond price change when interest rates change?
• Chapter 12 Problem 2 (Page 333)- Given a 15-year bond that sold for $1,000 with a 9 percent coupon rate, what would be the price of the bond if interest rates in the marketplace on similar bonds are now 12 percent? Interest is paid semiannually. Assume a 15-year time period.
• Chapter 12 Problem 6 (Page 333)- What is the current yield of an 8 percent coupon rate bond priced at $877.60?
• Chapter 12 Problem 7 (Page 333)- What is the yield to maturity for the data in.vitalsource.com/books/0077637011/content/id/P12-177">problem 6? Assume there are 10 years left to maturity. It is a $1,000 par value bond. Use the trial-and-error approach with annual analysis. [Hint: Because the bond is trading for less than par value, you can assume the interest rate (i) for which you are solving is greater than the coupon rate of 8 percent.]
• Chapter 12 Problem 16 (Page 333)- The following pattern for one-year Treasury bills is expected over the next four years:
What return would be necessary to induce an investor to buy a two-year security?
What return would be necessary to induce an investor to buy a three-year security?
What return would be necessary to induce an investor to buy a four-year security?
• Chapter 18 Discussion Question 5 (Page 488)- As market rates of interest become higher, what impact does this have on duration?
• Chapter 18 Problem 5 (Page 490)- You are considering the purchase of two $1,000 bonds. Your expectation is that interest rates will drop, and you want to buy the bond that provides the maximum capital gains potential. The first bond has a coupon rate of 6 percent with four years to maturity, while the second has a coupon rate of 14 percent and comes due six years from now. The market rate of interest (discount rate) is 8 percent. Which bond has the best price movement potential? Use duration to answer the question.
FIN 351 DeVry Week 5 Homework Assignment
Chapter 13 Discussion Question 1
Chapter 13 Problem 1
Chapter 14 Discussion Question 3
Chapter 14 Discussion Question 11
Chapter 14 Problem 2
Chapter 14 Problem 3
Chapter 15 Discussion Question 7
Chapter 15 Discussion Question 14
Chapter 15 Problem 3
Chapter 16 Discussion Question 1
Chapter 16 Discussion Question 6
Submit your answers in a Word document to the Week 5 Assignments Dropbox.
1. Why would an investor be interested in convertible securities? (What do they offer to the investor?)
2. A convertible bond has a face value of $1,000, and the conversion price is $50 per share. The stock is selling at $42 per share. The bond pays $60 per year interest and is selling in the market for $930. It matures in 15 years. Market rates are 10 percent per year.
What is the conversion ratio?
What is the conversion value?
What is the conversion premium (in dollars and percent)?
What is the floor value or pure bond value?
3. What is meant by the exercise or strike price on an option?
4. What are two option strategies to take advantage of an anticipated decline in stock prices? (Relate one to call options and the other to put options.)
5. Look at the option quotes in Table 14–2 on page 368.
What is the closing price of the common stock of SINGLE Systems?
What is the highest strike price listed?
What is the price of a December 20 call option?
What is the price of a January 22.50 put option?
6. Assume a stock is selling for $66.75 with options available at 60, 65, and 70 strike prices. The 65 call option price is at $4.50.
What is the intrinsic value of the 65 call?
Is the 65 call in the money?
What is the speculative premium on the 65 call option?
What percentage does the speculative premium represent of common stock price?
Are the 60 and 70 call options in the money?
7. How does the concept of margin on a commodities contract differ from that of margin on a stock purchase?
8. How can using the financial futures markets for interest rates and foreign exchange help financial managers through hedging? Briefly explain, and give one example of each.
9. Sterling Jones purchases a 5,000 troy ounce contract on silver at $13.00 an ounce. At the same time he purchases an 112,000 pound sugar contract at 0.191 cents a pound. If the price of silver goes down to $12.94 at the same time the price of sugar goes up to 0.196 cents, will Sterling have an overall net gain or loss?
10. Why are stock index futures and options sometimes referred to as derivative products? Why do some investors believe derivative products make the markets more volatile? “
11. Why is it unrealistic for a portfolio manager to sell a large portion of his portfolio if he thinks the market is about to decline?
