Multiple Choice Answers

1. (TCO 3) The basic premise of ________________ is that past trends in market movements can be used to forecast or understand the future. (Points : 3)
the Efficient Market Hypothesis
fundamental analysis
technical analysis
none of the above

2. (TCO 3) Prior to the announcement of an acquisition until the acquisition takes effect, most likely the value of the stock of the acquiring company will: (Points : 3)
rise sharply.
rise sharply, then slowly fall.
remain largely unchanged.
fall slowly, then rise sharply.

3. (TCO 3) In a merger, a white knight is: (Points : 3)
a helpful investment banker that makes sure the merger is successful.
a third company that buys the acquisition target before an unwanted suitor can.
an investor who pays a high price to buy at least five percent of the shares of the acquisition target.
a commercial banker that provides a guarantee that the financing for the merger will be available.

4. (TCO 3) Studies have shown that the best time to sell an unseasoned issue is: (Points : 3)
prior to announcement of a merger.
shortly after the initial distribution.
after one year of trading.
more than one of the above

5. (TCO 3) The semi-strong form of the efficient market hypothesis maintains that: (Points : 3)
all public and private information is already impounded into the value of a security.
there is no relationship between past and future prices.
all public information is already impounded into the value of a security.
insider information is immediately impounded into the value of a security.

6. (TCO 3) ________ is used by the Dow Theory to follow three major types of market movements. (Points : 3)
Key indicators
Fundamental analysis
None of the above

7. (TCO 3) The ____________ suggests watching the small investor, who is right most of the time but misses key market turns, and then doing the opposite. (Points : 3)
contrary opinion rule
odd-lot theory
greed index
none of the above

8. (TCO 3) While the Dow Jones Industrial Average may be weighted toward large firms, a __________ indicator may be used to examine all stocks on an exchange. (Points : 3)
contrary opinion
breadth of the market
more than one of the above

9. (TCO 3) A bar chart is used to demonstrate: (Points : 3)
advances and declines of stock prices.
high, low, and closing stock price on a daily basis.
changes of two points or more.
more than one of the above

10. (TCO 3) Smart money rules or approaches to the market include: (Points : 3)
short sales by specialists.
the put-call ratio.
investment advisory recommendations.
the odd-lot theory.