Monetary policy actions that can be taken by the Federal Reserve Board include changing: I the discount rate

II reserve requirements

III margin requirements

IV open market operations levels

Answer: 

I the discount rate

II reserve requirements

III margin requirements

IV open market operations levels

Which of the following economic events would have a positive long term impact on common stock prices?

I Rising interest rates

II Rising capital gains tax rates

III Rising employment rates

IV Falling inflation rates

Answer: 

III Rising employment rates

IV Falling inflation rates

Which of the following information sources would be used to evaluate a corporate security trading in the Secondary Market?

I Feasibility Study

II Income Statement

III Balance Sheet

IV Prospectus

Answer: 

II Income Statement

III Balance Sheet

If the price of a stock breaks out through the support level, it is expected that the stock's price will:

A. rise

B. fall

C. remain stable

D. become volatile

Answer: B

An extended period where there is no discernible trend in prices is termed:

A. overbought

B. oversold

C. consolidation

D. resistance

Answer: C

The use of multiple asset classes when constructing a portfolio reduces:

A. regulatory (legislative) risk

B. market (capital) risk

C. interest rate risk

D. purchasing power risk

Answer: B. market (capital) risk

The largest component of the Standard and Poor's 500 Average is the:

A. banking and finance

B. transportations

C. utilities

D. industrials

Answer: D. industrials

The Bank of England is concerned that the British Pound is weakening against the U.S. Dollar. The appropriate action for the British central bank is to:

I buy British Pounds

II buy U.S. Dollars

III sell British Pounds

IV sell U.S. Dollars

Answer: 

I buy British Pounds

IV sell U.S. Dollars

If the federal reserve tightens credit via open market operations, which of the following interest rates will increase?

I Fed Funds Rate

II Discount Rate

III Broker Loan Rate

IV Prime Rate

Answer: 

I Fed Funds Rate

II Discount Rate

III Broker Loan Rate

IV Prime Rate

Gross Domestic Product is measured in:

A. constant dollars

B. inflated dollars

C. dollars deflated by the gold standard

D. dollars deflated by the sterling standard

Answer: A. constant dollars

Which of the following is a leading economic indicator?

A. Personal Income

B. Employment Duration

C. Labor Cost Per Manufactured Unit

D. Contracts for plant and equipment

Answer: D. Contracts for plant and equipment

An investor holds an international bond fund. Regarding the performance of the fund, which of the following statements are TRUE?

I If the foreign currency value rises against the dollar, the fund's Net Asset Value will increase

II If the foreign currency value rises against the dollar, the fund's Net Asset Value will decrease

III If the dollar falls against the foreign currency, the fund will have an inferior performance relative to dollar denominated funds

IV If the dollar falls against the foreign currency, the fund will have a superior performance relative to dollar denominated funds

Answer: 

I If the foreign currency value rises against the dollar, the fund's Net Asset Value will increase

IV If the dollar falls against the foreign currency, the fund will have a superior performance relative to dollar denominated funds

A balance of payments deficit would be widened by which of the following?

I Increased levels of U.S. imports

II Decreased sales of U.S. securities to foreign holders

III Decreased levels of foreign tourists visiting the United States

IV Decreased dividends paid to foreign holders of U.S. securities

Answer: 

I Increased levels of U.S. imports

II Decreased sales of U.S. securities to foreign holders

III Decreased levels of foreign tourists visiting the United States

Which of the investments listed below has historically offered the greatest hedge against purchasing power risk?

A. Common Stocks

B. Treasury Bills

C. Preferred Stocks

D. Treasury Bonds

Answer: A. Common Stocks

A "saucer" formation is a(n):

A. uptrend

B. downtrend

C. reverse upward trend

D. reverse downward trend

Answer: D. reverse downward trend

A corporation issues convertible debentures at par. Which of the choices are affected?

I Current Assets

II Current Liabilities

III Net Worth

IV Net Working Capital

Answer: 

I Current Assets

IV Net Working Capital

If a corporation declares a cash dividend, which of the following statements are TRUE?

I Net working capital increases

II Net working capital decreases

III Stockholder's equity increases

IV Stockholder's equity decreases

Answer: 

II Net working capital decreases

IV Stockholder's equity decreases

Investing in a manner that will emulate the performance of the S&P 500 Index as closely as possible is an example of:

A. active management

B. passive management

C. fundamental analysis

D. technical analysis

Answer: B. passive management

In a period of deflation, which of the following statements about fixed income securities are TRUE?

