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LOS b: Compare and contrast major structural features of domestic and global stock indexes, bond indexes, and composite stock-bond indexes.ffice ffice" />
Q1. Which of the following indexes is a price weighted index?
A) The ffice:smarttags" />New York Stock Exchange Index.
B) The Nikkei Dow Index.
C) The Standard and Poor's Index.
Correct answer is B)
The Nikkei Dow Index is a price-weighted index. The other two are market value-weighted indexes.
Q2. With regard to stock market indexes, it is least likely that:
A) the use of price weighting versus market value weighting produces a downward bias on the index.
B) buying 100 shares of each stock in a price-weighted index will result in a portfolio that tracks the index quite well.
C) a value-weighted index must be adjusted for stock splits but not for dividends.
Correct answer is C)
A price-weighted index needs to be adjusted for stock splits, but a value-weighted index does not. Neither type of index considers dividend income.
Price weighting produces a downward bias compared to market weighting because firms that split their stocks (which tend to be the more successful firms) decrease in weight within a price-weighted index. The returns on a price-weighted index can be matched by purchasing a portfolio with an equal number of shares of each stock in the index.
Q3. Which of the following statements about bond and stock market indexes is least accurate?
A) When a company splits its stock, it loses weight in a price-weighted index.
B) Bond market indexes have been in existence virtually as long as the major stock indexes such as the Dow Jones Industrial Average (DJIA).
C) A small number of very large firms can dominate a value-weighted index.
Correct answer is B)
Bond market indexes are relatively new.
Q4. Which of the following sets of indexes are price-weighted?
A) Dow Jones World Stock Index and Russell Index.
B) S& 500 Index and Dow Jones Industrial Average.
C) Dow Jones Industrial Average and Nikkei Dow Jones Stock Market Average.
Correct answer is C)
The Dow Jones World Stock Index, the Russell Index, the S& 500 Index, and Morgan Stanley Capital International Index are all market-value weighted. Only the Dow Jones Industrial Average and the Nikkei Dow Jones Stock Market Averages are price-weighted.
Q5. Which of the following regarding bond market indexes is least accurate?
A) Unlike stocks, bonds lack continuous price trading data.
B) The bond universe is more stable than the stock universe.
C) There are more bond issues than stocks.
Correct answer is B)
One reason why the creation of a bond index is more difficult than a stock index is due to the fact that the universe of bonds is constantly changing because of numerous new issues, bond maturities, calls, and bond sinking funds.
Q6. Which of the following is NOT a reason bond market indexes are more difficult to create than stock market indexes?
A) Bond deviations tend to be relatively constant.
B) The universe of bonds is much broader than that of stocks.
C) There is a lack of continuous trade data available for bonds.
Correct answer is A)
Bond prices are quite volatile as measured by the bond’s duration.
Q7. What are the three basic categories of bond indexes?
A) Secured; unsecured; subordinated offerings.
B) Investment grade; high yield; global.
C) Corporate; government; municipal.
Correct answer is B)
The three categories include investment grade, high-yield (weaker than investment grade) and global.
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发表于 2009-3-2 13:03
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