FIN 351 DeVry Week 6 Homework Assignment
Chapter 4 Discussion Question 15
Chapter 19 Discussion Question 8
Chapter 19 Problem 3
Chapter 20 Discussion Question 4
Chapter 20 Discussion Question 12
Submit your answers in a Word document to the Week 6 Assignments Dropbox.
See the Syllabus section "Due Dates for Assignments & Exams" for due date information
What is dollar-cost averaging? If you were a particularly astute investor at timing moves in the market, would you want to use dollar-cost averaging?
Are foreign markets likely to be more or less efficient than U.S. markets? What effect does this have on bid-ask spreads and the ability to absorb large transactions?
Assume you invest in the Japanese equity market and have a 25 percent return (quoted in yen). However, during the course of your investment, the yen declines versus the dollar. By what percentage could the yen decline relative to the dollar before all your gain is eliminated?
What two factors have hurt real estate in recent times? Why might the future outlook be more positive?
What are some factors that drive up the price of gold? What are factors that drive it down?
FIN 351 DeVry Week 7 Homework Assignment
Chapter 17 Discussion Question 4
Chapter 17 Discussion Question 6
Chapter 17 Discussion Question 8
Chapter 17 Discussion Question 10
Chapter 17 Discussion Question 12
Chapter 17 Discussion Question 13
Submit your answers in a Word document to the Week 7 Assignments Dropbox.
• Chapter 17 Discussion Question 4 pg. 456-In a two-asset portfolio, is the portfolio standard deviation a weighted average of the two individual stocks’ standard deviation? Explain.
• Chapter 17 Discussion Question 6 pg. 456-What are the two characteristics of points along the efficient frontier? Do portfolios exist above the efficient frontier?
• Chapter 17 Discussion Question 8 pg. 456-Describe the optimum portfolio for an investor in terms of indifference curves and the efficient frontier.
• Chapter 17 Discussion Question 10 pg. 456-In examining the capital market line as part of the capital asset pricing model, to increase portfolio return (KP) what other variable must you increase?
• Chapter 17 Discussion Question 12 pg. 456- What can be assumed in terms of volatility for a stock that has a beta of 1.2?
• Chapter 17 Discussion Question 13 pg. 456- What does the security market line indicate? In general terms, how is it different from the capital market line?
FIN 351 DeVry Week 1 Quiz Latest
1. (TCO 1) When ranking security returns from highest return to lowest return, the data shows that the annualized returns are as follows:
Large stocks, small stocks, long-term corporate bonds, long-term government bonds, and treasury bills.
Treasury bills, long-term government bonds, long-term corporate bonds, large stocks, small stocks
Large stocks, small stocks, long-term government bonds, long-term corporate bonds, and treasury bills.
Small stocks, large stocks, long-term corporate bonds, long-term government bonds, and treasury bills.
Question 2. Question : (TCO 1) A direct equity claim arises through investment in _____.
bonds and other debt instruments
common stocks, warrants, and options
preferred stock and commodity futures
Question 3. Question : (TCO 1) What factors must be considered in choosing between investment alternatives?
Risk and liquidity
Interest or dividends versus capital gains
Timeframe for managing funds and evaluating performance and tax effects
All of the above
Question 4. Question : (TCO 1) Which of the following is NOT a characteristic of an organized exchange?
An organized exchange functions as a primary market.
Securities are bought and sold in an auction market by brokers acting as agents for buyers and sellers in a central location.
An organized exchange may be either national or regional.
An organized exchange has a central location where all trading takes place.
Question 5. Question : (TCO 1) Secondary markets provide _____.
Question 6. Question : (TCO 1) The process of selling a new issue of securities so that the price is guaranteed to the selling firm is referred to as _____.
direct by issuer
Question 7. Question : (TCO 1) The first exchange to become a publicly traded company was the _____.
New York Stock Exchange
Chicago Board of Trade
NASDAQ Stock Market
Chicago Mercantile Exchange
Question 8. Question : (TCO 1) The _____ is the tax rate that applies to each new dollar of income.
average tax rate
short-term capital gains tax rate
long-term capital gains tax rate
marginal tax rate
Question 9. Question : (TCO 1) The index which gives equal weight to every company included, and is therefore not dominated by any single company, is the _____.