I Issuers are more likely to sell fixed income securities

II Issuers are likely to sell non-callable issues

III Holders are likely to realize capital appreciation on fixed income securities that are not close to maturity

IV Holders receive payments on fixed income securities that buy more in real terms

Answer: 

I Issuers are more likely to sell fixed income securities

II Issuers are likely to sell non-callable issues

III Holders are likely to realize capital appreciation on fixed income securities that are not close to maturity

IV Holders receive payments on fixed income securities that buy more in real terms

A corporation's annual report shows that the reported net income before tax is falling at a faster rate than operating income. Which of the following expenses must have grown at a faster rate?

A. Depreciation

B. Bond Interest

C. Preferred Dividend

D. Cost of Goods Sold

Answer: B. Bond Interest

Which of the following actions by the Federal Reserve will increase interest rates?

I Purchases of securities as directed by the FOMC

II Sales of securities as directed by the FOMC

III Repurchase agreements with U.S. Government dealers and banks

IV Reverse repurchase agreements with U.S. Government dealers and banks

Answer: 

II Sales of securities as directed by the FOMC

IV Reverse repurchase agreements with U.S. Government dealers and banks

The "Monetary Environment" is a reflection of all of the following EXCEPT:

A. money supply levels

B. stock price levels

C. monetary policy

D. fiscal policy

Answer: B. stock price levels

If the U.S. economy runs balance of trade surpluses, which of the following statements are TRUE?

I U.S. currency values will increase relative to that of foreign countries

II U.S. currency values will decrease relative to that of foreign countries

III U.S. exports should become more expensive to foreign countries

IV U.S. exports should become less expensive to foreign countries

Answer: 

I U.S. currency values will increase relative to that of foreign countries

III U.S. exports should become more expensive to foreign countries

Book value per share is the same as:

A. net asset cost per share

B. net tangible asset value per share

C. fair market value of assets per share

D. net working capital per share

Answer: B. net tangible asset value per share

Which of the following formations are bearish?

I Saucer

II Head and Shoulders

III Inverted Saucer

IV Inverted Head and Shoulders

Answer: 

II Head and Shoulders

III Inverted Saucer

Which of the following indicators would be evaluated by a technical analyst?

I Quick Ratio

II Price Earnings Ratio

III 200 Day Stock Price Moving Average

IV Advance / Decline Ratio

Answer: 

III 200 Day Stock Price Moving Average

IV Advance / Decline Ratio

The lowest interest rate listed below is the:

A. discount rate

B. federal funds rate

C. prime rate

D. broker loan rate

Answer: federal funds rate

The market price average is decreasing daily; however, the level of declines relative to advances is falling. The market is reaching a(n):

A. overbought condition

B. oversold condition

C. breakout on the upside

D. breakout on the downside

Answer: B. oversold condition

Which of the following statements are TRUE?

I Systematic risk can be diversified away

II Systematic risk cannot be diversified away

III Non-systematic risk can be diversified away

IV Non-systematic risk cannot be diversified away

Answer: 

II Systematic risk cannot be diversified away

III Non-systematic risk can be diversified away

A "consolidating market" is one where prices are:

A. rising

B. falling

C. flat

D. volatile

Answer: C. flat

The initials "CAPM" refer to:

A. Computer Algorithm Pricing Module

B. Computer Assisted Portfolio Management

C. Corporate Allocation Portfolio Mechanism

D. Capital Asset Pricing Model

Answer: D. Capital Asset Pricing Model

Which of the following is NOT a technique for assessing economic feasibility?

a. time value of money

b. payback analysis

c. return on investment

d. net present value

e. all of these are techniques for assessing economic feasibility

Answer: a

At which of the following point during systems analysis would you NOT have a feasibility checkpoint?

a. after the scope definition phase

b. after the decision analysis phase

c. after the problem analysis phase

d. after the logical design phase

e. you would have a feasibility checkpoint after each of these phases

Answer: d

Which of the following is NOT an approach for identifying candidate solutions?

a. recognize ideas and options expressed by users

b. brainstorming possible solutions

c. only consider building the application in-house

d. seeking references from other persons or organizations that implemented similar systems

e. all of these are approaches for identifying candidate solutions

Answer: c

What variable is part of the return on investment analysis?

