Question 1

In studies of the predictability of GDP using the term structure by Harvey (1988),an upward sloping yield curve suggests future economic growth.

Accepted Answer

A) True 
 B)False

Question 2

Given an earnings per share figure for the All-Ordinaries of 357 and a price-earnings ratio of 18,what is the price of the All-Ordinaries?

Accepted Answer

A)    19.83 
B)   30.74 
C)   6426D 13554D) None of the above
E) All of the above

Question 3

If the ICAPM beta is 1.2,and the world market return and risk-free rates are 14% and 6% respectively,then the expected return predicted by the ICAPM is:

Accepted Answer

A)    12.0% 12.0\% 12.0% 
B)    14.8% 14.8 \% 14.8% 
C)    15.6% 15.6 \% 15.6% 
D)    16.4% 16.4 \% 16.4%  E) B) and D)
F) C) and D)

Question 4

The investment approach where the analyst attempts to identify mispriced securities first and then construct a portfolio based on those securities is known as:

Accepted Answer

A)   the top-down approach
B)   the industry approach
C)   fundamental analysis
D)   the bottom-up approachE) All of the above
F) None of the above

Question 5

An indexed-linked bond is one where the price is linked to the:

Accepted Answer

A)  All-Ordinaries
B)  Consumer Price Index
C)  world equity market index
D)  industrial production indexE) B) and D)
F) A) and B)

Question 6

The investment strategy of Siegel (1991) suggests that investors can profit by:

Accepted Answer

A)   buying equities before a trough and bonds before a peaks
B)   buying bonds before a trough
C)   buying equities after a trough and bonds after a peak
D)   buying equities after a trough and bonds before a peakE) A) and B)
F) A) and C)

Question 7

The demand side of an economy relates to government fiscal policy and government monetary policy.

Accepted Answer

A) True 
 B)False

Question 8

It is generally argued that when pricing equities inflation risk is __________ it is for pricing bonds.

Accepted Answer

A)   not as important as
B)   more important than
C)   equally important as
D)   more difficult thanE) A) and B)
F) A) and C)

Question 9

Which one of the following is probably the most direct and immediate way to stimulate or slow the economy,although it is not very useful for fine-tuning economic performance?

Accepted Answer

A)  Fiscal policy
B)  Monetary policy
C)  Supply-side policy
D)  Rising minimum wagesE) A) and B)
F) A) and C)

Question 10

Supply side economics tends to focus on _______________.

Accepted Answer

A)  government spending
B)  price controls
C)  monetary policy
D)  increasing productive capacityE) B) and D)
F) A) and B)

Question 11

Given a nominal interest rate of 6.75% and a real rate of return of 4%,what is the expected rate of inflation?

Accepted Answer

A)    1.67% 1.67 \% 1.67% 
B)    2.14% 2.14 \% 2.14% 
C)    2.26% 2.26 \% 2.26% 
D)    2.64% 2.64 \% 2.64%  E) B) and C)
F) None of the above

Question 12

The goal of supply side policies is to _______.

Accepted Answer

A)  increase government involvement in the economy
B)  create an environment where workers and owners of capital have the maximum incentive and ability to produce and develop goods
C)  maximise tax revenues of the government
D)  focus more on wealth redistribution policiesE) B) and C)
F) A) and D)

Question 13

If interest rates increase,business investment expenditures are likely to __________ and consumer durable expenditures are likely to _________.

Accepted Answer

A)  increase;increase
B)  increase;decrease
C)  decrease;increase
D)  decrease;decreaseE) All of the above
F) B) and D)

Question 14

When modelling the industry earnings per share forecast,the main modelling problem lies in the prediction of:

Accepted Answer

A)   industiy classification
B)   industry sales
C)   industry capital structure
D)   all of the aboveE) None of the above
F) A) and C)

Question 15

The study by Reilly,Griggs and Wong (1983)provides evidence that past EPS growth is a good predictor of future EPS growth.

Accepted Answer

A) True 
 B)False

Question 16

Assume a bond with a face value of $100 000 pays semi-annual coupons of 6% p.a.in perpetuity.This bond has a discount rate of 8% p.a.What is the price of the bond?