Dow Jones Composite Average
Standard & Poor's 400 Index
Value Line Average
American Stock Exchange Index
Question 10. Question : (TCO 1) The success of a short investment position depends on _____.
a level stock price
a declining stock market
an increasing stock price
declining interest rates
FIN 351 DeVry Week 2 Quiz Latest
1. (TCO 2) The primary purpose of fundamental stock valuation is to _____.
eliminate stocks of those companies that are potential losers from the portfolio
identify for purchase those companies that are fundamentally undervalued
learn to identify peaks and troughs of the business cycle
Question 2. Question : (TCO 2) Some of the major leading indicators would be _____.
money supply (M2), consumer expectations, and stock prices (S&P 500)
personal income, employees on nonagricultural payrolls, and industrial production
average prime rate charged by banks, labor cost per unit of output, and commercial and industrial loans outstanding
Question 3. Question : (TCO 2) In which stage of the industry life cycle are companies likely to be privately owned?
Question 4. Question : (TCO 2) The crossover point on the life cycle curve is the point where _____.
the company issues stock in an initial public offering (IPO)
the company gets listed on an organized exchange
the company's industry moves from the growth stage to the expansion stage
the industry's products begin to be accepted by the marketplace
Question 5. Question : (TCO 2) Which of the following statements about stock valuation based on asset value is NOT true?
Natural resources often give a company value, even if an income stream is not produced.
The value of the assets may not even appear on the balance sheet.
Current assets are usually excluded from the valuation process, since they will be used up in the next business cycle.
Hidden assets can add substantial value to the firm.
Question 6. Question : (TCO 2) The primary difference between dividend valuation models and earnings valuation models is _____.
selecting the appropriate discount rate
dividends are not considered in earnings models
whether the investor's income stream or the firm's income stream is measured
More than one of the above
Question 7. Question : (TCO 2) P/E ratios are influenced by a company's _____.
Question 8. Question : (TCO 2) The major device for measuring the profitability of a firm over a defined period of time is the _____.
statement of cash flows
None of the above
Question 9. Question : (TCO 2) Asset-utilization ratios measure _____.
productivity of fixed assets in terms of sales.
the relationship of sales on the income statement to various assets on the balance sheet.
the firm's ability to pay off short-term obligations as they come due.
Question 10. Question : (TCO 2) _____ ratios measure the impact of external market forces on the internal performance of a firm.
FIN 351 DeVry Week 3 Quiz Latest
1. (TCO 3) When viewing the terms "special returns” or “abnormal returns,” we know this can refer to _____.
the Efficient Market Hypothesis
gains in excess of the market risk-adjusted average
convertibles and warrants, etc.
Question 2. Question : (TCO 3) Legal methods for attempting to profit through mergers and acquisitions include all of the following, except identifying _____.
an insider close to the information
candidates through financial or operating characteristics
securities which are undergoing unusual volume or pricing patterns
industries where companies are being absorbed
Question 3. Question : (TCO 3) An acquisition may be canceled because of any of the following except _____.
an unusually high premium on stock price
a lawsuit brought by stockholders
disapproval of the target company's management
Question 4. Question : (TCO 3) New stock issues are considered a special investment situation, because _____.
they exhibit a very good long-term investment potential
the spread is greater than that in the secondary market
there is some evidence that new issues are underpriced
Question 5. Question : (TCO 3) Research on the strong form shows that _____ are able to achieve superior returns.
members of the SEC
corporate insiders and public officials
market specialists and corporate insiders
the majority of professional mutual fund managers
Question 6. Question : (TCO 3) According to the Dow Theory, daily fluctuations and secondary movements in the market are used to help identify _____.
a key indicator
a primary trend
shifts in demand and supply
Question 7. Question : (TCO 3) All of the following are smart money rules except ¬_____.
investment advisory recommendations
short sales by specialists
Barron's Confidence Index
Question 8. Question : (TCO 3) A low Barron's Confidence Index means that _____.
investors prefer stocks to bonds
the yield on bonds is greater than that on stock
low-quality bonds have returns much higher than high-quality bonds
low-quality bonds have returns slightly higher than high-quality bonds
Question 9. Question : (TCO 3) The problem in reading charts has always been _____.
with the errors that are frequently made in the graphing process
understanding the past market movements
in analyzing the patterns in such a fashion that they truly predict stock market movements before they unfold
Question 10. Question : (TCO 3) Smart money rules or approaches to the market include _____.
the put-call ratio
the odd-lot theory
FIN 351 DeVry Week 4 Quiz Latest
1. (TCO 4) The most important feature of municipal bonds is _____.
the wide range of denominations and maturities
that the interest is not taxable by the federal government
the risk-free nature of this investment
its appeal to investors needing growth
Question 2. Question : (TCO 4) For the major bond-rating agencies, the lowest level of an investment grade bond is _____.