a. estimated opportunity costs

b. estimated lifetime benefits

c. estimated lifetime costs

d. both estimated lifetime benefits and estimated lifetime costs

e. both the discount rate and the number of years

Answer: d

A simple and popular technique for determining if and when an investment will pay for itself is known as:

a. schedule investment analysis

b. return on investment (ROI)

c. payback analysis

d. not present value

e. none of these

Answer: c

When determining the cost-effectiveness of a project, which of the following is an important concept to understand?

a. the feeling of the end-users about their role in the system

b. do we currently posses the necessary technology?

c. the time value of money

d. does the system offer adequate controls against embezzlement and fraud?

e. all of these

Answer: c

Which of the following is a term for the period of time that will elapse before accrued benefits overtake accrued costs?

a. time value of money

b. true value of money

c. payback analysis

d. payback period

e. return investment

Answer: d

Which kind of feasibility deals with deadlines?

a. operational feasibility 

b. technical feasibility 

c. schedule feasibility 

d. legal feasibility 

e. culture or political feasibility

Answer: c

Which kind of feasibility can be impacted by how the working environment of end users will change given the proposed system?

a. operational feasibility 

b. technical feasibility 

c. schedule feasibility 

d. legal feasibility 

e. culture or political feasibility

Answer: e

Which kind of feasibility asks how well the proposed system satisfies the identified system requirements?

a. operational feasibility 

b. technical feasibility 

c. schedule feasibility 

d. legal feasibility 

e. culture or political feasibility

Answer: a

The event that initiates the execute of the use case is called a(n):

a. precondition

b. trigger

c. post condition

d. open issue

e. conclusion

Answer: b

A constraint on the state of the system before the use case can be executed is call a(n):

a. precondition

b. trigger

c. post condition

d. open issue

e. conclusion

Answer: a

Which of the following references is an excellent source to find potential actors?

a. an organization chart

b. a context diagram

c. existing system documentation

d. both B and C above

e. both A and B above

Answer: d

Which if the following is NOT a step in the process of requirements use case modeling?

a. identify business actors

b. identify business use cases

c. construct use case model diagram

d. document business requirements use case narratives

e. none of these - they are all steps of the process

Answer: e

Which use case relationship is used to model the dependencies among use cases?

a. association

b. extends

c. uses

d. depends on

e. inheritance

Answer: d

Which use case relationship is used to model the relationship between a use case and an actor?

a. association

b. extends

c. uses

d. depends on

e. inheritance

Answer: a

Which use case relationship is used to model the relationship between an abstract use case an the original use case?

a. association

b. extends

c. uses

d. depends on

e. inheritance

Answer: c

Which of the following would not be an example of an actor?

a. heat sensor

b. time

c. the system itself

d. an organization

e. an individual

Answer: c

Which of the following best describes use cases?

a. they are the results of decomposing the scope f system functionality

b. they are represented graphically by a horizontal ellipse

c. each use case represents a single goal of the system 

d. they describe user interactions with system

e. all of these

Answer: e

Which of the following is NOT a source mentioned in the textbook for finding potential actors?

a. context diagram

b. entity relationship diagram

c. user manuals for the existing system

d. minutes of project meetings

e. the statement of work

Answer: b

A motorist stops at a self-service gas station to fill up her car, paying by credit card at the pump. In this use case, who is the external service actor?

a. the motorist

b. the station owner

c. the credit card authorization company

d. the oil company

e. none of these

Answer: c

A motorist stops at a self-service gas station to fill up her car, paying by credit card at the pump. In this use case, who is the primary business actor?

a. the motorist

b. the station owner

c. the credit card authorization company

d. the oil company

e. none of these

Answer: a

A motorist stops at a self-service gas station to fill up her car, paying by credit card at the pump. In this use case, who is the primary system actor?

a. the motorist

b. the station owner

c. the credit card authorization company

d. the oil company

e. none of these

Answer: a

Which of the following can a project manager use to determine the importance of uses cases?

a. use case dependency diagram

b. use case glossary 

c. use case narrative

d. actor glossary

e. context diagram

Answer: a

Which of the following cannot be found on a use case narrative?

a. use case name

b. use case type

c. primary business actor

d. description

e. none of these - they can all be found on a use case narrative

Answer: e

When looking for actors, which of the following questions is the best one to ask?

a. how often is the system backed up?

b. who or what process inputs to the system?

c. who is responsible for the budget of the system?

d. who is responsible for training the users?

e. who is responsible for reporting to the project stakeholders?

