Economics & Analysis

Question 1

Small businesses and individuals typically use the _______ accounting method

Answer 1

cash

Question 2

Cash accounting records transactions on the date _______ is actually received

Answer 2

payment

Question 3

Accrual accounting recognizes expenses based on the date the ______ is incurred

Answer 3

liability

Question 4

Cash accounting recognizes revenue/expenses _____ than accrual accounting

Answer 4

later

Question 5

Both sides of the balance sheet are arranged in order of _______

Answer 5

liquidity

Question 6

CA/CL are due within ______

Answer 6

within 1 year

Question 7

Accounts payable include:

Answer 7

AP, Wages, Taxes, and Interest (payable)

Question 8

Long term capital =

Answer 8

LT liabilities + OE

Question 9

D/E =

Answer 9

LT debt / total OE

Question 10

10Ks are filed anywhere from ____ to ____ after year end

Answer 10

60 to 90 (larger companies with over $700m public float file within 60 days, smaller companies at 90 days)

Question 11

10Qs are ______ and are filed anywhere from ____ to ______ after qarter-end

Answer 11

unaudited; filed anywhere from 40 to 45 days (bigger @ 40, smaller at 45)

Question 12

Earned surplus is another name for _____

Answer 12

retained earnings

Question 13

Falling inflation (measured via the CPI) will result in higher ____ prices and _____ prices

Answer 13

stock AND bond prices

Question 14

Emerging growth stocks are brand new ventures that have high potential reward but NO _____ and typically can’t pay _____

Answer 14

track record; typically can’t pay dividends

Question 15

A typical example of an income security is a ______ stock

Answer 15

utility

Question 16

Counter-cyclical stocks include ______ and _____

Answer 16

food producers and gold mining stocks

Question 17

Speculative stocks include _____ and ____ companies, they are ones that fly high during business cycle upturns

Answer 17

airplane manufacturers and toy companies

Question 18

ROI is the ________ cash flow divided by the ______

Answer 18

average annual cash flow divided by the initial investment outlay

Question 19

Total Return on an investment is =

Answer 19

income + growth

Question 20

The Risk Free Rate is the expected return on _____

Answer 20

treasuries

Question 21

The Sharpe Ratio =

Answer 21

(Total Return - RF) / Portfolio STdev

Question 22

The higher the Sharpe ratio, the greater incremental reward for assuming _____

Answer 22

risk

Question 23

The geometric mean takes into account ______ (when the ______ mean does not)

Answer 23

takes into account compounding, while the arithmetic mean does not

Question 24

Expected Return is simply the _______ average of different scenarios

Answer 24

weighted average of different outcome scenarios

Question 25

The shorter the holding period, the greater the _______

Answer 25

variability of returns (STdev)

Question 26

Capital gains on munis are _____ taxable

Answer 26

fully (at Fed level too)

Question 27

An active manager’s “active return” is the % by which they ______ the index

Answer 27

outperform/underperform

Question 28

Time-weighted returns are used by ______ and show the growth of a _____ investment over a fixed period of time

Answer 28

used by mutual funds, show growth of a 1-time investment over a fixed time period

Question 29

Time-weighted return is the same as ______

Answer 29

total return

Question 30

An investor’s specific performance in a fund is the _______ return

Answer 30

dollar-weighted return

Question 31

Dollar-weighted average return is the same thing as the ______

Answer 31

IRR

Question 32

Often, _____ return is lower than _____

Answer 32

dollar-weighted return is lower than time-weighted

Question 33

FV (for compounding) =

Answer 33

P * (1 + r)^n

Question 34

Non-systematic risk is also known as _______

Answer 34

selection risk

Question 35

Monte Carlo simulations are used to find a portfolio’s _______

Answer 35

value at risk

Question 36

Examples of high beta companies would be _____ and _____

Answer 36

airlines and toy companies

Question 37

Examples of low beta stocks would be ____ and _____

Answer 37

drug companies and utilities

Question 38

If beta = 1, then portfolio only has _____ risk; if beta > 1, then portfolio has ______

Answer 38

= 1, has only systematic risk, if greater than 1 has non-systematic risk

Question 39

Price volatility of options is measured using ____

Answer 39

delta

Question 40

Weak form EMT states that you cannot predict future returns based on _____

Answer 40

historical data

Question 41

Semi-strong EMT states that public information is already _______ stock prices

Answer 41

baked into

Question 42

Strong form EMT states that stock prices reflect ______

Answer 42

all information (public or private)

Question 43

The main risk of investing in a muni bond is ______

Answer 43

legislative risk (since the income isn’t subject to fed taxes)

Question 44

What is the biggest risk for holding a zero coupon bond to maturity?

Answer 44

purchasing power risk (market risk goes away since you’ll get par back at maturity)

Question 45

Tangible assets tend to keep pace with _______

Answer 45

inflation

Question 46

During a time when the yield curve is inverted, issuers will likely sell ______ bonds

Answer 46

callable (since when it goes inverted typically all rates are higher)

Question 47

Do corporate bonds have some level of marketability risk?

Answer 47

YES - more so than preferred stock

Question 48

A way to hedge against systematic risk is to _______

Answer 48

buy puts

Question 49

ROI =

Answer 49

Average annual cash returns / initial investment

Question 50

LT bond PRICES are always more _____ than short term bond prices

Answer 50

MORE VOLATILE

Question 51

For calculating Total Return, do you take the actual total of all the income and capital gains or do you annualize them?

Answer 51

ANNUALIZE them

Question 52

The coupon on a TIPS is ALWAYS the _____

Answer 52

real rate of return (inflation adjusted)

Question 53

Does business risk take fraud into account?

Answer 53

NO

Question 54

Business risk, most simply, is the risk of buying _____

Answer 54

a single stock