AA (investment grade includes AAA and AA)
A (investment grade includes AAA, AA, and A)
BBB (investment grade includes AAA, AA, A, and BBB)
B (investment grade includes AAA, AA, A, BBB, BB, and B)
Question 3. Question : (TCO 4) A corporate bond quoted at 108.25 is selling for _____.
Question 4. Question : (TCO 4) Assume a $1,000 treasury bill is quoted to pay 7% interest over a three-month period. What will be the price of the treasury bill?
Question 5. Question : (TCO 4) When should an investor calculate both yield to maturity and yield to call?
An investor should calculate both yield to maturity and yield to call whenever there is a call provision.
An investor should calculate both yield to maturity and yield to call when the sum of the present values of the interest payments exceeds the call price.
An investor should calculate both yield to maturity and yield to call when the market price is greater than or equal to the call price.
An investor should calculate both yield to maturity and yield to call whenever the funds can be reinvested.
Question 6. Question : (TCO 4) What will happen to the market value of a bond if interest rates increase?
The market value will decrease.
The market value will increase.
The market value will increase or decrease, depending on the general economic climate.
The market value should remain level.
Question 7. Question : (TCO 4) Short-term interest rates have _____ volatility in comparison to long-term interest rates.
Question 8. Question : (TCO 4) The duration of a bond is determined by a combination of the maturity date and value, and _____.
the pattern of coupon payments
the call premium
the put premium
Question 9. Question : (TCO 4) Factors which influence the relationship between duration and maturity include all of the following EXCEPT _____.
the face value of the bond
the coupon rate of the bond
the number of years to maturity
Question 10. Question : (TCO 4) The duration on an 8%, 25-year bond is _____ the duration on a 9%, 30-year bond.
There is not enough information to tell
FIN 351 DeVry Week 5 Quiz Latest
1. (TCO 5) When is the best time to convert a convertible bond to common stock?
The best time to convert is when the call price exceeds the conversion value.
The best time to convert is after the conversion ratio decreases.
The best time to convert is when the conversion value is below the pure bond value.
Question 2. Question : (TCO 5) Which is the conversion ratio of a $1,000 bond convertible at $25.50 per share? The coupon rate is 10% and the market rate 12%. This company's common stock is currently trading at $22 per share.
Question 3. Question : (TCO 5) A put is said to be "in-the-money" when the strike price is _____ the market price.
Question 4. Question : (TCO 5) A major disadvantage of using call options to hedge a short position is that _____.
hedging increases the risk of loss on the short sale.
the option premium and commission reduce profit potential.
the price of the stock may go up
Question 5. Question : (TCO 5) A straddle is a combination of a put and call on _____.
the same stock, with the same strike price and expiration date.
different stocks, with the same strike price and expiration date.
different stocks, with different strike price and expirations dates.
the same stock, with the same the strike price and different expiration dates.
Question 6. Question : (TCO 5) An agreement which provides for the delivery of a given amount of something at a given time in the future, at a given price is called a(n) _____contract.
Question 7. Question : (TCO 5) The primary difference between options and futures is that _____.
the option premium is the full liability of the purchaser, while a futures contract may call for additional margin to hold the position
options are more speculative than futures
futures require the physical transfer of goods, while options do not
Question 8. Question : (TCO 5) The value of a stock index futures contract is the product of _____ and the appropriate multiplier.
the settle price
the change in the settle price
the difference between the settle price and the change
Question 9. Question : (TCO 5) Which of the following statements about hedging a stock portfolio with stock index futures is NOT true?
Futures contracts magnify gains (or losses) on the stock portfolio.