Accepted Answer

A)    $37500 \$ 37500 $37500 
B)    $75000 \$ 75000 $75000 
C)    $100000 \$ 100000 $100000 
D)    $150000 \$ 150000 $150000  E) A) and D)
F) B) and D)

Question 17

In order to predict an industry price-earnings ratio,the following estimate(s) is/are needed:

Accepted Answer

A)   industiy dividend payout ratio
B)   industiy required rate of return
C)   industry growth rate
D)   all of the aboveE) C) and D)
F) All of the above

Question 18

Layton (1994)models the Australian economy as a combination of periods of 'normal' and 'sluggish' growth.

Accepted Answer

A) True 
 B)False

Question 19

Companies that are little affected by the business cycle,exhibiting reasonably stable performance independent of the level of economic activity are called:

Accepted Answer

A)   cyclical companies
B)   offensive companies
C)   defensive companies
D)   growth companiesE) A) and D)
F) B) and C)

Question 20

Mature growth is the __________ stage in the industry life cycle.

Accepted Answer

A)   stable
B)   third
C)   expansion
D)   lastE) B) and C)
F) A) and D)

Exam 12: Macro- and Industry Analysis of Share Markets

In studies of the predictability of GDP using the term structure by Harvey (1988),an upward sloping yield curve suggests future economic growth.

Correct AnswerverifiedShow Answer

Companies that are little affected by the business cycle,exhibiting reasonably stable performance independent of the level of economic activity are called:

Correct AnswerverifiedShow Answer

In order to predict an industry price-earnings ratio,the following estimate(s) is/are needed:

Correct AnswerverifiedShow Answer

Given a nominal interest rate of 6.75% and a real rate of return of 4%,what is the expected rate of inflation?

Correct AnswerverifiedShow Answer

The demand side of an economy relates to government fiscal policy and government monetary policy.

Correct AnswerverifiedShow Answer

The study by Reilly,Griggs and Wong (1983)provides evidence that past EPS growth is a good predictor of future EPS growth.

Correct AnswerverifiedShow Answer

It is generally argued that when pricing equities inflation risk is __________ it is for pricing bonds.

Correct AnswerverifiedShow Answer

The investment approach where the analyst attempts to identify mispriced securities first and then construct a portfolio based on those securities is known as:

Correct AnswerverifiedShow Answer

An indexed-linked bond is one where the price is linked to the:

Correct AnswerverifiedShow Answer

When modelling the industry earnings per share forecast,the main modelling problem lies in the prediction of:

Correct AnswerverifiedShow Answer

Which one of the following is probably the most direct and immediate way to stimulate or slow the economy,although it is not very useful for fine-tuning economic performance?

Correct AnswerverifiedShow Answer

If the ICAPM beta is 1.2,and the world market return and risk-free rates are 14% and 6% respectively,then the expected return predicted by the ICAPM is:

Correct AnswerverifiedShow Answer

Layton (1994)models the Australian economy as a combination of periods of 'normal' and 'sluggish' growth.

Correct AnswerverifiedShow Answer

Mature growth is the __________ stage in the industry life cycle.

Correct AnswerverifiedShow Answer

Supply side economics tends to focus on _______________.

Correct AnswerverifiedShow Answer

Given an earnings per share figure for the All-Ordinaries of 357 and a price-earnings ratio of 18,what is the price of the All-Ordinaries?

Correct AnswerverifiedShow Answer

The goal of supply side policies is to _______.

Correct AnswerverifiedShow Answer

Assume a bond with a face value of $100 000 pays semi-annual coupons of 6% p.a.in perpetuity.This bond has a discount rate of 8% p.a.What is the price of the bond?

Correct AnswerverifiedShow Answer

If interest rates increase,business investment expenditures are likely to __________ and consumer durable expenditures are likely to _________.

Correct AnswerverifiedShow Answer

The investment strategy of Siegel (1991) suggests that investors can profit by:

Correct AnswerverifiedShow Answer

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If interest rates increase,business investment expenditures are likely to __ and consumer durable expenditures are likely to _.

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