Answer: b

Schedule feasibility ask the following question(s)?

a. is the solution practical? does the staff have the technical expertise to design and build the system?

b. will the solution fulfill the users' requirements? to what degree? how will the solution change the user's work environment?

c. is the solution cost-effective?

d. can the solution be designed and implemented within an acceptable time period?

e. none of these

Answer: d

Economic feasibility ask the following question(s)?

a. is the solution practical? does the staff have the technical expertise to design and build the system?

b. will the solution fulfill the users' requirements? to what degree? how will the solution change the user's work environment?

c. is the solution cost-effective?

d. can the solution be designed and implemented within an acceptable time period?

e. none of these

Answer: c

Operational feasibility asks the following question(s)?

a. is the solution practical? does the staff have the technical expertise to design and build the system?

b. will the solution fulfill the users' requirements? to what degree? how will the solution change the user's work environment?

c. is the solution cost-effective?

d. can the solution be designed and implemented within an acceptable time period?

e. none of these

Answer: b

Technical feasiblity asks the following question(s):

a. is the solution practical? does the staff have the technical expertise to design and build the system?

b. will the solution fulfill the users' requirements? to what degree? how will the solution change the user's work enviroment?

c. is the solution cost-effective?

d. can the solution be designed and implemented within an acceptable time period?

e. none of these

Answer: a. is the solution practical? does the staff have the technical expertise to design and build the system?

A small scale, incomplete, but working sample of a desired system is:

a. an entity realtionship diagram

b. a prototype

c. a data-flow diagram

d. a unifired modeling language diagram

e. none of these

Answer: b. a prototype

Data flow diagrams are used in

a. model-driven analysis

b. traditional approaches

c. structured analysis

d. obeject oriented anyalis

e. a,b, and c

Answer: e. a,b, and c

A problem solving technique that decomposes a system into its component parts while focusing on the business problem independent of technology is:

a. system design

b. system analysis

c. cause-and-effect analysis

d. joint application design (JAD)

e. none of these

Answer: b. system analysis

The study of a current business and information system application and the definition of use requirements and priorities for a new or improved information system is part of which phase?

a. problem analysis phase

b. scope definition phase

c. requirements analysis phase 

d. decision analysis phase

e. none of these

Answer: a. problem analysis phase

The alpha coefficient is a measure of:

I stock specific risk

II market risk

III a stock's price relative to the market as a whole

IV a stock's price relative to a specific industry

Answer: 

I stock specific risk

IV a stock's price relative to a specific industry

Common shares of which of the following issuers are likely to have a Beta coefficient much lower than +1?

A. Tool and die maker

B. Pharmaceutical manufacturer

C. Public utility

D. Electronics manufacturer

Answer: C

Which of the investments listed below offers the greatest protection against market risk?

A. Common Stocks

B. Treasury Bills

C. Preferred Stocks

D. Treasury Bonds

Answer: B

The risk inherent in a portfolio that can be diversified away is known as:

Answer: non-systematic risk

The Capital Asset Pricing Model (CAPM) would identify the most efficient investments as those with the:

Answer: highest return for the lowest level of risk assumed

"CAPM" stands for:

Answer: Capital Asset Pricing Model

The market theory that states that technical and fundamental analysis is of no use in selecting stocks for a portfolio is known as the:

Answer: Efficient market theory

A constant ratio investment plan is one which:

Answer: maintains a fixed percentage amount of a portfolio's assets in equities

A constant dollar investment plan requires:

Answer: that the same aggregate dollar amount be kept invested in equities

A trader liquidates an exchange listed stock position and invests the proceeds in an exchange listed stock index fund. The trader has reduced which risk?

A. Call risk

B. Inflation risk

C. Liquidity risk

D. Capital risk

Answer: D

If a portfolio manager's market sentiment is bearish, then which of the following are appropriate actions?