In a declining market, futures contracts help offset losses on the portfolio.
A risk-taker would probably not hedge the entire portfolio with stock index futures.
Question 10. Question : (TCO 5) The settle price shown in a stock index futures table is the _____.
highest price the contract hit during the day
closing price for the contract at the end of the day
price for the contract only for the last day of the contract
FIN 351 DeVry Week 7 Quiz Latest
Question 1. Question : (TCO 7) According to the text, a risk-averse investor _____.
demands a premium for assuming risk
will only participate in low-risk or risk-free investments
is one of a small minority in the United States
Question 2. Question : (TCO 7) Under Markowitz's theory, the ideal portfolio for an investor is represented by _____.
the point of tangency between the efficient frontier and the investor's indifference curve
the highest possible indifference curve
the highest possible point on the efficient frontier
Question 3. Question : (TCO 7) Systematic risk is rewarded with a premium in the marketplace because _____.
risk is particular to the stock or industry
it represents a random occurrence which could not have been foreseen
it is associated with market movements that cannot be eliminated through diversification
Question 4. Question : (TCO 7) Which of the following are assumptions of the capital asset pricing model?
Funds can be borrowed or lent in unlimited quantities at a risk-free rate.
The objective of all investors is to maximize their expected utility over the same one-period timeframe, using the same basis for evaluating investments.
There are no taxes or transaction costs associated with any investment.
Question 5. Question : (TCO 7) A good way to minimize risk and receive an optimum return on your portfolio is _____.
to buy only risk-free securities
through blue-chip stock purchases only
Question 6. Question : (TCO 7) Assume a portfolio has the possibility of returning 3%, 6%, 11%, or 16%, with the likelihood of 20%, 30%, 25%, and 25%, respectively. The expected value of the portfolio is _____.
Question 7. Question : (TCO 7) If the market rate of return is 10% and the beta on a particular stock is 1.00, the return on the stock will be _____.
greater than 10%
less than 10%
dependent on some other factor
Question 8. Question : (TCO 7) For two investments with a correlation coefficient (rij) greater than +1, the portfolio standard deviation will be _____ the weighted average of the individual investments' standard deviation.
zero compared to
Question 9. Question : (TCO 7) The capital asset pricing model (CAPM) takes off where the _____ concluded.
capital market line
efficient frontier and Markowitz portfolio theory
arbitrage pricing theory
Question 10. Question : (TCO 7) Using the formula for the security market line (Formula 21-7), if the risk-free rate (RF) is 6%, the market rate of return (KM) is 12%, and the beta (bi) is 1.2, compute the anticipated return for stock i (Ki).
FIN 351 DeVry Course Project
Course Project: Industry/Corporate Analysis: Fundamental and Technical Research
Objectives | Deliverables and Guidelines | Grading Rubrics | Best Practices
Select an industry and a company within the selected industry to complete a comprehensive analysis. Develop a well-written paper focusing on fundamental and technical research. The goal is to obtain a better understanding of the financial analysis process by studying public information and market data to make informed investment decisions.
Course Project Criteria
Course Project Progression: Review the recommended milestones in the weekly Assignment tabs towards completing your Course Project, which is due Week 6.
Course Project Submission: Your Course Project is due Week 6. Please submit your assignment to the Course Project Dropbox located in Week 6 (150 points). Late papers will not be accepted. You need to work on your Course Project as we move through the course, and I need adequate time to read and grade each paper to give it the attention it deserves.
Course Project Requirements: Your Course Project consists of valuing a firm using fundamental and technical analyses and presenting your investment recommendation. Your course project will consist of a 5-6 page paper following APA format and will include at least one graphic (refer to the line chart under technical analysis below). The project should include a title page, introduction, analysis, graphic(s), conclusion, and reference page.
Fundamental Analysis: You will prepare a top-down fundamental analysis that covers economic, industry, company, and financial analysis (Chapters 5, 6, 7, 8). The analysis should parallel the type of analysis conducted by a professional security analyst (although not with the same degree of rigor).
Economic analysis (Chapter 5): Your paper must cover current monetary-fiscal policy, government policy, economic indicators, inflation, gross domestic product growth (GDP), unemployment, and any foreign trade and world events that are currently affecting the securities markets.
Industry analysis (Chapter 6): Your paper must cover the life-cycle phase your chosen industry is in, the implications of such, and the industry structure (including but not limited to economic factors, competitive factors, and government regulation).
Company/financial analysis (Chapters 7 and 8): Choose a specific company within your chosen industry in which you would like to invest. Value the firm using a dividend valuation model, an earnings valuation model, and the P/E ratio. Forecast earnings per share for the next two years. Using the most recent two years of financial statements (annual report or 10-k), perform a ratio analysis using the 20 ratios presented in Chapter 8. (You do not need to calculate these ratios, but must properly cite your sources.) The analysis should comment on the most recent year's ratios and on any trends between the two years, in addition to research industry norms for the profitability, asset-utilization, liquidity, debt-utilization, and price ratios, and analyze your selected firm's performance against the industry.
Technical analysis: (Chapter 10) Using one of the readily available charting resources on the Internet, prepare a line chart on the company's price and volume movement. Discuss the overall movement of the stock price and the relationship of the stock price to volume. Using a straight line of best fit through the data, comment on the stock price that you project for the future.
Investment recommendation: Based upon the fundamental and technical analysis, present your investment recommendation, tying together the results and data from your fundamental and technical analysis and supporting your investment recommendation with your results and data.
Content - 86%
Valuation and Investment Recommendation
Editing - 14%
Points Deduction (per occurrence)
Sentence Meaning Unclear
Total (not to exceed)
Start your project as quickly as possible. You should become acquainted with the project instructions during Week 1 of the course and progressively move forward. Please review the objective, deliverables, and milestones in the weekly Assignments tabs.
Your Course Project should be well-organized.
Insure resources are verifiable and from a credible source.
Follow required APA guidelines.
A recommended timeline for project development is as follows:
Get acquainted with project instructions and rubric.
Post any questions under the Q & A.
Complete Task 1.
Finalize the industry and company selection by the end of Week 2.
Work on the project.
Work on the project and finalize your draft.
Complete final project review.
Post any remaining questions under the Q&A.
Submit your project by the end of Week 6.
Don't forget to cite your sources properly, both parenthetically and in your reference page. If you need assistance with proper citation, there is a tutorial in the Syllabus that will help you format APA correctly.
FIN 351 DeVry Final Exam
Question 1.1.(TCO 1) Which of the following investments would theoretically always carry the highest risk premium? (Points : 4)
A U.S. treasury bill
Question 2.2.(TCO 1) From the investment banker's point of view, the major reason syndicates are formed in the distribution of large issues is for the purpose of (Points : 4)
improving the liquidity of the issue.
improving geographic distribution.
reducing the underwriter's risk.
improving brand recognition.
Question 3.3.(TCO 1) A _____ requires full payment for the purchase of securities, whereas a _____ allows the investor to borrow a portion of the purchase price from the brokerage firm. (Points : 4)
money market account; cash account
cash account; charge account
cash account; margin account
type 5 account; type 2 account
Question 4.4.(TCO 2) The composite index of leading indicators, made up of 10 leading indicators, has historically (Points : 4)
not always preceded changes in the business cycle.
given roughly the same notice at peaks as at troughs.
varied widely in its timing of notice at peaks and troughs.
Question 5.5.(TCO 2) Why would an investor want to use the rotational investing method? (Points : 4)
It allows the investor to rotate out of losing stocks.
The investor is attempting to profit from movements in the economic cycle.
It is an easy method of employing dollar-cost averaging.
It assures the investor of owning the proper mix of stocks and bonds.
Question 6.6.(TCO 2) If the equity risk premium (ERP) expands, Kewill(Points : 4)
increase by beta times the equity risk premium.
not be affected.
decrease by beta times the equity risk premium.
Question 7.7.(TCO 2) _____ analysis is the process of studying a series of ratios for a company and/or industry over time. (Points : 4)
Question 8.8.(TCO 3) What is market capitalization? (Points : 4)
The total owners' equity in a firm
The total marketable assets of a firm
Shares outstanding multiplied by the market value of the stock
Question 9.9.(TCO 3) A ratio of the total short sales positions on an excour fundamental and technical analysis and supporting your investment recommendation with your results and data.
Shares outstanding multiplied by the ma