I Cash positions will be decreased

II Cash positions will be increased

III Investments in stock positions will be decreased

IV Investments in stock positions will be increased

Answer: 

II Cash positions will be increased

III Investments in stock positions will be decreased

An older female customer, in the lowest tax bracket, wants an investment that will provide asset growth for retirement. The best recommendation would be:

A. Emerging markets fund

B. Single stock

C. Municipal bond

D. Index fund

Answer: D

A young couple in a low tax bracket have 2 young children and they want to start saving for the kids' college education. The best recommendation would be:

A. T-Bills

B. Growth funds

C. Municipal bond funds

D. 20 year maturity municipal bonds

Answer: B

A retired customer that has a portfolio of blue chip stocks is looking to supplement his retirement income. An appropriate recommendation would be to:

A. sell covered calls

B. sell naked calls

C. sell covered puts

D. sell naked puts

Answer: A

A customer has an existing portfolio that is mainly invested in high quality corporate bonds for stable income. As market interest rates have dropped, the customer's income has declined and she would like to reallocate part of the portfolio to corporate bonds that offer potential growth. The best recommendation is to buy:

A. convertible debentures

B. equipment trust certificates

C. long term zero coupon bonds

D. commercial paper

Answer: A

If one asset class greatly underperforms another class in an asset allocation plan, the portfolio must be:

A. renegotiated

B. rebalanced

C. repositioned

D. realigned

Answer: B

Which of the following are appropriate investment strategies for a client with a 20-year time horizon?

I Holding less cash

II Holding more stock

III Holding less bonds

Answer: I, II, III

The portfolio management technique that uses a market index as a performance benchmark that the asset manager must exceed is called:

A. Passive asset management

B. Active asset management

C. Tactical asset management

Answer: B

Which of the following investment portfolios is LEAST liquid?

A. An aggressive growth fund

B. A U.S. Government securities fund

C. A money market fund

D. An income fund

Answer: A

Defensive stocks included in a portfolio's construction will minimize exposure to:

A. market risk

B. credit risk

C. legislative risk

D. marketability risk

Answer: A

Diversification of a portfolio among asset classes:

Answer: reduces the variability of the rate of return over the investment time horizon

Rank the following investments from lowest to highest, for overall historical returns experienced by investors over long periods of time:

I Treasury Bills

II AAA Rated Corporate Bonds

III Common Stocks

Answer: 

I Treasury Bills

II AAA Rated Corporate Bonds

III Common Stocks

If 26 week T-bills are yielding 5%, all common stocks are yielding 10%, and growth stocks are yielding 15%, the risk premium for investing in growth stocks is:

A. 0%

B. 5%

C. 10%

D. 15%

Answer: C

Which of the following best describes a stock that does not move with the market?

A. Income stock

B. Special situations stock

C. Defensive stock

D. Blue Chip stock

Answer: C

Which of the following securities are directly interest rate sensitive?

I Utility Stocks

II Growth Stocks

III Preferred Stocks

IV Common Stocks

Answer: 

I Utility Stocks

III Preferred Stocks

Which of the following securities is NOT directly interest rate sensitive?

A. Utility Stocks

B. Corporate Bonds

C. Preferred Stocks

D. Growth Stocks

Answer: D

A sharp rise in interest rates would have the greatest effect on the market price of:

A. pharmaceutical stocks

B. public utility stocks

C. electronics stocks

D. forest products stocks

Answer: B

All of the following securities are directly interest rate sensitive EXCEPT:

A. common stock issued by a utility

B. bonds issued by a utility

C. common stock issued by a manufacturer

D. preferred stock issued by a manufacturer

Answer: C

Which of the following stocks would be considered defensive?

A. Automobile manufacturer

B. Pharmaceutical manufacturer

C. Gold mining company

D. Computer software developer

Answer: B

Equity securities of which issuer are the LEAST defensive?

A. Defense

B. Pharmaceuticals

C. Grocers

D. Utilities

Answer: A

A counter-cyclical stock would be described by which of the following?

A. No earnings variability due to changes in economic growth

B. A stock which remains unaffected in good or bad economies

C. A stock price that tends to move in the same direction of the market as a whole

D. A stock price that tends to move in the opposite direction of the market as a whole

Answer: D

Which of the following is NOT considered to be a cyclical stock?

A. Home appliance manufacturer

B. Automobile manufacturer

C. Natural gas producer

D. Home builder

Answer: C

Companies characterized by high price-earnings ratios and low dividend payout ratios are:

A. blue chip companies

B. mature companies

C. cyclical companies

D. growth companies

Answer: D

The average dividend payout and Price / Earnings ratios for NYSE listed companies are 30% and 10X respectively. The dividend payout and Price / Earnings ratios for MCR indicate that this is a:

A. growth company

B. mature company

C. cyclical company

D. deteriorating company

Answer: B